August 21, 2013, 3:33 PM — When last heard from, VMware's CEO and president were trash-talking Amazon Web Services at a VMware partner event, characterizing it as an offering from a "bookseller." This week, in the run-up to VMworld 2013, VMware is on a publicity blitz, presenting an outline of the themes it will, presumably, flesh out in great depth at the event.
NetworkWorld last week carried an extensive interview with VMware's Pat Gelsinger that explored VMware's cloud strategy in depth. It was illuminating in that it presented a fascinating perspective on how VMware views the way IT operates and the role of the cloud in that operations method.
One must acknowledge at the outset that the execs have learned from their mistake at the partner event. There's no overt denigration of competitors in any of the interview. On the other hand, the interview presents a self-centered and, from my viewpoint at least, highly skewed view of IT buyers and other competitors in the market.
VMware Continues to Dismiss Amazon at Its Own Risk
The VMware mantra can be boiled down to this: The "enterprise" is coming to cloud computing, the "enterprise" is IT operations and VMware understands the enterprise like no one else. In fact, VMware is really the only enterprise-worthy solution, because only its solution allows one technology to run everywhere.
Other vendors suffer because they have non-VMware compatible technology, or their offerings are used by SMBs, or because they don't really understand the enterprise. And the enterprise, above all, wants to primarily run applications in-house, and use external cloud environments as an adjunct environment.
In discussing AWS, for example, Gelsinger begins by praising it for getting the cloud computing thing going. But then he notes that the problem is that Amazon doesn't understand the enterprise, and applications developed on AWS can't be brought in-house to be put into production-which, of course, is the enterprise goal.
To listen to Gelsinger's remarks, you'd think that no real production applications are run in AWS and that the primary issue users have with the product is that it's not compatible with VMware, since the really important aspect of hybrid cloud computing is that it supports VMware technology top to bottom.
I continue to be amazed by how so much of the tech industry belittles AWS as a sort of toy computing environment. (See the second paragraph in this Infoworld piece as an example.)
I don't think Amazon resents being underestimated, but the thinking presented in this interview that significant enterprise workloads are not being run in AWS today betrays a shocking ignorance of the true state of things-or an unwillingness to acknowledge the obvious.
VMware Misunderstands Microsoft Cloud Offerings, Too
Turning to the company that VMware identifies as its true competition-Microsoft-Gelsinger dismisses it. First, it gives away its hypervisor, and how can you take a free product seriously? Besides, the channel isn't going to be enthusiastic about a free product, even if customers might be. About Microsoft's product, he says, "We think its largely a low-end effect, at the low end of the marketplace-SMB, very small, a little bit of test and dev, etc. When it really comes to an enterprise choosing what their infrastructure is, it's a small piece of the choice and of the marketplace."
It's always a poor strategy to dismiss the competition. Furthermore, you have to wonder how deeply VMware has really looked into actual IT operational environments. Many enterprises are using Hyper-V and implementing on-premises private Azure deployments; characterizing them as unimportant use cases pursued by tiny SMB users is, in a phrase, dangerously arrogant.
Where VMware's strategy gets really confusing, however, is in the off-premises aspect of the VMware hybrid cloud vision. It's nearly impossible to understand exactly how VMware plans to provide its customers with the outside computing capacity necessary for its hybrid cloud vision.
While a number of CSPs have offered VMware-based cloud environments for quite a while, it seems their progress has been unsatisfactory to the company, because a few months ago it announced that it would offer its own public cloud environment. Predictably, that caused an uproar with existing partners, and VMware hastily backpedaled on this VMware-provided cloud-forward vision.
In his interview, Gelsinger took pains to note that it will include what it calls "franchise partners" will participate in the VMware ecosystem, offering an external piece of the VMware hybrid cloud offering, with the provider taking on the capital investment responsibility and with VMware (presumably) sending them business. However, this is muddled-so much so that the aforementioned Infoworld piece had to be updated because it wasn't clear in the initial interview with VMware's senior vice president of hybrid cloud that VMware in fact will offer its own public cloud environment.
