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VMware Revenues Show Cloud Worries

VMware rules the virtualization market and wants to do the same with cloud. Can it pull that off and continue its fast-paced growth?

The OpenStack project in particular has been artful in recognizing the virtualized enterprise belongs to VMware and has designed its cloud software to support VMware's ESX Server, as well as open source KVM. Cast in the headlines as a VMware competitor, OpenStack is more likely to serve as a cooperative transition zone between the virtualized data center and the public cloud. It may or may not be the customer's choice for private cloud, but it's guaranteed to work with VMware in either public or private cloud-computing realms.

The weak link of VMware's cloud strategy could lie in assuming would-be cloud users are looking for a VMware look-alike environment outside their premises, when they might be more comfortable with a neutral platform focused solely on optimizing large scale, cloud operations. Despite the interest in cloud, many VMware customers are not there yet, not ready to send workloads outside the company perimeter. Others, who are there, are already using something else, such as Amazon Machine Images, a version of Xen.

It should be noted that VMware has already had some success in getting its technology adopted by public cloud services -- BlueLock, CSC, Dell, Colt, Singtel and Softbank. It currently looks like a big fish in what is still a relatively small pool of cloud providers. But if Forrester is right, the whole ocean beckons. A significantly greater share of the world's enterprises are going to be engaged in and spending money on cloud computing between now and 2020 and they're not necessarily looking to VMware to provide it.

The strength of the Amazon model must give some VMware customers pause. Amazon's EC2 and for that matter, Microsoft Azure and Google Compute Engine, run infrastructures that dwarf the typical enterprise data center. They achieve a degree of automation and economies of scale -- such as a single admin supervising thousands of physical servers -- that are likely to elude the most conscientious VMware vCloud implementer.

Enterprise buyers are approaching a critical phase where they are past the point of experimenting with the cloud and ready to commit real resources toward a private cloud that will interoperate in some fashion with a public cloud -- an Amazon, Google, Microsoft or OpenStack service provider, such as Rackspace. To do so, they need to be convinced of the long-term viability of those investments. VMware's vCloud Suite will take a customer to a high degree of automated operations, end user self-provisioning and elastic expansion and contraction. But when it comes to cloud, implementers also hope to achieve a long term, low cost of operation.

What's the rate of innovation behind vCloud Director versus OpenStack? Will it or one of the other open source systems obtain a position of predominance, the way Linux has taken over as the alternative to proprietary operating systems in the data center? It's the latter experience that must be giving some IT managers pause, as they consider their cloud options.

In addition, VMware customers may have noticed that OpenStack is not hostile to VMware, merely competitive with it for future cloud computing accounts. Its designers have from the get-go decided they needed to be able to work with VMware environments. OpenStack will host ESX server workloads as well as open source KVM. (Hyper-V is still out in the cold, as far as OpenStack is concerned.)

CloudTP's Treadway noted VMware's application to join OpenStack last month as a sign that VMware's top management recognized that the future may lie in both its own product line and cooperation with a future open source system.

"OpenStack innovation seems to be rapidly outpacing vCD (VMware vCloud Director), which looks very much like a project suffering from bloated development processes and an apparent lack of innovation. At some point it may have become obvious to people well above the vCD team that OpenStack's momentum and widespread support could no longer be ignored in a protectionist bubble," Treadway wrote in a blog posted on the CloudTP site.

VMware's management appears to understand that 21% to 22% revenue growth this year means its cloud product line is unlikely to achieve the same dominance as its virtualization products.

It also understands uncertainty over future interoperability in the cloud could constrain revenues for both its product lines. By joining OpenStack, it is giving customers the option of proceeding further down the road toward the fully virtualized data center -- the software defined data center -- and private cloud with VMware, while reserving the right to go in different direction at a later date.

By viewing OpenStack as a cooperative competitor, VMware is joining in a major industry initiative rather than being "protectionist" and getting left behind by it. It may also be safeguarding 21% to 22% revenue growth, which a few years from now may look like a healthy base from which to launch its next initiative.


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