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Could VMware's vCloud Hybrid Service Arrive to a Tepid Response?

VMware has finally came out and officially announced what it had already hinted at for some time — a new Infrastructure as a Service (IaaS) offering called the vCloud Hybrid Service.

The reaction can be summed in a single word.


Why? Well for a start, we've heard it all before. The whole VMware Service Provider Program was all about offering secure public clouds that work with VMware-based private cloud infrastructures.

What VMWare has announced is an IaaS cloud that the company will operate itself. The vCloud Hybrid Service will allow customers to use virtual networking to securely extend existing Layer 2 or Layer 3 networks from their data center to the vCloud Hybrid Service, and like the service offered by VMware Service Provider Program members, vSphere administrators will be able to view, manage and migrate VMs from the vSphere client using the vCloud Connector plug-in.

Virtually SpeakingBig wow.

What's most interesting about all this is the fact that VMware is facing the same conundrum that Microsoft is with its Office product. How do you introduce a service — Office 365 in Microsoft's case or vCloud Hybrid Service in VMware's case — without harming your cash cow: Office 2010 / Office 2013 for Microsoft or vSphere for VMware?

And once you introduce a service, how do you compete with other lower cost, less fully-featured services that may be similarly attractive to customers — Google Apps for Business or many OpenStack-based offerings, for example?

Whether its current strategy will work is something that remains to be seen. What will the company do if its hybrid service starts giving customers an appetite for the public cloud and starts cannibalizing VMware's on-premise license sales too much? Adjust the pricing? Abandon or restructure the service?

After all, Office 365 isn't the first cloud-based office service Microsoft launched, merely the most recent. And its pricing has changed frequently in response to market forces.

VMware intends to offer the service in two different ways:

  • vCloud Hybrid Service Dedicated Cloud will provide physically isolated and reserved compute resources and will be sold on an annual term with pricing starting at 13 cents an hour for a fully protected, fully redundant 1 GB virtual machine with 1 processor. In other words, that's a $1140 per year outlay at minimum.
  • vCloud Hybrid Service Virtual Private Cloud has a multitenant compute resource model, but with dedicated allocations for customers. Virtual Private Cloud will be sold on a monthly term with pricing starting at 4.5 cents an hour for a fully protected, fully redundant 1GB virtual machine with 1 processor. This option involves a minimum outlay of just over $30 per month.

Companies like Amazon and Google offer cloud resources on an hourly basis at a very similar price, although with much more memory offered. But by insisting on longer term commitments VMware has made it clear that its hybrid service is not really about "cloud-bursting" from a private cloud to additional resources just for those times when extra capacity is needed.

With monthly or annual commitments demanded this is clearly about something else entirely, even though the term "hybrid" is often associated with this type of cloud-bursting behavior.

Since the price points VMware has chosen are so similar to Amazon's and Google's, VMware clearly believes it has a premium offering that enables the company to insist on a long minimum commitment, if not premium pricing.

We'll have to wait a few months at the very least to find out how this vCloud Hybrid Service pans out, though, as it won't be generally available until July at the earliest, hosted in four yet-to-be-specified data centers around the US.

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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This article was originally published on June 13, 2013
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