(Above is VMware’s global CEO Pat Gelsinger)
The strategy of “alliance and cooperation” originated during the Spring and Autumn Period and the Warring States Period. Initially, the states of Qi and Qin were the most powerful, while the other five states would sometimes form alliances to counter Qi and Qin, and vice versa, Qi and Qin would occasionally pull in the other five states to jointly confront other nations. The alliance tactics among the smaller states and the alliances between small and large states became classic strategies for the “great powers” to compete during chaotic times.
Since 2006, the first decade of cloud computing has marked the beginning of a global technological industry “chaos”. During this decade, IT infrastructure and traditional IT technologies faced tremendous shocks, particularly for the first major camp of enterprise IT represented by companies like IBM, VMware, Microsoft, and Oracle. Consequently, Microsoft invested heavily in building large data centers globally, becoming the second-largest public cloud provider after AWS, while Oracle spent five years rewriting all its software code for cloud computing, and IBM acquired the public cloud service provider SoftLayer and vigorously developed its cloud computing business.
As the world’s leading virtualization vendor, VMware faced significant challenges during the first decade of cloud computing, as many internet companies and cloud computing vendors developed virtualization software based on open-source technologies. As a software vendor, VMware did not have the financial strength to build its own public cloud data centers on a large scale, so it chose a second path: the strategy of “alliance”—supporting numerous other cloud service providers outside of the giant public clouds to form the second major alliance in cloud computing.
The Public Cloud Market for Data Center Transformation is Huge
At VMworld 2016, held on August 29, 2016, VMware emphasized that there are currently two types of public clouds: one type includes the three giant public clouds—AWS, Microsoft Azure, and Google—forming the first major camp of public clouds, while the other type consists of other public clouds, telecom operators, and local data center service providers.
In fact, every country has its own local public cloud service providers and many telecom operators and traditional IDC data center service providers eager to develop public cloud businesses, but their data center transformation into cloud services has always been a challenge, resulting in a fragmented state. Currently, only AWS, Microsoft Azure, and Google possess the technical strength to develop a complete set of public cloud software technology systems, while the vast majority of other public cloud and data center service providers can only rely on OpenStack to establish their public cloud technology systems. The open-source OpenStack has only a five-year history, and its entire technical system and framework are still evolving.
According to relevant data, there are currently about 500,000 data centers in the Chinese market. Based on data from the China IDC Circle, in 2014, the government strengthened policy guidance and opened IDC data center licenses, while the rapid development of emerging industries such as mobile internet, video, and gaming propelled the IDC industry market size to 37.22 billion yuan. It is expected that the growth rate of the Chinese IDC market will stabilize at over 35% in the next three years, and by 2018, the market size will exceed 140 billion yuan, with a growth rate approaching 39.6%.
In contrast, Alibaba Cloud currently has an annual revenue of about 1 billion USD, and Deloitte predicts that Alibaba Cloud will reach an annual revenue of 67.7 billion yuan by 2019, a figure close to the market’s forecast for AWS’s revenue in 2016. In other words, if it can capture the majority of public cloud service providers, telecom operators, and data center service providers outside of the three major public cloud giants, this so-called second alliance in cloud computing could rival any giant public cloud.
Supporting the Second Major Alliance in Cloud Computing with Complete Technology
Looking back at VMware’s technological evolution over the past five years from the current results, everything becomes clear. Five years ago at VMworld, the concept of the Software Defined Data Center (SDDC) was first proposed, which is VMware’s main strategy to respond to the significant changes in cloud computing technology. However, over the past five years, SDDC has continuously evolved, and it was only at VMworld 2016 that the final product line of SDDC was launched, allowing the industry to understand what VMware truly aims to achieve.
Simply put, public cloud data centers mainly include three fundamental functions: computing, storage, and networking, along with operating systems primarily used for task and load balancing scheduling. Among these, computing is mainly based on virtual servers, storage on virtual storage, and networking on virtual networks, with the core idea being to install software on industrial-standard x86 server clusters to achieve the three fundamental functions of public cloud at a low cost.
