VMware turned in a good quarter, no question. There is a question on why that’s true. According to a piece in CRN, it’s their multi-cloud strategy, but I’m not convinced. Multi-cloud is a requirement for many enterprises, but is it enough to pull through a whole virtualization story? Not according to the enterprises I’ve talked with. So, what is VMware doing right?
The big thing, if you analyze both the company’s earnings call and the enterprise input I get, is “multi-cloud” but perhaps in a different sense than most would think. The media uses the term to describe an enterprise commitment to multiple cloud providers at the same time. Enterprises aren’t broadly committed to that, and in fact most enterprises tell me that they’d prefer to have only a single cloud partner. They’re building hybrids between their own enterprise-hosted applications/components and a public cloud provider, and different enterprises pick different providers. Even the same enterprise admits that they might be induced to change providers. Thus, “multi-cloud” is an attribute of a hybrid cloud strategy that can hybridize with all or at least most of the public cloud providers.
The two cloud-provider market leaders in hybrid cloud are Amazon and Microsoft, and VMware has a hook to both of these. Enterprises tell me that VMware is also interested in hybridizing with Google’s cloud services and even with IBMs. A couple claim to have been offered special integration quotes to both, in fact. Given the importance of hybrid cloud to enterprises, and given the fact that VMware is certainly a credible player in the data center, it’s not a surprise that as hybrid cloud interest grows, VMware would appear to be a credible partner.
Having what might be more accurately termed “any-cloud” support doesn’t hurt VMware a bit, but I think it’s the Amazon partnership that’s really churning up the opportunity. Microsoft has all the tools for effective hybridization in their own portfolio and they have a strong premises presence too. Amazon has no real traction in the data center, and so they need somebody like VMware to serve as their outpost on the premises. That’s a great position to have, of course, and the one I think is profiting VMware the most.
So does VMware now sweep all before it? I don’t think so, for a couple of reasons I’ll dig into a bit further. The first is that any-cloud hybridization is increasingly becoming an extension of container orchestration, specifically Kubernetes. The second is that competitors to both Amazon and VMware are surely looking at ways to derail the momentum VMware has shown. Finally, at least a part of VMware’s success is the classic low-apple story.
Let’s take the last of these first. VMware has a good premises base, but it’s not universal. There’s no way to tell from the earnings calls, but I’d say about three-quarters of the enterprises who tell me they’re in bed with the VMware/Amazon duo were VMware customers before, and of course an even larger percentage were Amazon customers. That means that all the stars are aligned for an easier sale and faster uptake on the result of the deal. As the low apples in the opportunity base of combined customers is plucked, it will get harder to sustain the early level of deals.
The competition angle, my second point, comes not only from Microsoft as the leader of the combined-hybrid story, but also from players like IBM/Red Hat and HPE. The former is the one who probably keeps VMware execs up at night, because IBM needs to exploit Red Hat’s broad industry footprint in the data center, a footprint broader than VMware has.
A Forbes article on the IBM cloud strategy seems hopeful. It focuses on containers, which is smart. It recognizes the role of Red Hat, which is smart, and it seems to admit that IBM can’t make this purely about IBM’s own cloud offerings. In particular, the decision to make Watson available on multiple cloud providers seems to point the way toward a broad application of Red Hat’s all-cloud model. To be sure, IBM might decide to try to keep Red Hat hybrid cloud as an IBM-cloud on-ramp, but that would seriously limit the benefit of the deal, and the Street already has doubts.
Red Hat’s OpenShift is not only the best-known production-grade container system out there, it’s also the one that enterprises tell me they find most credible. VMware doesn’t have the kind of container creds that Red Hat has, and so the increased buzz around containers plays directly to Red Hat’s strengths. If Red Hat were independent now, I’d say they’d probably have a clear edge, but since we still don’t know that IBM won’t snatch defeat from the deal, I have to wait and see.
Containers offer users three important things. First, containers have lower overhead than virtual machines, meaning you can stuff more application components into a server. Second, containers can be used to subdivide cloud IaaS services, letting users obtain virtual machines as their “infrastructure” in the cloud and then manage deployment and scaling by using the VMs as container hosts. Finally, containers have attracted so much interest that they’re the foundation of a whole ecosystem of enhanced middleware and tools.
That, of course, raises the Kubernetes point. I’ve said many times in my blogs that Kubernetes’ greatest strength is its ability to support a glue-on ecosystem through its open design. Workflow management, networking, and just about everything else you’d need in a hybrid cloud is already available in some Kubernetes-related open-source tool. The fact that there are many such tools and that some assembly is required is slowing down the realization that the Kubernetes ecosystem is turning into a massive distributed competitor.
Kubernetes is advancing on many fronts. There are initiatives designed to deploy across multiple Kubernetes-managed-clouds and on premises, to deploy on public clouds inside VMs as well as on premises, to create a workflow fabric, to integrate with OpenStack, to build virtual networks that are agile enough to keep pace with scaling and redeployment, and of course to support continuous development and integration. All of this is open-source and available to VMware, but also to everyone else.
The final point is that “multi-cloud” has become one of those marketing slogans that take on their own life. Even companies that don’t have any hosting platform business (Juniper comes to mind) are singing the song. There is always a marketing problem associated with riding a hype wave, which is that once the wave curls it can bury you in foam. VMware can’t rest on multi-cloud positioning. Nobody can, but that means finding another positioning story that works, and that’s never easy.