The VMworld conference, for the five days it runs, is like a city unto itself. Some 23,000 professionals gather from around the globe: vendors, analysts, investors, managers, and – dreaming of the free lunches – the journalists who cover it all.
The event fills the voluminous Moscone Center in mid-town San Francisco, with its countless halls and meeting rooms. The proceedings spill over into nearby trendy bars and restaurants. These cocktail gatherings spur a blizzard of shoptalk, with insiders exchanging unfiltered opinion over $14 glasses of Napa Valley Pinot Noir.
I spent two days at VMworld asking experts several questions that all centered on one topic: Is VMware positioned to be competitive in the years ahead?
In 2015, an existential question confronts VMware: the company’s success comes from enabling the datacenter, but IT is in a generational shift away from the data center, to the public cloud. The datacenter is fading as the cloud rises. Can VMware stay highly competitive in the cloud-based years ahead?
VMware, to be sure, is one of the great Silicon Valley success stories. EMC acquired it in 2004 for a paltry $625 million; its current market cap levitates around $33 billion. Its vSphere virtualization technology has fundamentally reshaped enterprise computing. It has aggressively expanded its product line, including NSX (network virtualization), VSAN (software-based distributed storage) and AirWatch (enterprise mobile management). The newly released Photon, a Linux-based OS for cloud-native apps, is a rapid response to the threat that container technology poses to VMware.
Still, VMware faces a challenge from both sides as the move to the cloud takes flight.
On one side are today’s younger developers – an ascendant group in 2015. They have no particular attachment to VMware’s platform. They’re focused on containers and open source and apps that fly every which way. A datacenter? What’s that?
Challenging VMware on the other side are the behemoth cloud giants: Amazon and Microsoft Azure. Microsoft has datacenter in its soul, and its Hyper-V virtualization is second only to VMware’s. Amazon’s cloud holds commanding dominance and spits out new tools and features at a breathless pace. VMware’s vCloud Air, while growing quickly, isn’t yet a significant challenger to these cloud leaders.
So what will VMware’s place be in the cloud-based years ahead? At VMworld, I had the luxury of a veritable ocean of experts to answer that complex question.
Miniman is as savvy as any tech analyst; it helps that he worked for EMC for 10 years. I found him in the lobby of the Moscone, where he broadcasts punditry nonstop with the Cube crew.
Whether VMware will remain relevant as IT migrates to the cloud is “a really interesting question,” Miniman said. “First of all, this shift to cloud is a long term thing. We’re talking one of these ten-year swings. Wikibon’s latest research on it is, in ten years, it’s a third of the enterprise spend.” There’s time to adapt.
VMware is “doing a great job of trying to make things more efficient, and they listen to their customers,” he said. He pointed to the company’s progress with VSAN and NSX.
“However, I worry about VMware ignoring the impact of AWS and Azure.” Initiatives like Pivotal’s Cloud Foundry (a well-funded offshoot developed by VMware) are promising, he said. “But I feel like they’re kind of trying to run out the clock on some stuff they’re doing, and not pushing as aggressively in some of the new technologies as fast. And when I hear their cloud message, I don’t hear it matching the multi-cloud with Amazon and Azure…so I’d like to see more of that.”
Then there’s the intangible: the buzz factor. “If I’m hanging out here in the Valley, maybe VMware isn’t as sexy as they were a few years ago. Maybe it’s boring,” Miniman said. “But there are a lot of companies that are boring that make a ton of money. We forgot about Microsoft for about ten years…while they were just an OS and applications company. And now they’ve come back and they’re super exciting again, because they’re doing Docker and cloud, and look at all of the Linux stuff they’re doing.”
Bottom line: VMware “has one of the best ecosystems in the marketplace,” he noted. “That being said, it’s not the coolest thing. It’s not the hottest thing. And you have to be careful that the market doesn’t leave you behind.”
The exhibitor hall at VMworld
Industry pundit Ben Kepes is usually good for some contrarian opinion. The New Zealand-based analyst churns out more IT opinion pieces than just about anyone.
“Clearly, VMware understands that the face of enterprise IT is changing,” he said. “The issue isn’t whether or not they can understand and react from a technology perspective. It’s whether their business can support them reacting.
“It comes down to their existing revenue streams, the fact that they’re used to a particular type of licensing and a particular caliber of customer, and whether or not their shareholders will be happy with them moving to a model that has some very, very difficult fundamentals.
