You can't debate the success VMware has had in the data center over the last 5 years, but they are now faced with how to scale the success they have had. Just as any other large growing technology company, they need to think of alternative revenue streams to maintain a positive economic growth trajectory. VMware customers have a few choices right now:
- Continue to consolidate using VMware and migrate more top tier applications. This is all well and good, but is not moving at the pace VMware saw with initial IT owned workloads.
- Explore alternative hypervisors. This is a real threat to VMware and customers have already started down this path. It makes perfect sense but...wouldn't you know it.....here comes Microsoft with Windows Server 2012 with a solid case to use Hyper-V.
- Invest up the stack. This really means that customers can invest up the VMware stack with more management and automation capabilities. Again there is a segment of the market that will move in this direction, but the majority of VMware customers have yet to recognize the value of server virtualization beyond consolidation and cost containment.
- Expand consumption models. And here lies VMware's strategy. It's pretty simple. If VMware can build a bridge to service providers, customers have the opportunity to move all the consolidation efforts out of the data center into an alternative consumption model that in theory will likely cost less and is better than what IT can build and maintain. Thus you see VMware building vCloud Director, acquiring DynamicOps and then, knowing that the network plays a huge role in this shift, writing a big check to Nicira.
I don't think companies are about to shift their entire data center to Amazon or any other service provider, but the consumption model of leveraging compute resources from the cloud is real. Virtualization has really changed the way IT views and workload. Once that workload is virtualized, options abound. The virtual machine becomes easier to move-it is not bolted to a piece of hardware and suddenly what it is "running on" doesn't matter.
My colleague Jon Oltsik looks at the networking angle deeper in his recent blog, analyzing-vmwares-acquisition-of-nicira/index.html" target="_blank">Analyzing VMware's Acquisition of Nicira. At the end of the day VMware has to look ahead and predict where workloads are moving and how they can play a part. The networking layer plays an important role and if VMware can successfully inject themselves here AND win the hearts of the rapidly expanding service provider community, they improve their chance of creating the next wave of success.
With that said, this is not an easy nor an obvious win. Companies like Amazon are still ramping and have yet to fire on all cylinders in the enterprise IT market. Open source deserves a deeper look as community initiatives such as OpenStack continue to build solutions. Citrix has CloudStack. Cisco won't lay low and Microsoft Azure should not be ignored.
IT will adopt these alternative consumption models. They have already begun. Whereas VMware ruled the roost in the server virtualization market, it is not obvious that they will have the same success in the migration to service providers, but have certainly showed that they intend to play. As VMware invests and diversifies, it also has to be thinking about monetizing its application platform business and the impact this will have with its customers and the market. The business dynamic VMware faces is a true test to see how its leadership team can take a company that has been on fire with a steep growth trajectory to the next level with a diversified product portfolio and tap into the next wave of success that is about to light up in the market