Where VMware's strategy gets really confusing, however, is in the off-premises aspect of the VMware hybrid cloud vision. It's nearly impossible to understand exactly how VMware plans to provide its customers with the outside computing capacity necessary for its hybrid cloud vision.
While a number of CSPs have offered VMware-based cloud environments for quite a while, it seems their progress has been unsatisfactory to the company, because a few months ago it announced that it would offer its own public cloud environment. Predictably, that caused an uproar with existing partners, and VMware hastily backpedaled on this VMware-provided cloud-forward vision.
In his interview, Gelsinger took pains to note that it will include what it calls "franchise partners" will participate in the VMware ecosystem, offering an external piece of the VMware hybrid cloud offering, with the provider taking on the capital investment responsibility and with VMware (presumably) sending them business. However, this is muddled-so much so that the aforementioned Infoworld piece had to be updated because it wasn't clear in the initial interview with VMware's senior vice president of hybrid cloud that VMware in fact will offer its own public cloud environment.
VMware's Hybrid Cloud Strategy Marginalizing CSP Partners
There are three significant issues with this vision from the cloud service provider's point of view.
First, asking CSPs to implement and sell the VMware software stack as part of VMware's hybrid cloud strategy means they will be offering something just like all the other franchise partners. The first question every company asks is, "How do I differentiate myself?" Dictating that all partners offer the same software stack provides no basis for that-and asking them to take on the capital investment necessary for this, including the significant cost of VMware software itself, adds insult to injury.
Gelsinger offers some hand-waving about how the partners will bring other expertise to bear, such as local market regulatory knowledge, but I believe most of them would find that much less compelling than the issue of delivering a commoditized offering. Moreover, in my experience at least, few cloud providers really bring any business domain expertise to the table. They're hosting companies, not consulting firms.
Second, if the primary driver for the hybrid vision is going to be the on-premises piece, with the external resources used for bursting, that presumes the sale-and primary customer relationship-will rest with VMware or a system integrator partner. The CSP becomes little more than the recipient of referral business.
You can own the technology, or you can own the customer relationship. But if you don't own either, you're just an OEM supplier. OEM margins are much lower than the primary supplier's. So now you've taken on the capital investment and you're a dumb pipe. I don't think most of these companies went into business to be a dumb pipe.
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