VMWare CEO Pat Gelsinger clarified the virtualization company's cloud strategy during the company's Q4 2015 earnings call with Wall Street analysts. The move comes as Dell, EMC and VMware continue to press forward with Dell's pending $67 billion buyout of EMC.
First, some background: Overall VMware's business grew 10 percent in Q4 2015, with healthy momentum for the company's NSX network virtualization, virtual SAN and end-user computing businesses. Those are important, growing areas for channel partner. But on Wall Street, VMware has been hounded by market confusion, some layoff chatter and investor questions amid Dell's pending buyout of parent EMC. Among the question marks:
- Why did VMware abandon the Virtustream joint cloud venture with EMC?
- How will the company compete against fast-growing public clouds like Microsoft Azure and Amazon Web Services?
- Which cloud products and services will VMware emphasize, and which will become more targeted?
In response, Gelsinger is stepping up to the microphone to clarify the company's cloud strategy.
VMWare's Updated Cloud Strategy
During yesterday's earnings call, Gelsinger said VMware's cloud strategy now has three core components:
First, VMware plans to extend its leadership in private clouds -- where the company's Software Defined Data Center (SDDC) is taking hold across networking, storage and management, he asserted. ChannelE2E's Spin: VMware will need to move quickly here. On the one hand, VMware's traditional server virtualization is starting to slow. But on the other, VMware's NSX network virtualization revenue grew over 100% year-over-year in 2015, bringing the total annual bookings run rate to well over $600 million, the company said. Also, VMware’s Virtual SAN business grew nearly 200% year-over-year, with a total annual bookings run rate well over $100 million, VMware asserted.
Second, VMware will help customers to extend private cloud workloads into the public cloud. Here, Gelsinger clarified where vCloud Air fits into the conversation, stating:
"I’d like to take a moment to clarify our strategy for vCloud Air; the service will have narrower focus providing specialized cloud software and services unique to VMware and distinct from other public cloud providers. We will aggressively provide these innovations to our vCloud Air Network partners helping them to accelerate their growth.
VMware is creating cloud software and cloud services for cloud providers. It’s important to note that given that’s narrower focus, we believe the capital expenses we’ve already invested in vCloud Air will be adequate for our needs and that we expect our vCloud Air service to be accretive by the end of 2017."
ChannelE2E's Spin: Read between the lines and VMware believes vCloud Air can be a profitable business by the end of 2017 -- roughly 21 to 24 months from now. Meanwhile, Amazon is expected to disclose even stronger cloud profits for AWS later as part of the company's January 28 earnings call.
VMware Partners: Managing All Clouds?
Third, VMware will help customers and partners to manage workloads across numerous public and private clouds. That's where a new NSX offering -- slated to debut later this year -- will help customers to create secure and encrypted overlay networks across public clouds including AWS and Azure and On-Premise Data Centers, he said.
"VMware’s new multi-cloud and multi-device strategy will transcend the limitations of individual cloud services by providing customers with the ability to run, manage, secure and connect all their applications across all clouds and all devices," Gelsinger said.
ChannelE2E's Spin: Effective management, monitoring, optimization, security and automation across multiple clouds rank among the greatest needs facing partners and customers. It looks like VMware sees NSX as a software layer that can address all of those needs across all the major clouds as well as customer data centers. That sounds like a tall order. But it could effectively help VMware to be a cloud leader without competing head-on against AWS and Azure.
Additional Components
Gelsinger also pointed to VMware's mobility portfolio (i.e., AirWatch) as the pipeline for delivering secure cloud applications. And he also mentioned EMC’s Virtustream service in passing, promising that VMware will continue to work with that startup.
But the real secret sauce will involve NSX and other VMware tools that allow partners to manage multiple clouds and workloads from a single dashboard...
