Some folks think VMware Inc.'s business is at a crossroads. Gone are the days of rapid vSphere revenue growth. But someday, maybe newer virtualization platforms like NSX and VSAN will take off. Take a closer look at VMware's Q1 2016 results, and "someday" apparently has arrived.
Virtual SAN (VSAN) is radically simple, enterprise-class storage for VMware Hyper-Converged Software solutions, VMware asserts. Meanwhile, the company positions NSX as a network virtualization platform for the Software-Defined Data Center (SDDC).
So what does the current market momentum for NSX and VSAN look like? CEO Pat Gelsinger and CFO Zane C. Rowe provided some deeper details during a Q1 2016 earnings call last night.
VMware NSX Sales Momentum
Overall, VMware's Q1 2016 revenues rose a healthy 5 percent vs. Q1 2015, slightly ahead of Wall Street's expectations. Several new products within VMware's portfolio are beginning to take hold. Investors were impressed, lifting VMware's stock 13 percent in early morning trading today.
Among the highlights from Q1 2016: Overall, quarterly NSX bookings grew over 100% year-on-year, Gelsinger said. "We're continuing to increase the customer count customers going into production," he added. "Some of the customers as well that we saw – and while we didn't have as many big deals in Q1, we see a very powerful pipeline for the year, also across , across verticals, large and mid-size customers. So I'll just say overall, NSX, we are really excited about the potential and the transformative capabilities."
Overall, VMware has more than 1,400 NSX customers, with nearly 350 of those in production deployments, Rowe said. "These deployments are across a wide variety of use cases in the three broad categories of IT automation, application continuity and security, which includes our micro segmentation capabilities," Rowe asserted. "NSX is proving to be the premiere network overlay solution across any hardware infrastructure."
Still, VMware won't stop there. The company later this year will update its partner program to further motivate partners to promote NSX, VSAN and more, Channel Chief Ross Brown has confirmed to ChannelE2E.
VMware Cloud Strategy Clarified
Gelsinger also worked overtime to further clarify VMware's cloud strategy. Earlier this year, he described new approaches to build momentum without necessarily competing head-on against Amazon Web Services and Microsoft Azure. He made similar statements during yesterday's earnings call.
The multi-cloud strategy has three parts, Gelsinger said:
- Continue to help customers build private clouds;
- Extend that into the public cloud that SDDC stack into the public cloud; and
- provide a unique control plane to manage, run, secure and connect across any cloud on any device.
VMware has already announced new ways to manage AWS workloads, and a similar rollout for Azure is coming soon, he said. An IBM partnership will further accelerate the multi-cloud strategy, he added.
"At the highest level, customers are going on a journey," Gelsinger said. "They're going on journey to the multi-cloud future. They're picking strategic partners for that journey. And from a financial perspective, we clearly have a share-of-wallet opportunity in today's infrastructure on-premise, but we're laying out a clear path for customers being able to monetize and benefit from the new value, and taking advantage of clouds for tomorrow."
VMware VSAN, End User Computing Momentum
Meanwhile, the company also pointed to VMware Virtual SAN (VSAN) momentum.
"Although it's still early in the product cycle, VSAN license bookings grew over 200% year-over-year," Rowe said. "We are pleased to close our largest-ever VSAN deal with a global investment bank."
Still, VSAN has taken several years to mature. " just takes awhile to get a storage product mature,right, and...we have crossed the two-year cycle on VSAN now," said Gelsinger. "The 6.2 release, as I would say, checks all the boxes with regard to key features, capabilities and so on, and we are, I'll say right on schedule, right, we're seeing the inflection point on that business, and the 6.2 release really hit the mark in the marketplace very well."
VMware also touched on end user computing (EUC) momentum. Nine of VMware's top 10 deals in Q1 quarter containing some component of the EUC products, CFO Rowe said.
"All-in business was strong for EUC," Gelsinger said. "Big, big customers are coming our way. Huge deal in Japan for both desktop and mobile. Several large takeouts of competitive offerings both from the desktop and on the mobile side, particular strength in healthcare. Overall, VMware had a real barn burner quarter in healthcare and a lot of that was led by EUC, and overall growth rates, strong double-digit growth rates overall for the business and each of the parts."
VMware's Remaining Challenges
Still, VMware conceded that the AirWatch business needs to show stronger momentum. It sounds like a reorganized sales team may help with that effort.
Also, VMware will need to train far more partners to support NSX and VSAN. Most initial NSX deals have involved direct sales engagements, Channel Chief Ross Brown told ChannelE2E a few weeks ago. But channel partner program changes are coming later this year. The effort will include NSX training, and new forms of incentives. The incentives should motivate partners to create long-term NSX sales pipelines that are filled with customer wins, he added.
VMware must also work overtime to keep partner and employee morale high amid Dell's pending buyout of EMC (VMware's parent). That deal is expected to be completed somewhere between May and October 2016.
Amid all those variables, VMware is showing signs that it has turned the corner -- extending beyond traditional server virtualization and gaining momentum in network and storage virtualization. No doubt, Brown wants to accelerate that momentum with upcoming partner moves.
