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VMware wants to do what it knows best: server virtualization

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April 5, 2017

We've learned today that VMware is leaving the public cloud by divesting its vCloud Air division to OVH. VMware still has excellent prospects in the cloud however, but without having to operate one per se.

The company might still have a few challenges left, however. It clearly thought it could run a public cloud and that turns out not to be the case.

That leaves it with an option to keep building a software-defined infrastructure stack it feels will most likely deliver more value if you implement it.

But in today's market conditions, vCloud Air's apparent failure shouldn't be too obvious to some. The service probably made VMware a few tens of million dollars a year.

vCloud Air also had the potential to cost VMware a lot of money. It was launched way too late sometime in 2013, near the end of the Cloud Explosion and therefore was almost certainly getting close to end-of-life for the first set of servers and associated infrastructure.

If divesting its cloud service to OVH means that VMware has dodged that responsibility and associated capital expenditure, the financial impact of the deal could be better than some analysts are predicting.

VMware took some complaints from customers that relied on vCloud Air for specific cloud workloads. We are told that VMware did deliver some complex applications like running DOS workloads in vCloud Air, and that customers liked the fact it would hand-hold them as they got up and running.

But there's nothing we see in this deal to stop VMware continuing to help them, this time in assisting OVH to keep those same enterprise customers going stong.

And another positive element is that VMware has freed itself from conflict between its own cloud and the approximate 4,000 vCloud Air Network partners who run vSphere-powered clouds.

Those partners may lament the fact that VMware won't have serious implications in the project and that could stop things in their tracks, but there will still be lots of noise for them to latch on once VMware-on-AWS fires up later in 2017.

Gartner Research director Michael Warrilow also pointed out to us that OVH's European footprint is a big plus for European businesses.

Additionally, Warrilow agreed that VMware is in good company as a major cloud partner, given HPE and Cisco both created and then subsequently cancelled their cloud services. If those two giants couldn't make a public cloud viable, VMware isn't in bad company after all.

Most of the vCloud Air Network today runs more-or-less the same implementation of vSphere. However, VMware also has a Cloud Foundation bundle of vSphere, Virtual SAN and NSX that it says is the best way to build a hybrid cloud, and is also a great idea to get VMware users to buy in to VSAN and NSX, thereby extending VMware's on-premises footprint.

Gartner's Warrilow also underlined the fact that VMware's Photon Controller is basically a re-write of vCenter for hyperscale operations, which could also have potential for service providers.

But having said that, OVH also has a delicate job ahead of it to make the new service work, because much of vCloud Air resides in third-party data centres from the likes of Equinix and Telstra, and that is sure to complicate matters more than some observers think.

It must be a bit worrisome for a cloud provider like OVH to have inherited obligations to competitors. Unpicking those arrangements without disruption is an unenviable task because potential failures have the habit to hurt customers, no matter where they are and who is responsible for the services provided.

It's rather difficult to see much else in this transaction that will immediately be bad for customers, but of course time will tell in the long run. Lots can happen in the mean time.

Even though the deal can be seen as an admission of vCloud Air's failure, it's probably one that won't mean too much pain for VMware and its customers. In fact, it could be one of the best things that recently could have happen to the company. We'll keep you posted on further developments.

Source: Gartner Market Research.

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