“At the end of the day, developers, and increasingly enterprise IT, are used to acquiring infrastructure on a pennies basis. No longer are they used to paying huge licensing fees to salespeople that drive Ferraris.” The effect of that fundamental shift is currently unknown, he said.
But, I asked Kepes, VMware is moving aggressively to a hybrid cloud model; it’s not stuck in the old datacenter model.
“Sure, it’s moving to a hybrid cloud model,” he said, “but it’s still a hybrid model that is pretty much predicated on a VMware-centric view of the world. And my thesis is that the future isn’t VMware-centric any more than it’s, say, Microsoft-centric, but it’s all of those things. And so, again, does a company like VMware play well in a world where it’s just a small component part of an enterprise IT plan? That’s a difficult question.”
A press conference with VMware execs: Carl Eschenbach, COO, and Pat Gelsinger, CEO
Johnson’s primary coverage area is Infrastructure and Operations; he’s done stints at BMC Software and Altiris/Symantec. I interrupted his lunch in the press/analyst room to ask about the future of VMware.
As Johnson sees it, it bodes well for VMware that it’s integrating container technology into its core vSphere product; it’s part of what he calls VMware’s “embrace and extend strategy.”
However, “operating a cloud environment is not something that the largest providers do on VMware. Parts of their operations run there, but they’re not using VMware hypervisor as an infrastructure for that.” For instance, “you’re not running Hadoop on VMware – things like that. Or, maybe some are, but in any case, it does create a challenge to remain relevant to providers.”
VMware’s wholehearted embrace of the hybrid cloud is “a transitional step,” he said, and by itself it isn’t sufficient. The company must get better at providing components that cloud infrastructure and platform providers depend on. For instance, information services and analytic services. “That’s a big one.”
The company’s key advantage: the ability to offer simplicity in a wildly complex world. With today’s heterogeneity comes overwhelming complexity.
“VMware’s strength has been making the difficult pieces easier,” Johnson said. “With the hypervisor, management, and all those things were difficult at one time, they made it easy. The administration of a cluster and other things were difficult at one time – VMware made it easier.
“So, as complexity goes up, the opportunity for a closed platform or a proprietary vendor who can coordinate and get things done goes up as well, because otherwise, the complexity is too high.” This ability to simplify might be VMware’s saving grace.
The press lunch. The Moroccan chicken was quite tasty.
Boston-based Eastwood seemed to be enjoying himself at the press-analyst mixer at the St. Regis Hotel. Based on the many people he chatted with, the IDC analyst is a popular pundit. I interrupted him mid-drink: Does emerging container technology challenge VMware?
Containers don’t work against VMware, he said. “They’re trying to make the argument that if you build applications and you componetize them on containers, there’s an efficiency play there, as well. So, if you do it on a consistent layer of virtualization software, you can do it super efficiently. And I think that’s true.”
Yet VMware isn’t the only company trying to co-opt container technology. Microsoft also has a container strategy.
“So, what VMware is pushing is a container strategy that runs everything on this lightweight Linux OS, and Microsoft is starting to push the opposite, which is a really lightweight Windows OS,” he said. “So, there is a little bit of a battle there with developers to get people to standardize on Microsoft versus a VMware approach,” Eastwood said.
“VMware’s approach probably runs a little bit more in line with what’s happening in the world of Amazon, which is highly built on open source. The Microsoft strategy is more trying to continually influence the Microsoft developer to stay with them.”
VMware’s bread and butter, the traditional datacenter, is flat to slightly down, Eastwood noted. The company has done “a pretty good job” of handling this shift. It’s outgrowing the shrinking market. Yet it faces a challenge near term around its VSAN and NSX solutions, which are still in their infancy. “Will the market move fast enough there for VMware to be able to capitalize on that and be able to offset some of its challenges in its core business?”
Longer term, VMware must appeal to a crowd it hasn’t traditionally reached: developers.
Two big forces face off in the market, Eastwood said. “One is the evolutionary force [traditional datacenter], and VMware has done a really nice job of keying into that, helping people become more efficient, delivering traditional IT services on on-prem architectures. Then you have this more revolutionary play, which is influencing and developing these next-gen applications, which historically are all about open source and are really not about proprietary technologies.
“So, the challenge that I see, and it’s not unique to just VMware, is that they have to deliver that message not just to infrastructure folks, but to the developer audience. And that’s not a core constituency that they spend a lot of time talking to.”
