VMware 2019 Preview & 10 Year Reflection

David Vellante and Stu Miniman reflect on a decade of VMware's evolution, highlighting key milestones such as the shift from Paul Maritz's vision of a "software mainframe" to today's cloud-centric strategies under Pat Gelsinger. They discuss VMware's significant partnerships, particularly with AWS, and the impact of acquisitions like Nicira and AirWatch. The conversation also touches on the competitive landscape, including the rise of hyper-converged infrastructure, the role of containers, and the strategic positioning of VMware within Dell's broader ecosystem. They conclude by examining the future of multi-cloud environments and VMware's potential to dominate this space.

• Dramatic Change in VMware from 2010 to 2019
  • In 2010, VMware was led by Paul Maritz, who envisioned a "software mainframe."
  • The concept of a software mainframe involved highly integrated hardware and software capable of running any workload or application.
  • Initial skepticism existed, but over ten years, VMware achieved this vision, becoming a standard operating system in data centers.

"Paul Maritz was running VMware; he set forth the vision of the software mainframe last decade."

• This quote highlights the initial vision set by Paul Maritz for VMware, focusing on a highly integrated system.

"Essentially, it is the standard operating system if you will in the data center."

• This quote underscores VMware's evolution into a standard operating system for data centers.

• Complex Environment and Storage Bottlenecks
  • The environment was complex; issues required expert intervention.
  • Storage was a significant bottleneck, often referred to as the "I/O blender problem."

"It was a very complex environment when something went wrong; you needed guys with lab coats to come in and figure out what was going on."

• This quote emphasizes the complexity of the environment and the level of expertise required to troubleshoot issues.

"Storage was a real bottleneck."

• This quote succinctly points out the primary technical challenge of the time.

• Ecosystem and Storage Consolidation

  • VMware's strategy involved leveraging the ecosystem to solve storage problems.
  • Notable acquisitions included 3PAR by HP, Compellent by Dell, and Isilon and Data Domain by EMC.

"For every dollar spent on VMware license, fifteen dollars was spent on the ecosystem."

• This quote illustrates the significant investment in the ecosystem relative to VMware licenses.

"We pushed VMware at the time, saying, 'You guys got a storage problem.' He said, 'Listen, we don't have a lot of resources; we're going to let the ecosystem solve the problem.'"

• This quote highlights VMware's strategy of relying on the ecosystem to address storage issues.

• Pat Gelsinger's Leadership and Nicira Acquisition
  • Pat Gelsinger became CEO in 2012, marking a significant leadership change.
  • VMware acquired Nicira, which was pivotal in advancing networking capabilities beyond virtual machines.

"Pat Gelsinger took over as CEO, and VMware acquired Nicira, beating Cisco to the punch."

• This quote marks the leadership change and a significant acquisition that influenced VMware's networking strategy.

"Nicira had some really smart people and fundamental technology that would allow networking to go beyond the virtual machine."

• This quote underscores the strategic importance of the Nicira acquisition in enhancing VMware's networking capabilities.

• Software-Defined Data Center Vision

  • VMware aimed to extend its virtualization success in compute to storage and networking.
  • This vision led to tensions with companies like Cisco.

"VMware wanted to do to storage and networking what it had done to compute."

• This quote encapsulates VMware's broader vision for a software-defined data center.

"This started to set up the tension between VMware and Cisco, which lives on today."

• This quote highlights the emerging competitive tensions resulting from VMware's expanded vision.

• Emergence of Flash Storage
  • Flash storage became a significant trend, addressing some of the limitations of traditional storage systems.
  • API integrations initially served as a temporary solution to storage challenges.

"The other big mega trend, of course, was flash storage, which was coming into play."

• This quote introduces flash storage as a significant technological trend.

"That whole API gymnastics was a band-aid."

• This quote describes the temporary nature of API solutions before the adoption of flash storage.

• Integration of EMC and Dell Technologies

  • Pat Gelsinger was more willing to integrate EMC and Dell technologies into the VMware stack.
  • This integration led to the development of products like vSAN, which became prominent in the hyper-converged infrastructure space.

"Pat Gelsinger was much more willing to integrate some of the EMC technologies and now Dell technologies into the VMware stack."

