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Summary:

VMware is banking that its brand and customer base will make it a power in public cloud infrastructure. Others bet that VMware’s “hybrid public” cloud plan is too little too late.

It may be a cliche, but it’s also true: VMware is at a crossroads. The company, which dominates server virtualization in company data centers, continues to struggle for credibility in the cloud — and it’s new plans for hybrid vCloud service haven’t done much to fix that.

VMware CEO Pat Gelsinger

VMware CEO Pat Gelsinger

This “VMware vCloud Hybrid Service,” to be run from partner data centers and sold by VMware’s channel but managed by VMware, is slated to come online later this year. VMware pitches it as a way for the company’s 480,000 customers “to reap the benefits of the public cloud without changing their existing applications while using a common management, orchestration, networking and security model.”

But VMware faces a raft of challenges.

Too little too late?

First of all, many of those VMware customers have already tested out other cloud offerings — Amazon Web Services, or a third party service provider, MSP or hosting company, they’re already in the cloud in some way. AWS, for better or worse, has set the bar high when it comes to pay-as-you-go services for developers and higher-level managed services for other constituencies in the enterprise. Even solid VMware shops are testing out alternatives for different use cases, as we learned in last week’s big PayPal does/doesn’t dump VMware for OpenStack kerfuffle.

Fractious partner relationships

Second, VMware’s existing cloud partners — including big service providers and telcos offer VMware’s vCloud Director as an option but several of those partners, speaking privately, aren’t wild about it. They say it’s under-featured and expensive. And, nearly all of them offer other — less costly — options to vCloud Director including OpenStack.

The fact that VMware will pick certain service providers over others to host this cloud means it will tick off others.

“Nearly all of the service providers were already hedging on vCloud Director because of cost issues and now all those that weren’t already hedging are aggressively moving in that direction,” said an exec with one vCloud Director partner who requested anonymity for obvious reasons.

Forrester cloud analyst James Staten agreed that VMware stepped on “xSP” partner toes, but said it had no choice.  “None of its partners — not even the vCloud Data Center partners —  were really offering the full vCloud Director cloud experience as VMware views it. And it felt it needed to do this to really help educate buyers on the full capabilities of vCloud Director,” he said via email.

Playing catchup is hard, especially for a leader

The bigger problem, is that VMware is behind the curve when it comes to full pay-as-you-go cloud capabilities. And the claim that customers running vSphere internally and vCloud Director in the cloud get fully interoperable elastic cloud services across sites,  is, untrue, said Carl Brooks,  internet infrastructure services analyst at The 451 Group.

“If you run vSphere in house and vCloud outside, you can get very basic capabilities — virtual storage and virtual servers– but that’s very little compared to what you get from any other hoster these days,” Brooks said. With vCloud director, “it’s like VMware is giving you a 1978 Pinto and saying it’s a Formula 1 car.”

VMware would argue that the level and type of services that a third party service provider offers depends on the service provider itself, not on VMware, which supplies the software stack and tools. That’s one big reason that VMware will manage and run this new hybrid cloud, but proof will be in the pudding.

And VMware’s biggest problem — the perception that its software is a proprietary and expensive — remains unchanged.

Banking on the brand

But, VMware has its advantages. For one thing, there are all those customers. If it can stem defections to OpenStack or other cloud technologies and convince enterprise customers that its cloud is a more secure but also cost competitive alternative to AWS, it has a shot. VMware also spun off a bunch of projects to the Pivotal Initiative so it can better focus on its priorities — although Pivotal is also focusing on cloud initiatives. It’s not clear — at least to me — how Pivotal’s work will or will not complement what VMware itself is doing with its hew hybrid public cloud.

The problem there is AWS has a 7-year head start and rolls out new services (and price cuts) practically every week. And it’s getting more enterprise savvy and is showing more interest in co-existence with private clouds preferred by regulation-constrained industries.

OpenStack remains a wild card. VMware CEO Pat Gelsinger was careful to talk about the company’s commitment to heterogeneous environments when he outlined the new strategy. And, after all, VMware is a member of OpenStack now, a development that caused a lot of head scratching.  One big reason for OpenStack momentum is that VMware’s rivals and enterprise customers alike have vested interest in preventing VMware from parlaying its on-site virtualization dominance into the cloud.

Staten maintains that VMware’s hybrid-public cloud is trying to be bold without being too bold. “Any way you look at this, it seems like a half-hearted effort which means its likelihood of success is low,” Staten said.

Feature photo courtesy of Flickr user fontplaydotcom

  1. Good breakdown Barb. I think you echo most of my feelings about VMware’s Cloud strategy and their position. They do have a great advantage of having the ear of their enterprise customers. However when you try the pay as you go model of Amazon and then get a quote for “pooled” resources from a vCloud partner it’s not exactly what you expected for IaaS. Not to mention there’s a significant difference in cost.

