VMware Bets Its Future On Multicloud — But The Odds Are Long

Will enterprises pay big money for both public cloud IaaS and VMware cloud infrastructure services just to get past hyperscaler lock-in? That’s VMware’s wager in a multicloud and hybrid world, and the company’s flagship user event touted a series of services and offerings to convince customers to take VMware with them as they move from the data center to hybrid and multicloud. If customers perceive their choices to be a tradeoff between lock-in with public cloud vendors or lock-in with VMware, VMware is hoping the benefits of its ecosystem prove to be more valuable than the public cloud by itself. Key insights from the event include:

  • vSphere 8’s many enhancements target a hybrid and multicloud ecosystem. These additions include leveraging data processing units (DPUs or SmartNICs) to increase workload efficiency and the introduction of an elastic edge software defined firewall which allows NSX to run with less overhead and enables scale out firewall functionality up to eight nodes across different clouds instead of only being able to scale up a single node in one location.
  • VMware is making significant efforts to streamline a complex portfolio. Not only to simplify it but to make it consumable as a service. Universal licensing, alignment of products to solutions, and significant investments in VMware’s customer success organization are the most palpable changes to the product line. For example, CloudHealth, vRealize Automation, and Tanzu for Kubernetes Operators are being wrapped into VMware’s Aria to provide an end-to-end solution for managing cost, performance, configuration and delivery of cloud-native applications. Notable addition to the Aria brand for public cloud management is Aria Graph, a graph-based data store that can visualize resources and their relationships. Aria Graph will be delivered as a capability in Aria Hub which is a centralized view and control plane for multicloud environments.
  • VMware’s value is in consolidated management, including multicloud. VMware has traditionally provided value by virtualizing infrastructure resources to increase utilization, make management easier, and increase automation. VMware Cloud Foundation brought cloud-like resources to the private data center and helped extend VM management to the public cloud by providing a common abstraction layer for on-premises and cloud workloads.  VMware Explore saw the announcement of VCF support for more cloud targets than ever before with simplified management between the different providers.  Aria extends this trend in centralized management tooling by bringing metrics and data from non-VMware infrastructure into a single management console that is coupled with vRealize automation to manage far more with less.  The VMware version of multicloud management is compelling to many enterprises looking to leverage and extend existing infrastructure with relatively low upfront risk.

For Now, Key Questions Remain

After attending the event, key questions remain for us and our enterprise clients about VMware’s strategy and long-term market position.

  • Container-based, aka cloud-native, deployment is increasing; are VMs legacy? VMware’s competition is not another single platform, but rather a new compute model, one that is decentralized and decoupled, and oriented toward consuming computation as a service whether it is in the public cloud, a hosted private cloud, or on-premises. That model, of course, is being developed industry-wide with containers, serverless and other cloud native technologies. VMware has been an important player in crafting that open-source model, but its core revenue model is focused on attending to a large enterprise customer base that relies on VM-centric vSphere products and services.  VMs continue to be important part of the enterprise technology stack, but are increasingly perceived a legacy technology as the investment and innovation is moving to the newer ones
  • Can VMware shepherd enterprises to cloud native? Many enterprises are asking this question. The challenge is that there is no easy answer. The impending Broadcom takeover and VMware’s inability to build a strong public cloud presence so far leaves a lot of room for doubt, even if some of its open-source endeavors are successful. For example, Tanzu Application Platform (TAP) checks all the boxes for developers tired of wrestling with Kubernetes complexity. But TAP can run on other vendors’ K8s distros too, such as the Red Hat OpenShift capability announced at VMware Explore. Even if TAP grabs substantial market share of K8s-based development platforms, the revenue it would likely generate would only be a fraction of that generated by its legacy vSphere products.
  • Is lock-in to VMware better than lock-in on the hyperscalers? Another vexing question facing VMware is how long it can sustain a relatively neutral platform for enterprises to leverage multicloud and avoid lock-in by the hyperscalers. For VMware, offerings such as VMware Cloud Foundation help the company hang on to customers who are shuttering data centers and embracing public cloud. This buys VMware time to mature its cloud native Tanzu offerings and offer modernization within the VMware realm. But for the hyperscalers, hosting VMware workloads is the functional equivalent of the fox guarding the henhouse door. If VMware doesn’t deliver — or fails to do so cost effectively — the public cloud vendors will happily step forward to offer VMware Cloud Foundation customers comparable capabilities on cloud native platforms at an attractive price.
  • Will VMware’s investments in customer success make a difference? VMware has invested heavily in its customer success organization, especially as it transitions from perpetual to a subscription-based model. CFOs often ask CIOs to justify VMware costs, especially when most enterprises are purchasing very similar technologies from the public cloud providers and many alternative stacks exist.  Customer Success helps customers leverage their investments better, which in turn prove the platform’s value to the CIO. However, these investments may be too late to make a difference.  Broadcom has a history of reducing general customer support and funneling resources to its top customers.  VMware is new to its as-a-service transition, and the company may not have time to prove the value of its investments to its potential parent company.  This blog by Broadcom is an effort to signal to the market its intention to keep VMware whole and increase the value of the platform to customers.   However, given Broadcom’s record with past acquisitions, doubts over VMware’s future will persist until the acquisition is completed and Broadcom demonstrates that it can take VMware forward.

The announcements at VMware Explore show that VMware leaders recognize the many challenges ahead and are working to address them.    The real question is whether VMware has the capacity to remake itself, or whether it has sufficient time to make needed changes before taking on the additional strain of becoming the centerpiece of Broadcom’s software division.

VMware Bets Its Future On Multicloud — But The Odds Are Long

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