VMware's Hybrid Cloud Strategy Marginalizing CSP Partners
There are three significant issues with this vision from the cloud service provider's point of view.
First, asking CSPs to implement and sell the VMware software stack as part of VMware's hybrid cloud strategy means they will be offering something just like all the other franchise partners. The first question every company asks is, "How do I differentiate myself?" Dictating that all partners offer the same software stack provides no basis for that-and asking them to take on the capital investment necessary for this, including the significant cost of VMware software itself, adds insult to injury.
Gelsinger offers some hand-waving about how the partners will bring other expertise to bear, such as local market regulatory knowledge, but I believe most of them would find that much less compelling than the issue of delivering a commoditized offering. Moreover, in my experience at least, few cloud providers really bring any business domain expertise to the table. They're hosting companies, not consulting firms.
Second, if the primary driver for the hybrid vision is going to be the on-premises piece, with the external resources used for bursting, that presumes the sale-and primary customer relationship-will rest with VMware or a system integrator partner. The CSP becomes little more than the recipient of referral business.
You can own the technology, or you can own the customer relationship. But if you don't own either, you're just an OEM supplier. OEM margins are much lower than the primary supplier's. So now you've taken on the capital investment and you're a dumb pipe. I don't think most of these companies went into business to be a dumb pipe.
Third, and most troubling from the perspective of a CSP, is where it now sits in the value chain. Clearly, the VMware hybrid vision is that on-premises is the most important infrastructure. Only if it proves unable to handle a workload will outside infrastructure be used.
The question for the CSP has to be this: If VMware offers the onsite technology, and offers its own cloud service, what's the rep's incentive to sell the external CSP service? It probably feels like the franchise partners are only going to catch the least desirable overflow.
Summed up, it's hard to understand how this hybrid vision would generate much enthusiasm in the CSP community. It's no surprise that many of them are evaluating OpenStack; after all, if VMware is going to be a provider and a competitor, finding a low-cost component that enables a CSP to chart a course independent of VMware probably looks pretty attractive.
VMware's Cloud Computing 'Vision' Not That Visionary
What I find most striking about the Gelsinger interview, however, is not the smug dismissal of competitors, nor the vastly diminished role of other participants in the VMware ecosystem, but the absolute lack of presence of workloads, developers or groups other than IT in VMware's vision of cloud computing. It's as though applications and all those associated with them are passive recipients of whatever VMware and its partners within IT deliver.
To say this blindness to the role of developers and business units is disturbing is to vastly understate it. After all, it's not like the growing importance of applications is a secret. Last year a senior Gartner analyst predicted, with a great deal of resulting publicity, that by 2017 over half of all IT spend would be controlled by the CMO, not the CIO.
Meanwhile, just this week, Forrester released a report on cloud developers, which found that they are younger, more willing to take risks, more engaged with business units and putting applications into production in cloud computing environments today. Compare that to VMware's cloud computing vision, where developers, applications and business units are nowhere to be seen.
The biggest challenge to VMware's business isn't its hybrid cloud strategy and ecosystem and the roles the various companies play within it. Participant squabbling about primacy of place, revenue sharing and support responsibility for a joint offering is as old as the technology industry itself.
The far greater challenge to VMware's business is VMware itself. By binding itself ever more tightly to its traditional buyer, and by willingly playing a role that attempts to reinforce the traditional buyer's chokehold on investment and deployment, VMware risks allying itself to what will, inevitably, be the losing side in the battle between operations and applications.
Bernard Golden is senior director of Cloud Computing Enterprise Solutions group at Dell. Prior to that, he was vice president of Enterprise Solutions for Enstratius Networks, a cloud management software company, which Dell acquired in May 2013. He is the author of three books on virtualization and cloud computing, includingVirtualization for Dummies. Follow Bernard Golden on Twitter @bernardgolden.
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