    I think there is value in VMware’s pooled approach with the performance guarantee but I don’t think it’s enough to justify the cost difference. VMware has some work to do and it looks like I’m asking the question we asked last year about OpenStack. Is it too late for VMware?

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  2. Reblogged this on Virtualized Geek and commented:
    I asked the question last year if it was too late for OpenStack. I think it’s fair to now ask the question is it too late for VMware in gaining mind share in the Cloud space. This article over on GigaOm does a pretty good job of summarizing my thoughts on where VMware is in the Public Cloud market.

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  3. Eamonn Colman Friday, March 29, 2013

    The partner ecosystem has been severely debilitated by VMware’s lack of insight on public cloud and guiding hand on how to sell it with v”Cloud” Director. Many of the service providers that we work with at http://www.Computenext.com have had to tweak it to look like a legitimate cloud, and it’s a challenge for them.

    The pooled resource model from vCloud is great for the enterprise and private clouds, but the public cloud, and true cloud model can’t be brought in as a forethought to accommodate certain workloads.

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    1. interesting. it looks iike you guys are in a position to know re. VMware and partners and vCloud capabilities — thanks for the note.

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  4. Vinod Shintre Friday, March 29, 2013

    Consumerization as we call it is hard to achieve & given VMware sits as a leader with enterprise its hard to come back and slap a public offering to gain traction. let’s face it VmWare needs a change in thought leadership & sooner they do that, faster they would be able to tap into public IaaS domain. Isn’t Google facing the same challenge?.

    VMWare should look at tapping into the vast partner eco-system they have already built & use it to offer a globally distributed public offering facing non enterprise consumer. Think tons of data-centers running on vmware those allow one to commission virtual resources on-demand in any region they want. Its not a technology challenge but if they can manage to simplify it on business front it would work wonders.

    just my 2 cents.

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    1. “VMWare should look at tapping into the vast partner eco-system they have already built & use it to offer a globally distributed public offering facing non enterprise consumer. Think tons of data-centers running on vmware those allow one to commission virtual resources on-demand in any region they want. Its not a technology challenge but if they can manage to simplify it on business front it would work wonders.”

      I think that’s true. This initiative will bring much greater publicity to VMware’s strong software feature-set where it has its strengths and a 15 year pedigree. They’ve already stated that they will share the technology behind this cloud with partners via their VSPP license rental scheme. That will allow many partners to provide near-similar clouds around the world that all interoperable with VMware’s cloud. Such clouds do already exist at the moment but there will now be competitive pressures for partners to up their game in areas such as ease of use, support and provisioning.

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  5. Vmware’s cloud strategy is confusing. Vmware put itself into an impossible situation by selling its software to service providers to run their own cloud off of. I think that is the biggest challenge that they now face.

    This idea of Vmware selling access to selected service provider’s clouds is not a very good idea. How are they going to enforce the necessary quality of service this way? This strategy is also very expensive for everyone involved. The service providers are paying a lot of money for Vmware when they could use OpenStack for free. Then on the flip side Vmware is sharing the income with SPs which it could have had all to itself if it wasn’t forced into the convoluted arrangement in an effort to not step on any SPs toes.

    If you look at most industries you typically have two dominate players emerge and then you may have several smaller players which are pretty insignificant. In my opinion the two dominate players in public cloud have already been decided. They will be AWS and OpenStack. If Vmware really wants to compete in the cloud then they should fully embrace OpenStack, which they are a member of, and give up on this crazy hybrid-vcloud strategy.

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    1. Xtraordinary Hosting Tuesday, May 21, 2013

      “This idea of Vmware selling access to selected service provider’s clouds is not a very good idea. How are they going to enforce the necessary quality of service this way?” VMware have said they will run these new four clouds themselves and be responsible for the service stack from top to bottom. What they’re doing is putting their equipment in some of the larger partners’ datacentres, leasing datacentre space in this way is a well established business model and makes perfect sense at this scale.

      “The service providers are paying a lot of money for Vmware when they could use OpenStack for free.” Yes but OpenStack is still a work in progress at the moment and requires investment of a huge amount of developer resource to get something workable. OpenStack is far from the proven software option which VMware is.

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  6. Working with vCloud Director has been a challenge. It is not user friendly and often times we do most of the work and hand it over to our customers for simple management of their existing VMs.

    We do feel betrayed but that is business and will continue to concentrate on what we do best which is servicing our customers and shielding them from the lack of features the vCloud ecosystem currently provides.

    -Tom
    Bit Refinery

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