The press-analyst event at the St. Regis Hotel
As an analyst, Cancila is part of the Cloud and Virtualization Strategy group, focusing on public and hybrid cloud computing. Among her research projects is a report titled How to Budget, Track and Reduce Public Cloud Spending.
In Cancila’s view, VMware “must do three key things to remain relevant as organizations adopt public cloud services: accelerate investments to mature the vCloud Air platform; protect and evolve the large, existing ESX install base; and continue building integration between VMware environments and other public clouds.”
The challenge? “Many clients want to stop paying the hefty VMware license fees and don’t want additional management expenses to build private clouds and enable hybrid cloud capabilities,” she noted. “Some may not want to use VMware technologies, like NSX or vSAN. These customers are evaluating alternative deployment options like containers and open source technologies, or simply moving workloads into a competitor’s public cloud offering.”
The company needs to rise to the challenge: “VMware must protect their large install base by enabling open solutions, disrupt traditional virtualization with new deployment options like containers, and re-evaluate license models and pricing for on-premises solutions.”
In short, VMware is late – but not too late: “Although AWS and Azure have more mature public cloud services offerings today, VMware has plenty of opportunity to disrupt as organizations consider moving enterprise applications into the cloud.”
The ahi tuna at the press-analyst event. Delicious.
The VMware press conference on Monday afternoon was a sleepy affair. VMware executives answered questions in a large hall that was sparsely filled – many reporters were taking vendor briefings. I asked VMware’s Matthew Lodge why a prospective customer would choose VMware over Amazon AWS or Microsoft Azure.
In response, he said that what AWS wanted to do, from its launch, was “build a radically different way of building applications. And so that was great if you had a clean slate. If you were a startup, if you were Netflix, and you were going to rewrite your application twice in two years. The problem for most of our customers is that they don’t have that luxury,” Lodge said.
“When you look at our service set, it’s very much oriented around ‘how do I bridge from where I am today into the future?’ Our competitors are mostly about, ‘why don’t you rewrite your applications or build all new stuff this new way?’”
I asked him a follow-up: You’re saying you’re more hospitable to a legacy approach to applications?
“So, we are hospitable to a legacy approach,” he responded. “But as I said to you before, it’s more about the journey than it is about the destination.” For a lot of VMware customers, “what’s difficult is how to get there. That’s the real challenge.”
Especially, he said, “If you’re doing something like wholesale data center migration, we support over 90 different operating systems. We support Windows 2003 – Azure doesn’t support Windows 2003. We support more versions of Windows than Azure, right?….[that] means you can do an entire data center migration.
“It’s a real issue for a lot of customers. The re-platforming requirements really sound simple, ‘Oh, we’ll just re-platform – you should get off [Windows] 2003 anyway and get a new version.’ It’s time and it’s money for customers. It’s a real barrier.”
VMworld’s slogan this year was “Ready For Any,” which reflects the diverse array of challenges it faces.
Li has been in her current role at VMware for about a year, though she has been with the company since 2008. I caught up with her at the press/analyst mixer at the St. Regis, where I asked her: Does the generational shift to the cloud create a headwind for VMware?
“I definitely think so,” she said. “It is a headwind that is clearly recognized and emphasized and prioritized in the company.”
She elaborated: “We opened the show, normally you start with all of the good news of the VMware stuff, like the vSphere innovation and all the good news of SDC [software defined datacenter].” In contrast, “You can see this year, Carl [Eschenbach], Bill [Fathers], Ragu [Raghuram] and myself, the entire story we had is really about the unified hybrid cloud platform. So, I think that we recognize the importance of the headwind we’re in, but also indicate the approach that we’re going to take is really leveraging our success in the enterprise, and leveraging our customer’s desire and need to have this smooth transition into the cloud.”
In a nutshell, that’s the VMware message: smooth transition. Not a radical shift – the company’s big customers loathe quick shifts.
“Our cloud business is still very young,” Li said. “A year and a half, now two years old, but we’re seeing a significant increase. It’s just resonating. In the beginning we saw customer with a few VMs [virtual machines]. Now they’re betting multi-million dollars on us… I think they’re speaking with their wallet.”
I asked her about the perception that VMware has been reluctant to embrace a heterogeneous approach.
“I disagree,” she said. “If you look at our… some of the solutions that tie things together, management, NSX, these are cross datacenter type of solutions. They’re all being built non-inclusive to vSphere. They’re all being built to work with other stuff. So, obviously the hypervisor we have is vSphere, and the solutions that are integrated into that are vSphere-centric. But we have our management stretching across between vSphere and non-vSphere. So I disagree with that.”
