Recently, at VMworld Barcelona 2106, VMware announced a partnership with AWS to provide an SDDC based on Cloud Foundation on AWS hardware hosted in AWS regional data centers. This environment is a pure VMware play, but using AWS hardware. I had a number of conversations at the conference regarding this announcement, and the consensus appeared to be “Interesting, but we need to know more.”
Cost was the main question. How will this be priced? Gelsinger intimated that existing customers will be able to leverage their current vSphere licensing to consume the AWS vCloud. This raised additional questions. How exactly do you leverage a CapEx-based perpetual license to a consumption-based OpEx cost? There is little to no information on this. We would like a lot more clarity. We appreciate that it is currently only a technical preview, but if it is going to be utilized on release, budgets need to be planned.
As to use cases, we came up with quite a few. However, the crux of the questioning was what this might mean for vCloud Air, VMware’s public cloud offering, as well as what it might mean for those in the VMware Service Provider Program (VSPP). For the short to medium term, I think it will be business as usual, especially for the VSPP members. They provide, on the whole, a niche and turnkey solution for regional businesses either to use to burst their private data centers in times of peak usage or to use as DR sites for on-premises data centers. A good example of this is Zettagrid, an Australian VSPP based in Perth. In fact, the vCloud on AWS actually validates its businesses and could provide a way to rapidly expand its public cloud presence at a reasonable price or even add another string to its DR story.
The more interesting question is what happens to vCloud Air, VMware’s public cloud. The vCloud Air story is one of starts and stops, missed opportunities, and never enough funding to become competitive in the public cloud market, where AWS and Microsoft have poured billions into their offerings.
The truth is, VMware has never until recently truly understood the cloud. Yes, there is a case for arguing that it was one of the progenitors of the cloud, but its roots are firmly entrenched in legacy hardware–based on-premises data centers. Until recently, it considered vSphere and ESXi specifically its sacred cow and was very protectionist regarding its revenues for ESXi. Gelsinger has been slowly revolutionizing VMware, changing its culture regarding vSphere. However, it takes time to move those executives who are stuck with Old World viewpoints out. Some can be sidelined, but the more visible and senior ones have to be pushed or convinced to “pursue different challenges.” With the departure of Eschenbach and Casado, Gelsinger finally freed himself from the shackles of the founders; consequently, his vision is starting to take shape and form.
I firmly believe that vCloud Air will evolve as a product and business unit. What we traditionally view as the product will be expanded to include the vCloud on AWS play. I fully believe that VMware will also keep its current investment in data centers but will elevate them to a highly performant target, perhaps even a target for Virtustream’s high-end cloud business. I also think that employees in the vCloud Air business units will remain gainfully employed.
As for use cases for vCloud on AWS, there are many that come to mind. I am going to propose just a couple of major ones here. Now, considering that NSX is to be included in the offer, there is a powerful case for moving your endpoints to AWS-based vCloud, where they will be running on cheap and cheerful hardware and keeping your crown jewels in-house in your own data centers. Another use case could be off-site DR for on-premises clouds using Zerto or VDP.
To sum up, we at TVP Strategy feel that VMware is at a turning point. How it manages the migration from its reliance on vSphere revenues to growing its Cloud Foundation, NSX, and VSAN revenues to compensate, and how it delivers on what is actually a valid strategy of multicloud management, will determine whether it has its Nadella moment or Gelsinger goes down as the CEO who managed VMware’s decline into obscurity.
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