VMware vCHS growth hinges on upcoming hybrid cloud services

Beth Pariseau, Senior News Writer

Published: 06 Feb 2014

VMware made its mark in technology history with server virtualization, but the company needs to catch up to cloud competitors with services beyond basic infrastructure to succeed long-term, industry watchers say.

VMware Inc. was the first to successfully virtualize x86 machines and has enjoyed a dominant position as a server virtualization vendor since then. Analysts estimate its market share at 80% to 85%, despite competition from Microsoft Hyper-V, which claimed it took server virtualization share from VMware last year.

As IT pros move from server consolidation to automation and cloud computing, VMware has also evolved into a cloud-centric company. It offers several on-premises cloud computing products bundled into the vCloud Suite, which includes vCloud Automation Center as well as server virtualization software. And last fall, it entered the public cloud with its vCloud Hybrid Service.

But VMware faces stiff competition as it looks to flourish as a cloud service provider. Amazon Web Services (AWS) is the 800-pound gorilla in cloud computing, with hundreds of thousands of customers, and there are a number of other prominent cloud providers in the mix.

VMware vCloud Hybrid Service (vCHS) has attracted some enterprise interest so far, but VMware's execution must be stellar to catch up to the rest of the market, IT pros said.

Specifically, VMware's execution is critical when it delivers on the Disaster Recovery as a Service (DRaaS) and Desktop as a Service (DaaS) offerings it revealed with the launch of the vCloud Hybrid Service (vCHS) in September.

Both offerings officially remain in beta, though VMware said on a Jan. 28 earnings call that DRaaS is about to enter general availability.

DRaaS: The best bet for vCHS

Last fall, VMware said the Site Recovery Manager (SRM) product still needs multi-tenancy capabilities to make DRaaS work, which has been completed on schedule. DRaaS will be available in beta in the fourth quarter, and according to one beta program participant, it works as expected.

"It's giving us the frequency of updates that we expect, and we can move things in and out of the cloud very quickly," said Darryl Dugan, manager of information technology for Nexon America, an online game publisher headquartered in Los Angeles. "Now we're just mapping out the regions that we want to use."

Dugan's company now has a Dedicated Cloud Core instance in VMware's Western Region and one in the Eastern Region, as well as a Virtual Private Cloud Core in the Western Region.

"The DRaaS with SRM is probably the biggest opportunity that VMware has right now," said Kyle Hilgendorf, an analyst with Gartner Inc., based in Stamford, Conn. "I don't think they can get there fast enough."

VMware will also offer DaaS on vCHS based on its acquisition of Desktone in 2013.

VMware avoids saber-rattling when it comes to AWS, but once the VMware vCHS DaaS offering leaves beta, it will be in direct competition with the public cloud giant. AWS has already built up a months-long lead in the market; the Infrastructure as a Service leader came out with its Amazon WorkSpaces product in November.

For now, vCHS customers are content to wait for a virtual desktop environment compatible with VMware's View VDI software.

"Desktop is something we're chomping at the bit for," said Shawn Wiora, CIO of Creative Solutions in Healthcare, based in Greenville, Texas.

VMware vCHS to-do list continues

As VMware looks to expand vCHS, it must also refine its cloud pricing model and undertake international expansion.

VMware's cloud pricing may still change as the company gains experience as a cloud service provider. For example, today there isn't compatibility between the vCloud Hybrid Service and the Cloud Credits Purchasing Program used to buy services with VMware Service Provider Program partners via an up-front purchase of pre-paid credits. VMware said it is exploring ways to integrate the programs.

While the current model of purchasing Core packages up-front suits the budget cycles of some early adopters, it remains unclear how successful it will be overall.

For example, some partners say their customers are confused by the pricing requirements and unclear how on-premises licensing translates into this model.

"We've had more help on [vCenter Operations Manager] and vSphere with operations management," said one value-added reseller (VAR) based in the Northeast who requested anonymity. "That's easier to get our arms around. The cloud is scary for VARs and a lot of salespeople. … We could definitely use more help."

International expansion is also crucial for VMware's cloud business. On the company's Jan. 28 earnings call, VMware CEO Pat Gelsinger said there has been beta availability of vCHS in the United Kingdom since December, with general availability expected this month.

"They really need to stand up data centers outside the U.S. before people can really see what the world thinks of it," said Bob Plankers, a virtualization and cloud architect with a major Midwestern university and a VMware customer.

Beth Pariseau is senior news writer for SearchCloudComputing. Write to her atbpariseau@techtarget.com or follow @PariseauTT on Twitter.