"You're right," Gelsinger responded. "Maybe I should sit down with Steve and talk about aligning our strategies."
Guess it's time for Gelsinger to have that chat.
Yesterday Gelsinger was named CEO of VMware, replacing Paul Maritz, who will move up into a chief strategist position at parent company EMC. Maritz took over VMware when it had $1.3 billion in revenue and over four years led it to what is expected to be a $4.6 billion company this year.
My exchange with Gelsinger spotlights the blurring line between the missions of EMC and VMware. EMC is a data storage giant trying to play a bigger role in today's increasingly automated data centers. Companies increasingly want to manage their data center hardware-- storage, networking, and servers -- as one resource, and EMC doesn't want to be stuck providing just the storage hardware. VMware is the dominant server virtualization software provider, but it's increasingly focused on selling software used to manage virtualized data centers.
The executive shuffle occurs as VMware's growth, while still impressive, may be leveling off. VMware announced preliminary results for its second quarter this week, and they show revenue of $1.12 billion for the first quarter of 2012, up 22% over the same quarter last year. It will disclose full results July 23. Last year, its annual revenue growth was 32%, while the first quarter of 2012 showed a growth rate of 25%.
EMC CEO and Chairman Joe Tucci, who will continue in his roles, discussed the changes in a call with analysts. He is changing VMware's leadership, he declared, because the time to make changes "is when you are in a position of strength." Changes at the top were needed as "we see a transformation in the IT industry unlike anything we've seen before. Organizations are moving to adopt cloud computing that can invoke the efficiency and agility that comes from running IT as a service," Tucci said.
Maritz and team had done "a stellar job" in positioning VMware as a leader of that transformation. Now EMC and VMware needed to make adjustments that would allow the two companies "to become the leader in building out the complete, software-defined data center," he added.
The software-defined data center is a phrase that's been coined to describe a data center that can be organized more flexibly, with resources commissioned, reconfigured, or decommissioned through a software management layer. Administrators are able to make changes in such a data center continuously without disrupting users. But many challenges remain before a data center will be run from the management console of just one software layer. Data on hundreds or thousands of devices will need to be plugged into analytics software that can draw a picture of how the facility is running as a whole and help make decisions on how to keep it in trim.
When Tucci refers to "running IT as a service," he is referring primarily to a private, on-premises cloud--an environment that lets companies mimic some of the advantages of speed and flexibility that public cloud computing vendors such as Amazon Web Services offer. Private clouds let CIOs get some advantages of cloud computing without the risk of relying on an outside provider.
The EMC/VMware vision for a "software-defined data center," in comparison, is a safer, more conservative approach. Think of it as pulling existing legacy systems into a single management console without worrying about the IT changes a cloud environment demands, like letting employees self-provision their computing capacity or imposing a strict environment limited to x86 servers. The software-defined data center message lets EMC/VMware cater to both legacy and newly built, cloud-oriented, applications without VMware or EMC needing to tell customers which camp they should be in.
So how might EMC and VMware work more closely together to establish such a data center? Look at EMC's storage applications. Earlier this year, EMC said it plans to make its storage management software "virtualize-able," meaning able to run their functions in virtual machines. That would let IT move storage functions around the data center as virtual appliances, providing storage management wherever it's needed instead of centralized on EMC-only equipment. EMC is still working on executing on the idea.
Another innovation is to have more automated security and network management built into the management layer, allowing greater ease of administration of virtual machines, Gelsinger said during the call.
But if the software-defined data center is to come about, VMware is going to have to work with other software vendors, including other virtualization software vendors. The motive for elevating Maritz to the parent company may be a desire to get VMware one step removed from his known spirit of relentless competiveness. By putting VMware under the tutelage of the cool-headed Gelsinger, a veteran of Intel management techniques, Tucci is encouraging VMware staffers to reach out to other vendors. After all, before joining EMC in 2009, Gelsinger spent 30 years at Intel, the ultimate industry partner. He'll need those skills to diminish other tech vendors' fears that a software-defined data center is something designed to entrap them.
On the analyst call, Tucci referred to Maritz' "as the best technology visionary I have ever worked with," while praising "his fierce competitiveness." He also noted Gelsinger's ability to successfully build out an ecosystem around a proprietary vendor's set of technologies, "something he did at Intel."
After EMC bought VMware, it yielded ownership of 21% to give VMware some independence -- to give VMware room to lead in the emerging field of server virtualization without EMC's storage competitors needing to shy away. Gelsinger will face a tougher challenge keeping up that sense of independence. Wells Fargo equity analyst Jason Maynard thinks the exec shuffle is a step toward unifying EMC and VMware, a move he calls "inevitable" in a note today to investors. One reason: EMC's software-defined data center strategy centers on VMware's virtualization.
EMC's Tucci is also drawing on Gelsingers' experience in creating another independent entity, Virtual Computing Environments or VCE, a consortium of VMware, Cisco Systems and EMC. It produces racks of hardware with Cisco switches, EMC storage and VMware virtualization known as VBlocks for building cloud systems. No one knows exactly how well VCE is doing, and its product is known to be on the high end of the price scale. But the integrated package is in use at companies that wanted to get into cloud computing fast, including CSC, Xerox, and SunGard.
Enterprise customers may one day likewise want integrated units of hardware and software shipped to them, something like Oracle's Exadata and Exalogic machines, ready to be plugged in. Gelsinger's Intel experience--he led x86 architecture development and has played a role in each major modern Intel chip--might give him the right perspective to take VMware beyond virtualizing existing data center hardware and into a new, integrated virtualization appliance field.
In VMware's announcement of new leadership, Gelsinger indicated he was already thinking along those lines: "The next generation of software defined-datacenters will be built by combining software with standardized hardware building blocks. VMware is uniquely positioned to be the leader in this endeavor."
What was immediately clear Tuesday was that a major realignment of forces had been brewing, then occurred quickly at EMC and VMware. Maritz, for his part, said he was looking forward to working with Gelsinger; the two have worked together off and on over the 30 years since they got to know each other as junior employees at Intel. "I feel very good about handing over VMware to Pat… It frees me up to think about what can be done with this new cloud infrastructure," he said.
Gelsinger said Maritz "leaves very big shoes to fill." The changeover won't actually occur until Sept. 1, with a passing of the baton scheduled for VMworld in San Francisco Aug. 27-29.
Maritz will continue to serve on EMC's board of directors and Gelsinger will join the board. And Tucci himself isn't going anywhere, despite speculation that he may be about to retire. He said during the analysts briefing call that he was committed to stay as chairman of EMC through 2013 to make sure all the new arrangements worked out.
"I'm not putting any firm end point in the sand," he warned. He said the possibilities of the software-defined data center and cloud computing "energized" him and left him enthusiastic about the growth prospects of both EMC and VMware. "As long as I'm in good health, and I am, I'll be around," he said.
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