• This quote highlights the strategic integration of EMC and Dell technologies under Pat Gelsinger's leadership.

"vSAN today has the most customers in the hyper-converged infrastructure space and is continuing to grow."

• This quote emphasizes the success and growth of vSAN in the hyper-converged infrastructure market.

• Changes in Governance Structure
  • Under EMC's ownership, VMware followed a "let a thousand flowers bloom" strategy.
  • Jeff Clarke's leadership brought a more consolidated approach, particularly emphasizing VMware's vSAN.

"Under EMC's ownership, it was sort of a 'let a thousand flowers bloom' strategy."

• This quote describes the decentralized strategy under EMC's ownership.

"Jeff Clarke coming in and consolidating the portfolio, saying, 'Let's let VMware go hard with vSAN.'"

• This quote highlights the shift towards a more consolidated and focused strategy under Jeff Clarke's leadership.

• Looking Forward
  • The discussion hints at future topics, including the relationship between Dell and VMware and further strategic directions.

"We'll talk about this some more, that relationship between Dell and VMware is tighter than it ever was."

• This quote sets the stage for future discussions on the evolving relationship between Dell and VMware.

"2013 was a big year; that's the year they brought in Sanjay."

• This quote marks a significant point in time, indicating further developments to be discussed.

• AirWatch Acquisition and EUC Leadership:

  • VMware acquired AirWatch, leading to their dominance in the End User Computing (EUC) space.

  • Citrix was the dominant player before VMware's acquisition of AirWatch.

  "Sanjay Poonen came in with the AirWatch acquisition, now VMware is a leader in that space."

  • The acquisition marked a significant strategic move for VMware, establishing its leadership in EUC.

• Failed Cloud Strategy: vCloud Air:

  • VMware's cloud strategy, vCloud Air, was introduced in 2013 but did not succeed.

  • The strategy was intended to compete with major cloud players but was later deemed a failure.

  "VMware came out with its cloud strategy vCloud Air... it just was basically a failed cloud strategy."

  • Analysts and industry insiders were skeptical about the viability of vCloud Air from the beginning.

• Spin-out and Potential Re-acquisition of Cloud Foundry:

  • In 2013, VMware spun out Cloud Foundry and founded Pivotal.

  • There were gaps between VMware's infrastructure capabilities and Cloud Foundry's application modernization.

  "They spun out Cloud Foundry and founded Pivotal... there was a huge gap between what VMware was doing on the infrastructure side and what Cloud Foundry was doing on the application modernization standpoint."

  • Potential re-acquisition of Pivotal by VMware to integrate application and infrastructure capabilities.

• Achilles Heel: Application Ties:

  • VMware's weakness lies in its lack of strong ties to application development.

  • Other companies like Microsoft and Oracle have stronger application ownership.

  "VMware doesn't have enough of a tie to or help build the applications. Microsoft owns the applications, Oracle owns the applications."

  • Bringing Pivotal back into VMware could help bridge this gap.

• Strength: Data Center Operating System:

  • VMware is strong in the data center operating system space.

  • They have established partnerships and solutions like VX Rail with Dell.

  "Their greatest strength is really they are the data center operating system."

  • VMware's presence in the data center platform extends into hybrid and multi-cloud offerings.

• Hyper-Converged Infrastructure (HCI):

  • Hyper-converged infrastructure gained traction, with VMware and Nutanix as key players.

  • Over time, Nutanix's presence diminished, and VMware adapted to new trends.

  "Hyper-converged really hit... Nutanix was at one point a strong partner of both VMware and Dell."

  • VMware's ecosystem evolved, with changing dynamics between partners.

• Dell's Acquisition of EMC and VMware's Partnerships:

  • Dell acquired EMC in 2015, marking a new era of VMware ownership.

  • VMware formed key partnerships with AWS, IBM, Google, and Microsoft for cloud solutions.

  "2015 was the big announcement in the fall where Dell was acquiring EMC... VMware has done deals with Google and Microsoft."

  • The partnerships signify VMware's shift towards a multi-cloud and hybrid cloud strategy.

• Multi-Cloud and Hybrid Cloud Strategy:

  • VMware's cloud strategy evolved to include multi-cloud and hybrid cloud solutions.

