VMware EVO is bringing to software-defined data centers the same type of business model that Kentucky Fried Chicken had brought to restaurants decades ago. VMware is hungry to grow and is expanding its business to new territories. Colonel Sanders’s revolutionary vision to sell his chicken recipe and brand through franchise model is now coming to IT infrastructure as ready-to-eat value meals.
Most of the press reports and analyst blogs are focused on VMware’s arrival into converged infrastructure market. Of course, vendors like Nutanix and SimpliVity will certainly lose sleep as the 800-pound gorilla has set its eyes on converged infrastructure market. However, VMware’s strategy is much deeper than taking over the converged infrastructure market from upstarts, it is a bold attempt to disrupt the business model of selling IT infrastructure stacks while keeping public cloud providers away from enterprise IT shops.
Bargaining power of supplier: Have you noticed the commanding power of VMware in EVO specifications? Partners like Dell and EMC are simply the franchisees of VMware’s infrastructure recipe and brand. It is no secret that traditional servers and storage are on the brink of disruption because buyers wouldn’t pay premium for brand names much longer. It is the time for them to let go of individuality and become delivery model for a prescriptive architecture (franchise model) from a stronger supplier in the value chain.
Software is now the king, no more OEM: In the old world where hardware vendors owned brand power and distribution chains, software vendors had to make OEM deals to get their solutions to the market in those hardware vehicles. Now the power is shifting to software. The software vendor prescribes (a softened term that actually stands for ‘dictates’) how infrastructure stacks should be built.
Short-term strategy, milk the converged infrastructure market: This is the most obvious hint VMware has given; reporters, bloggers and analysts have picked up this obvious message. As more and more CIOs are looking to reduce capital and operational costs, the demand for converged systems is growing rapidly. Even the primitive assembled-to-order type solutions from VCE and NetApp-Cisco are milking the current demand for simplified IT infrastructure stacks. Nutanix leads the pack in relatively newer and better hyper-convergence wave. VMware’s entry into this market validates that convergence is a key trend in modern IT.
Long-term strategy, own data center infrastructure end-to-end while competing with public clouds: The two of three key pillars of VMware strategy are enabling software-defined data centers and delivering hybrid clouds. Although SDDC and hybrid cloud would look like two separate missions, the combination is what is needed to fight Amazon and other public cloud solutions from taking over the workloads from IT shops. The core of VMware’s business is selling infrastructure solutions for on-prem data centers. Although VMware positions itself as the enabler of service providers, it understands that the bargaining power of customers would continue to stay low if organizations stick to on-prem solutions. This is where SDDC strategy fits. By commoditizing infrastructure components (compute, storage and networking) and shifting the differentiation to infrastructure management and service delivery, VMware wants to become the commander in control for SDDCs (just like how Intel processors dictated direction for PCs in the last two decades). EVO happens to be that SDDC recipe it wants to franchise to partners so that customers could taste the same SDDC no matter who their current preferred hardware vendors are. Thus EVO is the KFC of SDDC. It is not there as a Nutanix killer, VMware also wants to take shares from Cisco (Cisco UCS is almost #1 in server market, Cisco is #1 in networking infrastructure), EMC Storage (Let us keep the money in the family, the old man’s hardware identity is counting its days) and other traditional infrastructure players. At the same time, VMware wants to transform vCloud Air (the rebranded vCloud Hybrid Service) as the app store for EVO based SDDCs to host data services in cloud. It is a clever plan to keep selling to enterprises and hide them away from the likes of Amazon. Well played, VMware!
So what will the competitive action from Amazon and other public cloud providers? Amazon has resources to build a ready-to-eat private Fire Cloud for enterprises that can act as the gateway to AWS. All this time, Amazon focused mainly on on-prem storage solutions that extend to AWS. We can certainly expect the king of public clouds do something more. It is not a question of ‘if’; rather it is the question of ‘when’.