Currently, the industry uses open-source technologies to implement these three major functions: virtual servers, virtual storage, and virtual networks, with the open-source version of OpenStack serving as the operating system for the entire public cloud data center. Over the past five years, VMware has successively launched three major product lines: vSphere server virtualization, vSAN storage virtualization, and NSX network virtualization, using mature commercial technologies as alternatives to open-source technologies to achieve the three fundamental functions of computing, storage, and networking.
At VMworld 2016, VMware further introduced VMware Cloud Foundation, which is not only an integrated hardware and software solution but also a complete public cloud management system suite. The software part includes vSphere server virtualization, vSAN storage virtualization, NSX network virtualization, and SDDC Manager management software. On the hardware side, it can utilize VCE architecture or general servers, storage, and networking hardware from DELL, QCT, HPE, Cisco, Arista, etc.
With VMware Cloud Foundation, it is easy to build a private cloud environment, and the entire software suite can also be deployed in public data centers to form public cloud infrastructure services. In other words, the software suite of VMware Cloud Foundation can replace open-source technologies to build computing, storage, and networking.
In addition to VMware Cloud Foundation, VMware also launched VMware Integrated OpenStack 3.0 (VIO 3.0) at VMworld 2016. VIO is VMware’s optimized commercial version of OpenStack, which not only addresses various shortcomings of open-source OpenStack but also includes extensive optimizations and tuning for VMware’s own software system. Particularly from VIO 2.0 onwards, it supports seamless upgrades between different versions of OpenStack, solving the most troublesome upgrade issues of OpenStack.
Besides the commercial optimized version of OpenStack, VIO, VMware also provides vRealize as an alternative to OpenStack at the cloud data center operating system level. The vRealize suite is now at version 7 and can manage, schedule, operate, and service computing, storage, networking, and applications in hybrid cloud environments.
VMware Cloud Foundation is expected to be officially released in the third quarter of 2016. By then, telecom operators and IDC data centers will have multiple technical routes to choose from for public and private cloud transformation, as well as local public cloud service providers building cloud services: at the underlying levels of computing, networking, and storage, they can choose open-source technologies, or individually select vSphere, vSAN, and NSX, or integrate these three into the VMware Cloud Foundation appliance; at the operating system management level, they can choose the open-source version of OpenStack, VMware Integrated OpenStack, or vRealize.
By the end of 2016, other public clouds, e-commerce operators, data center service providers, etc., outside the three major public cloud giants, will have the opportunity to obtain a complete set of mature public cloud software technology architecture, which is seamlessly connected and migratable with the VMware-based private cloud architecture, thus forming a complete hybrid cloud service system, and the second major alliance in cloud computing is expected to rise rapidly.
Entering the Era of “VMware Inside”
In the PC era, there was a famous slogan “Intel Inside”, which standardized and productized Intel chips embedded in all partner PC motherboards as the core standardized component of PCs. VMware intends to do the same in the cloud computing era, but in reverse, by providing standardized software products like VMware Cloud Foundation, while the hardware consists of already standardized x86 servers and storage and networking devices.
Before VMware Cloud Foundation, VMware had already launched the vCloud Air public cloud management system, which can be understood as an upgraded version of vCloud Air. vCloud Air is VMware’s public cloud and hybrid cloud product launched in 2014, mainly including vSphere, vCenter, vCloud Director, etc. At VMworld 2016, several updates were made to vCloud Air, including bi-directional migration of entire applications between public and private clouds without downtime and disaster recovery features.
The operation of vCloud Air includes two main parts: one part is the public cloud data centers built by VMware, currently with 5 located in the United States and 2 in Europe. The primary purpose of VMware’s self-built vCloud Air public cloud data centers is to develop and test public cloud technologies for different application scenarios in target regional markets, thereby helping VMware better develop software products and services for public cloud environments. From this perspective, self-built data centers are more like VMware’s innovation laboratories.
Last October, VMware specifically established a “Cloud Provider Software Business Unit” to develop software products for various cloud service providers, drawing on experiences and customer needs from the operation of vCloud Air’s public cloud, and then productizing them for all cloud service provider partners.
The other part of vCloud Air’s operation involves hosting, reselling, and leasing through public cloud service providers, telecom operators, and data center service providers, which means deploying vCloud Air’s software in partner data centers and then selling VMware-based public cloud services to end-users on a pay-as-you-go basis.