  • Partnerships with AWS, Google, and Microsoft are crucial for this strategy.

  "We now have entered the multi-cloud hybrid world... VMware capitulated on cloud smart, cleaned up its cloud strategy."

  • The strategy reflects the industry's recognition of on-premise and hybrid cloud environments.

• Integration of Pivotal and Other Software Assets:

  • Recommendation for Dell to fold Pivotal into VMware and integrate other software assets like RSA, Boomi, and SecureWorks.

  • This integration would strengthen VMware's position and tie Dell's hardware more closely to VMware's software.

  "I privately mentioned to a Dell executive that one of the things I thought they should do is fold Pivotal into VMware... make VMware the mothership of software."

  • This move could provide a competitive advantage in the ecosystem.

• VMware's Ecosystem and Competitive Landscape:

  • The ecosystem is less friendly than it used to be, with competitors like HPE and IBM expanding their capabilities.

  • Dell's cloud strategy heavily relies on VMware, making it their primary offering.

  "VMware now is in a position of strength with what are five six hundred thousand customers... HPE and IBM do a lot of other things beyond VMware."

  • Dell's alignment with VMware's cloud strategy is critical for maintaining competitive edge.

• Keeping Security Assets Separate:

  • Dell keeps security assets like RSA and SecureWorks at arm's length due to the inherent risks in the security space.

  • The separation helps manage potential issues more effectively.

  "They keep the security pieces at arm's length... when something goes wrong in the security space, it's not a question of if, it's a question of when."

  • This approach mitigates risk and ensures focused management of security challenges.

• Containers present both opportunities and challenges for VMware.
• Concerns about v-tax and vendor lock-in are prevalent among customers.
• VMware's acquisitions (CloudHealth, Heptio, Bitnami) and partnerships (Cloud Foundry, Pivotal) aim to position it as a leader in containerization and Kubernetes.
• VMware's large customer base and enterprise licensing agreements provide a stable foundation, but questions remain about their competitiveness in modern environments.

"Containers are this major force. Can VMware make containers a tailwind, or is it a headwind for them?"

• Containers can either benefit or challenge VMware's market position.

"VMware wants to be the group that educates you on containerization and Kubernetes."

• VMware aims to be a key educator and provider in the containerization and Kubernetes space.

"The question I would have is if I want to do something in a modern way, is VMware really the best partner to choose from?"

• Doubts exist about VMware's suitability for modern, cost-effective solutions.

• Multi-cloud is increasingly becoming a strategic choice rather than a byproduct of multi-vendor environments.
• Security, governance, and compliance are driving factors for multi-cloud adoption.
• Key players in the multi-cloud space include VMware, Microsoft, Cisco, Google (Anthos), and Red Hat with IBM.
• AWS remains dominant but prefers to focus on single-cloud solutions.

"Multi-cloud has largely been a symptom of multi-vendor. It's not necessarily been a strategy of customers."

• Multi-cloud often results from using multiple vendors rather than a deliberate strategy.

"Issues around security, governance, compliance have forced organizations and boards to say, 'You know what, we need IT more involved.'"

• Security and compliance concerns are pushing organizations towards multi-cloud strategies.

"AWS... they don't really want to talk about hybrid and multi-cloud. Why would you?"

• AWS prefers to focus on single-cloud environments due to pricing and control advantages.

• Cisco remains a dominant player in networking, but VMware's NSX presents a disruptive force.
• Cisco's strategy is evolving towards software-defined networking, moving away from purely hardware-based solutions.
• Customers seek simplicity and integration, often favoring NSX if they are already using VMware products.

"Cisco is a very impressive company... 60 plus percent market share."

• Cisco's strong market presence and historical dominance in networking.

"NSX is a disruptive force that's very hard for Cisco to deal with."

• VMware's NSX challenges Cisco's market position in various dimensions.

"Cisco is not a networking company. They are a software company."

• Cisco's strategic shift towards becoming a software-centric company.

• The VMware-AWS partnership has been beneficial for VMware, providing a bridge to cloud adoption.
• The long-term impact on customer spending is still uncertain, but the partnership has provided momentum for VMware.
• Cloud growth outpaces on-premises solutions, but VMware's hybrid approach offers a transitional path for customers.

