On the eve of VMworld 2016, VMware's annual user group conference, Microsoft and Red Hat would like to wean some of the company's customers to their offerings.

Charles Babcock, Editor at Large, Cloud

August 29, 2016

8 Min Read
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Beyond The Big 2: 10 Benefits Of Alternate IaaS Providers

Beyond The Big 2: 10 Benefits Of Alternate IaaS Providers

Beyond The Big 2: 10 Benefits Of Alternate IaaS Providers (Click image for larger view and slideshow.)

When VMware gathers the faithful at VMWorld 2016 in Las Vegas this week, the company might keep a careful eye out for how many of its customers are looking over their shoulder for some alternate source of virtualization.

Years ago, when VMware was winning the data center, raising prices and growing revenues by leaps and bounds, some observers concluded it had set itself up to be undermined by Microsoft, a skilled provider of mass market technologies at prices that tended to undermine the market leader.

Microsoft has indeed expanded the presence of its Hyper-V virtual machines in the Windows Server part of the data center. But the Hyper-V wave that was going to wash over the core, VMware-part of the data center never materialized.

Unfortunately for competitors, VMware has executed on its software strategy consistently enough to stay one step ahead of the prediction of eminent downfall. If it had faltered or introduced a highly defective product, it might have left more of an opening for Microsoft. But instead it has added value to its products and expanded those products into data center operations and virtual networking with such regularity that even IT managers who want to leave have found it hard to cut the cord.

What's different this time or is anything really different?

So below are six reasons why, as virtualization managers gather at VMworld -- which kicked off Sunday, Aug. 28, and runs through Sept. 1 -- they might be looking over their shoulders at any alternative on the horizon.

1. Prices Keep Going Up

VMware is unabashed about raising prices, as a successful proprietary software company needs to be in order to fund future development.

Last April, VMware consolidated some product lines, then raised prices; the price of vCenter Server Standard was set at $5,995, or up about $1,000, depending on your supplier. Granted it governs more virtual machines than it used to. That's the trade-off customers are constantly trying to calculate as virtualization budgets march higher. Some IT managers are looking at the amount of their budgets going to VMware and saying the rate of increase is not sustainable and they wish they could put some servers under a cheaper alternative, while still managing them through the vCenter Management Console.

Then there's the Gartner claim the virtualization market is "mature."

[Read more about VMware's latest acquisition.]

That means a successful company has to extract more out of each customer because almost everybody already has the product in a mature market. VMware, already a $6.6 billion company with nearly $1 billion in net income last year, says its license revenues grew 1% in the second quarter. It has other areas of growth, but that fact tends to confirm that the market is mature or soon will be. Does that mean more relentless price increases for VMware to keep revenues growing and investors happy?

2. Dell's Pending Mega-Merger Scares Customers

Dell is paying $67 billion for EMC, VMware, and Pivotal in a megadeal that has been months in the making. It's the largest acquisition on record and doubts remain in some quarters that it will be a fruitful one. CEO Pat Gelsinger is an experienced hand at managing corporate transitions, but Dell is an aspirant in managing a successful software business, not a proven hand.

No one is clear in how ownership and lines of responsibility will play out.

Diane Greene was a successful CEO at VMware from startup through its acquisition by EMC and right up to the point when EMC decided to replace her. She was followed by Microsoft veteran Paul Maritz in 2008, who was followed by Pat Gelsinger in 2012. Another key transition is the VMware vCloud Air business, whose senior vice president and general manager at launch, Bill Fathers, left VMware in April. Dell gets two clouds with the acquisition, EMC's VirtuStream and VMware's vCloud Air. If you want a clear path to the cloud, do you stick with VMware and see what happens or look elsewhere?

3. Microsoft Combines Virtualization, Cloud Services

Microsoft is proving increasingly savvy at combining enterprise products with Azure cloud services, and it's the only co-inhabitant, along with AWS, of the leaders quadrant in Gartner's Cloud Infrastructure Magic Quadrant

Microsoft Azure captured Boeing's predictive aircraft maintenance business on the strength of that appeal. Now Microsoft is combining its free, embedded Hyper-V virtualization with a free copy of soon-to-be-out Windows Datacenter 2016, the latest version of its Windows Server operating system, provided you're migrating away from VMware. Free is never quite what it seems. It's a limited time offer and you still have to buy a Software Assurance subscription (maintenance contract) to qualify. But for cost-sensitive virtualization managers with Windows Server already running in the data center, free Windows Datacenter may have its appeal. They can still virtualize another department under Hyper-V and manage the virtual machines through their existing VMware, vCenter management console.

4. Red Hat Offers Virtualization, Open Source, Cloud

A savvy alternative is beginning to take shape in Red Hat Virtualization, with some matching advantages, and some that VMware can't match. Some critics maintain that if the IT virtualization manager ever turns away from VMware, it will be for an open source alternative, not another proprietary license (such as Microsoft's). And one of the few credible sources of such an alternative is Red Hat.

The chit in Red Hat's hand addresses the chink in VMware's armor: Red Hat's KVM hypervisor is a second generation hypervisor that takes advantage of Linux kernel's scheduler and memory manager, both of which are efficient and avoid the need to go outside the host's operating system for those functions on behalf of virtual machines. Needless to say, Red Hat Virtualization (formerly, Red Hat Enterprise Virtualization) makes use of KVM. KVM is open source code and Red Hat contributes 60-63% of the changes in each release of KVM, giving it an ability to quickly take advantage of its changes in other products.

Red Hat is building out its product set to include Red Hat Virtualization Manager, which puts an agent on a VMware virtual machine and manages it alongside KVM VMs.

In this sense, Red Hat is copying VMware's moves and constantly bringing more cross-hypervisor management to virtual machines. The recently announced Red Hat Virtualization 4.0 works with cross-cloud manager, Red Hat CloudForms, not to mention Red Hat's distribution of OpenStack for on-premises, private clouds. In some ways, it's a software stack that's getting harder for VMware to directly match.

5. Software-Defined Networking Old Hat?

VMware popularized the concept of the software-defined data center driven by software applications guided by policies set by the human administrator. It was a leader in filling in that concept with software-defined networking via its acquisition of Martin Casado's Nicira SDN startup and its launch of its NSX product.

So doesn't that make VMware the automatic choice for enterprises that wish to move in this direction? It does up to a point, but the OpenStack project has a Neutron component that contains its own software-defined networking framework, with several third parties eager to provide applications for it through an open API. So again, if you're thinking that your virtualized data center is evolving toward a private cloud, which will be served by software-defined networking, there's a rapidly evolving alternative. Red Hat noted as much and has made it as convenient as it can for customers to implement Neutron networking as part of its virtualization environment.

6. Cloud Operations Look Different

Software-defined network may be a key, but the larger outline here is that enterprise data center has for many years been hospitable to proprietary software, with leanings in recent years to adopt more open source. The public cloud providers, such as Google and Amazon, have started out with open source code and come up with subscription services, sometimes with proprietary tweaks, such as AWS' Amazon Machine Image, a modification of the Xen virtual machine.

When it comes to standing in the right position to command the future virtualized data center, the vendor is going to have to not only have virtualization products but a public and private cloud strategy as well that a customer may pivot to when the time is right.

Chances are, the cloud strategy will need to stage a break with the proprietary, legacy data center and look more like the public cloud. And so far, the public cloud has been a place where prices go down, not up.

VMware remains a savvy and active supplier of what the data center needs next.

The question at VMworld will be whether its customers still look to it to cross that breakpoint with them or are they starting to look around.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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