Cloud // Infrastructure as a Service
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3/14/2013
03:21 AM
Charles Babcock
Charles Babcock
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Will VMware Challenge Amazon Head On?

VMware announces Hybrid Cloud Services unit. Does that mean VMware IaaS, competing directly with Amazon, or continued reliance on partners?

To establish a Hybrid Cloud Services division within VMware, VMware has hired Bill Fathers, a veteran of Savvis, as senior VP and general manager. "With his expertise and proven ecosystem mindset, VMware and its partners will deliver the richest set of complementary cloud offerings," Gelsinger said in an announcement Wednesday.

That announcement set off another round of speculation that VMware was becoming a provider of its own infrastructure as a service. Two weeks ago in Las Vegas, Gelsinger told partners: "We all lose if they [enterprise customers] end up in these commodity public clouds. We want to extend our franchise from the private cloud into the public cloud ... Own the corporate workload now and forever."

If anyone was in doubt about who was meant by "commodity public cloud," VMware COO Carl Eschenbach soon explained: "I find it really hard to believe that we cannot collectively beat a company that sells books," he said. The comments have been widely interpreted as indicating VMware is bent on keeping its customers off public clouds by launching its own cloud infrastructure as a service, something it has declined to do so far.

Such a move would entail risks. The extensive network of partners that VMware has spent years building up would find itself competing with its advocate and benefactor. VMware-compatible cloud suppliers could decide the cost of competing with VMware, when providing a compatible environment, is too great.

Gelsinger, and the man he hired to build out the VMware-sanctioned hybrid cloud, Fathers, are both advocates of and builders of ecosystems around a core product line in their previous jobs. Gelsinger built a reputation for doing it at Intel. Despite critics' speculation, it's unlikely that Gelsinger and Fathers have decided ecosystems don't count.

What's more likely is that VMware has built a hybrid cloud test bed, or potential application developers' cloud, and is test driving it with the help of selected outsiders. VMware needs to learn more about what distinguishes a cloud application from the enterprise legacy applications that it has so efficiently been virtualizing so far.

As the owner of a significant piece of open source code, the Spring Framework, and successful host of the open source Cloud Foundry, there's no question VMware could provide infrastructure for software developers, who would one day deploy applications to one of its partner environments, or to VMware itself. That may be the surprise coming in the second quarter.

VMware's aggressive projection that it would realize 20% revenue growth as a result of these moves after 2013 bolstered its standing in the market. Its stock, which had suffered a 20% decline after its fourth-quarter earnings report, regained 8% by the close of trading Wednesday.

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Laurianne
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Laurianne,
User Rank: Author
3/14/2013 | 4:17:04 PM
re: Will VMware Challenge Amazon Head On?
It will be interesting to see which Intel ecosystem lessons Gelsinger applies here. And to see how he chooses to compete with Amazon on cost.

