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VMware Shifting Focus in Preparation for Life Under Dell

By Paul Rubens (Send Email)
Posted March 28, 2016


Things are going to be very different for server virtualization technology pioneer VMware when Dell becomes its new master.

For one thing, the server virtualization technology moniker will probably have to go. Virtually Speaking That's because sales of its vSphere hypervisor platform have begun to fall, and that trend looks set to continue into the future.

That's what VMware top brass are saying following the company's full year financial results, which were announced last month.

Current VMWare Trends 

The company is also getting leaner, and has announced that it is shedding 800 jobs — almost 5% of the company's total workforce — at a cost of between $55 million and $65 million.

The company plans to reinvest the associated savings in field, technical and support resources associated with growth products, VMware said in its results announcement in January.

So what are these growth products? Not VMware's vCloud Air public cloud platform, that's for sure. Most of the 800 job losses are believed to have come from VMware's cloud operations.

The ramping down of the company's foray into the public cloud is probably sensible and not too surprising. That's because it faces formidable competition from Amazon's AWS public cloud, and increasingly from Microsoft's Azure public cloud platform.

Microsoft has ditched its aspiration to be a Windows platform in the cloud and is now competing hard for any workloads that businesses care to run on it, Windows, Linux or anything else there is sufficient demand for.

Not even Google, the world's biggest company, is putting up a serious challenge to AWS and Microsoft in the cloud, so Dell/VMware is probably right to conclude that its attention would be more profitably spent elsewhere.

VMware is not pulling out of the cloud entirely, though. Going forward, "the service will have narrower focus providing specialized cloud software and services unique to VMware and distinct from other public cloud providers," explains Pat Gelsinger, VMware's CEO.

NSX and Virtual SAN Sectors Showing Signs of Growth

One growth area for VMware that has been identified is in the company's NSX business, the network virtualization and security platform for software-defined data centers (SDDCs) that has emerged from VMWare's $1.3 billion acquisition of startup Nicira back in 2012. This grew over 100% year-on-year, bringing the total annual bookings run rate to well over $600 million, according to the company.

Instead of concentrating on competing with Azure and AWS, VMware is going to go hunting for business within those public clouds, offering a version of NSX that can be used to set up secure encrypted overlay networks across corporate data centers and Azure, AWS and other public clouds.

Another growth area is VMware's Virtual SAN, which the company says grew 200% year on year in Q4 2015, with a total annual bookings run rate well over $100 million. (While it's not immediately obvious why the figure VMware highlights is for Q4 only rather than for the whole year, it's a safe bet that it's because the full year figures weren't as high.

It's hard to get quite as excited about vSAN as it is about NSX though: the business is comparatively small, and virtualized storage is an area where VMware will face plenty of competition. If vSphere sales are falling you'd imagine that the prospects for vSAN are not exactly as rosy as if vSphere sales were growing.

One more promising area VMware highlights is so-called end-user computing, which grew over 30% year-over-year, bringing the total annual bookings run rate to over $1.2 billion. End-user includes things like VMware Horizon VDI infrastructure, as well as AirWatch, the enterprise mobility management software company that VMware acquired in 2014 for about $1.5 billion, and which can be used to deliver secure cloud applications.

Looking at all this, it seems like VMware is very deliberately transitioning itself — perhaps in preparation for life under Dell. It wants to become a company that helps you set up and manage hybrid clouds using many different public cloud providers, with NSX at the very heart of things.

That's going to make life rather interesting for Dell, because it will be a couple of years yet before the company discovers whether VMware's transformation strategy succeeds.


Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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