"The VMware AWS relationship has been a real positive for VMware."

• The partnership has been advantageous for VMware's market position.

"VMware really opened things up and says, 'Look, you can embrace cloud, and we're there for you.'"

• VMware positions itself as a bridge to cloud adoption for existing customers.

"There's only 20% of workloads that are in public cloud today."

• A significant portion of workloads still reside outside the public cloud, highlighting the ongoing relevance of hybrid solutions.

• Current and Future State:
  • Multi-cloud is the current trend among customers.
  • Hybrid cloud will be prevalent in the next five years.

"Multi-cloud is what customers are doing today, and multi and hybrid cloud is what customers will be doing five years from now."

• VMware's Role:
  • VMware is expected to maintain a significant presence even as the shift to native cloud services continues.

"Use VMware for what I need to, but I might go more native cloud for some of those other environments."

• Impact on Market Share:
  • The partnership between VMware and AWS could shift market share dynamics, potentially at the expense of other vendors.

"The other big question we're watching is, will VMware and Outposts get a larger share of wallet as a result of that partnership at the expense of other vendors?"

• Concept of Same-Same Full Stack:
  • The strategy of having the same control plane, hardware, software, and data plane both on-premises and in the data center has been around for over a decade.

"That full same-same full stack, it's been something we've been talking about now it feels like for 10 years."

• VMware's Strengths:
  • VMware has decades of experience in managing software stacks in heterogeneous environments, offering flexibility across different hardware stacks and cloud environments.

"VMware has strong strengths over two decades of experience in making sure that I can have a software stack that can live in heterogeneous environments."

• Diverse Partnerships:
  • VMware is aligning with multiple cloud providers, including Amazon, Google, and Microsoft, to ensure its presence across various environments.

"Amazon might be their number one partner, but they're lining up everywhere."

• VMware's Adaptability:
  • VMware aims to be as ubiquitous in the cloud environment as it has been in data centers.

"VMware is going to make sure that they live in all of these environments just like they lived on all of the servers in the data center in the past."

• Dell's Integration Strategy:
  • Dell is focusing on a tight integration with VMware, even at the potential expense of its broader ecosystem.

"Dell wants to integrate more tightly with VMware, and they don't really care if it's at the expense of the ecosystem."

• Leadership Dynamics:
  • The leadership team at Dell, including Michael Dell and Jeff Clark, is strategically positioned to strengthen the Dell-VMware relationship.

"Michael Dell putting Jeff Clark in charge of everything Dell was brilliant."

• Growth of Cloud Spending:
  • Cloud spending is growing significantly, with AWS being a major competitor to Dell.

"Cloud's gonna keep growing 35-40 billion dollar a year run rate company growing at 40 percent a year."

• AWS's Market Influence:
  • AWS's influence on the market is substantial despite its current market size.

"AWS is still a small piece of the overall IT spend, but their influence greatly outweighs their market size."

• Hybrid Cloud Experience:
  • The ability to create a seamless cloud experience in a hybrid world is crucial for Dell and VMware.

"To what degree can Dell, VMware, and the ecosystem create that cloud experience in a hybrid world?"

• Cost Structure Comparison:
  • Dell has a competitive cost structure in the on-prem world, while AWS is competitive in the cloud space.

"Dell's cost structure is better than anybody else's in the on-prem world, but AWS's cost structure is better relative to Dell."

• IBM and Red Hat:
  • IBM's acquisition of Red Hat positions them as a significant competitor in the multi-cloud space, leveraging their strong services background.

"IBM and Red Hat, this is a services play, and IBM has services in their DNA which can help supercharge Red Hat."

• Potential Market Leaders:
  • VMware is currently favored, but other players like Red Hat, Microsoft, and Google also have strong potential.

"VMware right now would be my favorite, but Red Hat has good market momentum, and Microsoft and Google have strong potential."

• Future Prospects:
  • The multi-cloud and hybrid cloud markets are still evolving, and there is significant competition among major players.

"It's so early right now in the hybrid cloud world in the multi-cloud world that if I were any one of those five, I'd be going hard after it."