VMware rolls back its borders with a flash sale of vCloud Air

In a not-too-unexpected move, VMware has announced the sale of its Public Cloud division. It is well-known that vCloud Air has been struggling. In a deal expected to close in Q2 2017 they have offloaded it to French Cloud hosting provider OVH. OVH defines itself as one of the largest cloud service providers in the world, with 1 million customers and 260,000 servers deployed, so roughly a quarter of a server per customer. I am pretty sure that Oracle, AWS, Google, and Azure are bigger, but there you go. Marketing at its best — OVH, one of the largest cloud service providers in the world.

Once the deal has gone through, OVH will rebrand the service as “vCloud Air Powered by OVH.” In addition, OVH will be shutting down vCloud Air’s pay-as-you-go service, ending the consumption model.

In a statement about the planned deal, VMware CEO Pat Gelsinger said:

“we have enjoyed a long and successful partnership with OVH and view the acquisition as an extension of our partnership and a positive for our customers and partners.”

This is positive for those who utilize vCloud Air as an extension of their private clouds or managed service public offering. It is not positive for those who use a pay-as-you-go consumption model.  Those customers, of which I am one, appear to have been left hanging. They have two options: move to a managed service with OVH or move to Azure, Google, or AWS’s pay-as-you-go model. The deal also includes the VMware vCloud Air operations and sales staff and the US and EMEA, data centers and customers.

Interestingly, for some reason, the deal does not include VMware’s Australian and New Zealand vCloud Air assets. This seems odd as OVH has recently commenced operations in the region. Perhaps these assets are being offloaded to a partner in that region. There is also no information regarding China or Japan or VMware’s Horizon FLEX offerings.

The downward spiral for VMware’s public cloud play has been long and sad to watch. Launched with loud applause, vCloud Air has never had the investment needed. vCloud Air could not truly compete with the likes of AWS. There are a number of reasons for this, not just limited to the fact that the product hit VMware’s cash cow, vSphere, directly in the pocket. Due to this fact, it has always been vastly overpriced compared to its direct competitors. Further, from the perspective of the EMC Federation, it was a competitor of Virtustream, its $1.2 billion public cloud enabler acquisition.

The sale makes perfect sense when coupled with the announcements of partnerships with its old enemy AWS, and with IBM Cloud (formerly IBM Softlayer) to install SDDC from VMware natively on their Infrastructures. VMware is now free to concentrate on its cross-cloud initiative. Further, it is very unlikely that this will be an at-profit sale. Data centers and staff are not cheap, but offloading the division does allow VMware to return to being Switzerland in regard to cloud services. This is similar to the stance that it held in the early naughties regarding server hardware.

VMware is, effectively, positioning itself as a broker of clouds, regardless of who they are. VMware is currently the only cloud vendor that does not tie you to a single provider infrastructure. Oracle Cloud ties you to Oracle data centers, AWS to AWS data centers, and Azure to Microsoft data centers. With this move, VMware can now legitimately span private on-premises locations with AWS, IBM Cloud, and other vCloud-based managed service providers, like OVH. The span will use a single management interface and virtual machine format. Now, VMware has the benefit of no longer having a potential conflict of interest regarding customers being sold vCloud Air at the expense of its other vCloud-based managed service providers. This is a win-win for all parties and has significantly cleared up muddy waters.

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