Laurianne McLaughlin
InformationWeek
timwessels
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timwessels,
User Rank: Apprentice
3/14/2013 | 5:25:47 PM
re: Will VMware Challenge Amazon Head On?
Well, yet another really excellent piece of tech writing from Mr. Babcock. VMware going head-to-head with AWS seems very unlikely. AWS is the gold standard for running Web-scale applications as inexpensively as possible. VMware is the gold standard for virtualizing legacy apps in enterprise data centers as expensively as possible. Their business models are fundamentally different. The friction comes as a result of AWS constantly introducing new services and lowering prices while actively soliciting enterprise cloud-era application workloads. VMware has had nothing to offer their customers, other than to point them to their vCloud partners. 175 vCloud partners do not equal AWS so VMware will have to do some heavy lifting. VMware is not interested in competing with AWS on price. It is interested in moving the legacy application workloads running in VMware virtualized enterprise data centers to its own VMware hybrid cloud service and hope that those customers will eventually build and run their cloud-era application workloads there too. The Nicira SDN technology will play in large VMware virtualized data center environments and in the VMware hybrid cloud. The DynamicOps technology will allow VMware to orchestrate more than just VMware environments. None of this will be offered at low cost to VMware's customers. The VMware hybrid cloud announcement is as much about keeping VMware's customers locked-in and the revenue stream flowing, as it is about the technology being deployed.
cbabcock
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cbabcock,
User Rank: Strategist
3/14/2013 | 9:41:21 PM
re: Will VMware Challenge Amazon Head On?
Yes, DynamicOps is a cross-hypervisor technology that VMware acquired and that fits its hybrid cloud strategy. Good point by Tim Wessels. From my perspective, VMware has different, major constituencies: its customer base, in its partner ecosystem and on Wall Street. It can't say (and isn't saying) different things to each. But when it's stock is down and it addresses Wall Street analysts, you should expect VMware to say it has a brilliant cloud strategy and will have no problem coping with Amazon and other cloud vendors. Remember, its comments on hybrid cloud followed its projection that it will grow revenues faster next year (20%) and the years thereafter than it is this year. And it will do so in an expanding cloud market. It made a bold case, and in two days the stock has gained back 12% of the 20% value that it lost after its fourth quarter earnings report in January. Mission accomplished, as our fearless leader used to say. But it has yet to really explain what VMware Hybrid Cloud Service is or what the Pivotal Initiative will do. There's a wide range of opinion on what Jim Gelsinger's remarks mean. Why clarify when the stock is moving upside? Charlie Babcock, InformationWeek
Andrew Binstock
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Andrew Binstock,
User Rank: Author
3/15/2013 | 8:02:10 PM
re: Will VMware Challenge Amazon Head On?
Agreed, another great piece by Charlie. You wrote "VMware going head-to-head with AWS seems very unlikely." I agree that they won't make an obvious us vs. them play, but in all other respects, I think they have to go head-to-head with AWS, but not as you suggest. Their best chance, IMHO, is to convince companies that private/in-house clouds are better than using public clouds. This tack will work for fin svs and some highly regulated industries. But eventually, I expect, the tide will flow towards public clouds. Not quickly, but inexorably.
lleblanc951
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lleblanc951,
User Rank: Apprentice
3/16/2013 | 1:18:09 AM
re: Will VMware Challenge Amazon Head On?
For VMware customers who want the flexibility to manage hybrid on and off-premise resources that includes Amazon EC2, they should check out the VMware Ready HotLink Hybrid Express (www.hotlink.com). It extends VMware vCenter to natively manage Amazon EC2 resources including cross platform administration, cloning, snapshots, templates, migration and bi-directional workload conversion. It won Best of Show at VMworld 2012.
Frankinca
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Frankinca,
User Rank: Apprentice
3/19/2013 | 11:26:08 AM
re: Will VMware Challenge Amazon Head On?
Thanks for the article. I am a fledgling business software provider and recommender. As a contractor to a group of dentists nearby who have common and separate data distribution needs, a hybrid cloud scheme is the answer. Have worked with virtual at desktop level, can now see how it can be applied at the cloud or universe level. Articles like these wake me up to the future and the possibilities of providing a superior IT capability to my dental group. I am going to follow VMware's business services closely and would like to be a test bed for their new cloud products. Are you listening VMware?
timwessels
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timwessels,
User Rank: Apprentice
3/19/2013 | 7:19:19 PM
re: Will VMware Challenge Amazon Head On?
Well, now that the VMware vCloud Hybrid Service has been formally announced, it is interesting to see what it is not. Mr. Gelsinger said that VMware is not building infrastructure to host the service and will continue to rely on its vCloud partner network of providers to deliver the service in cooperation with VMware. This is a far cry from VMware going head-to-head with AWS or announcing a plan to build its own data centers to deliver the service. I agree that VMware needed to make some bold announcement to re-inflate its stock price after seeing its value decline by 22% in one day, but vCloud Hybrid Service hardly looks like the "AWS killer" announcement everyone was expecting.
Shawn Douglass
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Shawn Douglass,
User Rank: Apprentice
3/20/2013 | 8:29:52 PM
re: Will VMware Challenge Amazon Head On?
From security and governance policies that follow entire application stacks to cloud portable services, the technology VMware is talking about as a future has been offered by at least one cloud management platform for a while now. However, a fight over IaaS is not a fruitful place to be without a discussion about how it supports the strategic endgame of increased business agility, faster time to innovation while decreasing operational costs. For a view of CMPs:
http://bigfatfinanceblog.com/2...
- Shawn Douglass, CTO, ServiceMesh
Multicloud Infrastructure & Application Management
Multicloud Infrastructure & Application Management
Enterprise cloud adoption has evolved to the point where hybrid public/private cloud designs and use of multiple providers is common. Who among us has mastered provisioning resources in different clouds; allocating the right resources to each application; assigning applications to the "best" cloud provider based on performance or reliability requirements.
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