A futuristic ping-pong table in the VMworld hang space.
Before becoming an analyst, Mueller did stints at Oracle, where he was VP of Applications Development, and SAP, where he was also a VP. He spoke volubly about the VMware ecosystem; the following is only the barest snippet.
I asked him if VMware is embracing the new world of heterogeneity, or is the company’s approach VMware-centric?
“Well, right now it’s VM-centric,” he said. “And yes, they want to play in the heterogeneous world, but there must be money for VMs. So, they support open standards and so on for their customers, but monetization behind it is VMs.”
Does that mean that they will play well in a heterogeneous world, or not necessarily?
“They’re the best player in the old heterogeneous world that was different hardware and operating systems, right? I mean, whatever you’ve acquired over ten years as an enterprise, as long as the servers are running for you, you can put VMs on it. Some are fast and some are slow, but they’re the great equalizer. That’s why they rule there.” That, in effect, is VMware’s core strength – the key reason for its success.
Now the company is navigating the new world of containers. “VMware is trying to build a virtualization where Linux uses Photon,” Mueller said. “All the other [virtualization solutions] are there to manage devices. The idea is that Photon is a virtualization-friendly Linux version, because the more VMs run out there, they have VMware [supporting them]. A lot of innovation happens on Linux, so Photon OS can do that and give you standard Linux, and all of the things around Linux – like Docker – can be running and taking advantage of VM.”
In essence, Photon is a tech-savvy business strategy: it provides give and take with other standards, but keeps the focus on VMware’s products.
A futuristic work environment in the VMworld hang space.
I know that Matchett, as repeat guest on the Datamation Hangouts, has a deep knowledge of the tech market, from cloud to Big Data. The Boston-based analyst worked at Dell and BMC, among other firms.
Matchett and I spoke about the huge increase in complexity in IT in the last few years. A quick stroll through VMworld’s exhibitor hall spotlighted myriad tech firms hawking solutions to IT problems that had barely occurred yet.
In the face of growing complexity, companies hunger for simplicity. “We did a survey recently where we asked: ‘Where do you see your future architectural vision?’” Matchett said. “Over a third of enterprises said ‘We actually view hyper converged infrastructure as our future vision for the data center, which is just a cry for that simplicity straight out.” Furthermore, “two years ago, no one would have said that because it’s kind of a new development.”
The desire to simplify plays into VMware’s strength. The company offers an ecosystem that, like Apple’s in the retail world, puts a premium on interlocking pieces – and consumers are willing to pay extra for it.
Complexity will only get worse. “If containers are the thing today, then highly automated and highly agile containers will be the thing tomorrow,” he said. “And then high velocity containers, and then there will be high capacity something or other. And then super-converged infrastructures and clouds, and just…”
The cloud itself is a reach toward simplicity. “Two years from now you’re going to see a lot of IT being reduced to that cloud ‘click and point and drag’ to find the service level, to find the catalog and get out of the way.”
VMware is keeping up with it all, he said. “Right now, I think the value proposition that VMware is offering is shifting adequately, and in fact, quite admirably, to cover and extend into containers and extend into cloud.”
The exhibitor hall reflected the complexity in today’s IT.
As the chief analyst for 451 Research, Hanselman delves wide and deep in the IT landscape: virtualization, mobile, cloud, security. His previous gigs include Principal Security Architect for IBM, and a consulting job for AMD.
To be sure, “the enterprise data center in the traditional model as it stands today is definitely on the way out,” he said. But as new models emerge, “the alternatives that enterprise are heading toward are also places where VMware plays as well.”
Among those alternative scenarios are large companies that have major resources: “If you’re able to build big operational environments, you can deliver IT services less expensively than Amazon.” In his view, “cloud capabilities that you own yourself can be run potentially just as effectively as long as you’re not overbuying capacity for what you need.”
Clearly, building the capacity to enable your peak needs all the time, no matter what, is expensive. That’s where a hybrid approach comes in – and VMware is focusing on the hybrid cloud. “So there will always be the need to have some burstable capability if you’re going to run your operation cost effectively. It’s the old saying, ‘Own the base, rent the peak.’”
The transition away from the legacy data center is going to take a significant amount of time, he noted. And at any rate, “VMware has the ability to work both sides of that equation.”
Front page graphic of Shutterstock.