In the past, users had to purchase full lifecycle software licenses from VMware, but now they only need to pay monthly based on usage, with a minimum of a few hundred dollars per month. vCloud Air offers five cooperation models to partners: managed IaaS services, hybrid cloud services, VMware Horizon desktop as a service, disaster recovery services, and management services.
Currently, vCloud Air has over 4,100 partners in 119 countries. VMware’s Senior Vice President of Product Development for Cloud Services, Ajay Patel, stated that the number of virtual machines operated by vCloud Air partners may be comparable to the number of virtual machines in Microsoft Azure.
VMware Cloud Foundation is a standardized and automated software deployment method that allows partners to more easily and quickly launch public cloud services. It is expected that vCloud Air will officially launch VMware Cloud Foundation in the fourth quarter of this year, initially rolling it out in self-built data centers and gradually promoting it to all cloud partners.
The vCloud Air Network is a channel sales model aimed at partners. Very similar to “Intel Inside”, VMware collaborates with partners on marketing activities and also reimburses marketing expenses to partners, and for large partners, they can also collaborate on sales. Currently, the vCloud Air Network has generated an annual revenue run-rate of 100 million USD, with an annual growth rate exceeding 50%, and is expected to become profitable in 2017.
IBM SoftLayer is the first partner of the VMware vCloud Air Network and is about to launch services based on VMware Cloud Foundation. IBM has also trained over 4,000 service experts to provide technical support for VMware solutions to help enterprises extend their existing on-premises VMware environments to the cloud. The global cloud collaboration between the two has already attracted over 500 customers.
Connecting More Cloud Ecosystems
If VMware uses the vCloud Air Network as a marketing and channel strategy to connect the second major cloud alliance, while VMware Cloud Foundation is the simplest path to cloudify data centers, VMware’s strategy of “alliance” has completed its initial layout, but VMware has not forgotten the strategy of “cooperation” with the giant public clouds.
In June 2016, VMware acquired a software company named “Arkin Net”, which specializes in products and solutions at the software-defined networking level. In August, VMware launched a technical preview of the Cross-Cloud Service based on Arkin’s technology. The biggest highlight of this service is the ability to manage and optimize resources across AWS, Microsoft Azure, Google public clouds, and private clouds.
Simply put, the Cross-Cloud Service provides IT administrators with a unified view to manage resources across AWS, Microsoft Azure, and Google public clouds, but in the form of APIs and SDKs rather than native methods, similar to managing multiple email accounts in a single inbox view. The Cross-Cloud Service addresses the need for enterprises to manage multiple cloud resources uniformly.
In addition to connecting with the three major public clouds, VMware has also strengthened its connection with the open-source container community. In August 2015, VMware launched the vSphere Integrated Containers (VIC), which supports deploying containerized applications on standard virtual server infrastructure. In August 2016, VMware again introduced the embedded container management portal Admiral and the enterprise-level container project Harbor for VIC, supporting production-grade containerized applications. At the same time, VMware announced collaborations with key container players such as CoreOS, Hasicorp, Mesosphere, Pivotal, and Rancher.
In the area of EUC (End User Computing) virtualization, VMware has also connected with Salesforce SaaS applications through unified ID management and strengthened connections with Windows 10 and Office 365.
At the beginning of VMworld 2016, VMware CEO Pat Gelsinger showcased numbers derived from his market research team: ten years ago, traditional architectures accounted for 98% of IT workloads while public clouds only accounted for 2%; today, 15% of IT workloads run on public clouds, 12% on private clouds, and 73% still run on traditional IT architectures; by 2030, 14 years from now, 52% of IT workloads will run on public clouds, 29% on private clouds, and only 19% on traditional IT architectures.
Is Pat’s set of numbers a death sentence for VMware? On the contrary, as VMware’s products fully transition to cloud computing, incubating tens of thousands or even hundreds of thousands of public clouds of various sizes, and connecting them through the vCloud Air Network to form a scaled second major alliance, VMware will have the opportunity to share at least half of the public cloud market, all of the private cloud, and traditional IT markets in 14 years.
Perhaps in 14 years, the VMware cloud alliance will become the fourth giant public cloud.
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