And don’t be surprised if VMware gets more pushback and changes its pricing model yet again.
My source believes that what is happening is that VMware will try to own a very specific cloud segment: private clouds, but more specifically, large enterprise on-premise private clouds.
“This move is already opening up a lot of real estate for Xen and Microsoft Azure,” he said. “Who’s going to serve SMBs? It sure doesn’t look like VMware will be attractive in any but the largest environments.”
That may not be a bad thing from VMware’s point of view. SMBs are aggressively moving to public clouds, and the public cloud game is already dominated by entrenched providers like Amazon, Google and Rackspace.
Meanwhile, pretty much every hosting provider on the planet is rolling out cloud services. Downward price pressure will be the norm. On-premise private clouds for large enterprises are probably a better bet, and that appears to be where VMware is placing its chips.
A final complicating factor on VMware’s cloud roadmap is OpenStack. Just this past April, Mathew Lodge, VMware’s VP of Cloud Services, argued that OpenStack was one of vCloud’s ugly sisters. (The other ugly sisters according to Lodge were CloudStack and Eucalyptus.)
What a difference a few months (or rather a single acquisition) make. Now, after the Nicira acquisition, VMware has taken a shine to one of those ugly sisters. Nicira was heavily involved in OpenStack, and OpenStack uses Nicira’s API for its network interface.
There was some public dissent about letting VMware into the OpenStack Foundation. Boris Renski, EVP of cloud startup Mirantis, an OpenStack gold member, believes this is a Sun Tzu-style move on VMware’s part. On the Mirantis blog, Renski focused on a tweet by @cloud_borat: “‘The supreme art of war is to subdue the enemy without fighting.’ – Sun Tzu – In other news @VMware joins @openstack.”
The OpenStack founders I spoke with didn’t feel this way, but you never know, it’s still early.
“Boris was one of two board members to vote against VMware. Two out of twenty-four,” said Josh McKenty, a co-founder of OpenStack and the CEO of Piston Cloud Computing.
“Look at hypervisors, they [VMware] have 90 percent market share. Every cloud has a hypervisor in it somewhere. VMware is in best position to make all of that work, and when we talk to end users, they all tell us they want VMware in OpenStack,” he said.
Which brings us back to management.
Basically, with the Nicira acquisition, VMware has all of the pieces for a compelling software-defined data center vision. VMware’s own portfolio virtualizes compute. Nicira virtualizes the network, and VMware has plenty of storage options, everything from vSphere virtual storage to parent company EMC’s cloud storage products to certified partners like StorSimple.
That’s a pretty compelling end-to-end portfolio. VMware has a lot of work to do if it wants to dominate clouds, even enterprise private clouds, the way it dominates the virtualization landscape. But if nothing else, it’s already carved out a high-margin cloud niche for itself, and the Nicira and DynamicOps acquisitions point towards a serious hybrid cloud play down the road.
The likes of Amazon and Google probably aren’t terribly worried by any of this, but competitors like Citrix, Cisco, Dell and HP most certainly are.