VMware, the tech company majority owned by EMC, outlined its latest cloud computing strategy on Monday. Lost in the hubbub was the fact that Virtustream, EMC’s “other” cloud company, had its own news.
First: Virtustream, which EMC bought for $1.2 billion in 2015, will integrate its existing enterprise cloud with VMware’s (VMW) NSX virtual networking gear.
Basically that means customers who run both NSX in-house and Virtustream’s external cloud can use one screen to set up network policies for both. “If you run NSX on premises you can extend that network up into Virtustream’s cloud,” said Virtustream chief executive Rodney Rogers.
Broadly speaking, network virtualization lets companies run more than one task on each piece of networking hardware, which helps make networking operations more flexible and programmable. If you can use one router to handle multiple jobs simultaneously and also reprogram it as needs change, you won’t have to buy as much hardware.
By many accounts, including VMware’s own, NSX sales are going well. Early this year, VMware chief executive Pat Gelsinger said that business was on track to reap $600 million-a-year in sales. No wonder a big cornerstone of VMware’s new Cloud Foundation, the company’s new cloud software announced Monday, relies so heavily on NSX. After all, to enable very flexible cloud infrastructure, the ability to reprogram existing hardware in software to do more or different jobs, is a very big deal and that is what NSX promises.
Second: Virtustream will also integrate its own cloud offering with VMware’s vRealize cloud management software that helps companies manage hybrid clouds (which mix privately run and third-party cloud resources.)
Both of these new tie-ins aim to make it easier for companies to run some workloads on internal systems and others on a cloud operated by someone else. That ability to use outside servers to handle spikes in workloads is a key priority for business customers looking to keep their data center budgets in check.
The macro story here is that public cloud leaderAmazon (AMZN)Web Services, which amasses huge amounts of computing, storage, and networking resources to rent to customers, is winning over more IT workloads that previously went to businesses that used to buy EMC, Dell, VMware, IBM (IBM), or HPE (HPE) gear.
That is the existential threat that has rocked hardware makers for the past five years. It has spurred some companies to merge or acquire as Dell is doing with its pending $67 billion acquisition of EMC, expected to close next week, and others to get smaller as IBM has done by selling off its low-end server business and HP (HPQ) has done by splitting itself in half.
Rogers’ take is that while most big web applications that must run on thousands of servers spread all over the world have flowed to AWS, it’ll take much longer for important enterprise software like accounting and inventory systems that have run in corporate data centers for decades, to do the same.
And those are the types of applications that Virtustream, vCloud Air, and other private clouds want to win. Private clouds use many of the building blocks of public clouds, lots of automation, the ability to charge internal departments on a pay-as-they-go basis, but are otherwise wholly managed by the customer they serve.
“By 2020, we think mission critical segment of infrastructure as a service will be 25% to 30% of the overall market,” he noted. And he thinks EMC/Virtustream will win a lot of that business.
EMC’s (and soon Dell’s) challenge however will be to figure out how to market and differentiate multiple cloud products. Dell’s EMC acquisition, and all its satellite companies, is expected to close by October. Not only must it balance vCloud and Virtustream, but the fact that IBM (IBM) will also offer VMware’s Cloud Foundation
s on its own Softlayer cloud infrastructure. That means EMC, and soon Dell, is backing a bunch of cloud options offered by different players which gets confusing fast, and causes competitive pressures among different sales teams.
Virtustream, which specialized in enterprise-class cloud infrastructure, offers IT resources optimized to run such sensitive business applications as SAP accounting and financial software used by big corporate accounts. EMC already owned an estimated 80% stake in VMware, which had its own business-focused cloud offerings in vCloud Air. So the Virtustream acquisition caused some head scratching about which cloud would be pitched to which customers.
In announcing the Virtustream acquisition EMC chairman Joe Tucci made much of the fact that the big companies that use EMC storage were also the sorts of companies that ran or would like to run Virtustream. These big companies have security and compliance concerns that made public cloud, which relies on resources shared by many companies, not the greatest option. And yet, wasn’t vCloud Air also an enterprise-focused cloud?
Interestingly, VMware itself was interested in buying Virtustream, one source said, which, if true, makes all the subsequent positioning between EMC clouds even more interesting.
In October 2015, EMC said it would set up a joint venture to include vCloud Air and Virtustream in an effort to make sense of all of its cloud products. That idea was nixed within months.
For more on the Dell-EMC deal
It’s safe to say that things will remain confusing as the Dell-EMC deal gets finalized. Dell apparently realized this. The company, which itself had its own cloud ambitions, has pared them back.
For example, a few months ago it discontinued Dell Cloud Manager management software based on the company’s 2013 acquisition of Enstratius. And Dell’s top cloud executives exited the company soon after the EMC deal was announced.
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At VMware’s VMworld event in Las Vegas on Monday, Michael Dell pledged that the combined company will make private cloud “easy.” That’s fine but still leaves the looming threat of Amazon’s public cloud out on the horizon.
