VMware plans cloud spin out to keep up with Microsoft, Amazon and Google
By Om Malik & Stacey Higginbotham
GigaOm
Jul. 16, 2012, 1:32pm PT
VMware, a Palo Alto, Calif.-based virtualization and software company, is planning a corporate shakeup. GigaOM has learned that VMware hopes to spin out some of its cloud assets, including its Cloud Foundry platform-as-a-service division and parent company EMC’s Greenplum assets into a separate company, according to sources close to the deal. The new company will also include assets of Project Rubicon, an infrastructure-as-a-service joint venture between VMware and EMC.
The move would help VMware, which is majority owned by storage vendor EMC, offer a competitor to cloud computing services offered by Google, Microsoft and Amazon. All three of those players are building out the infrastructure and platform layers to become the IT departments for developers and enterprise customers.
The plans for VMware’s cloud asset spin-out are said to be at an advanced stage and some of the pieces are already in place, but the spin-out isn’t yet complete. VMware declined to comment on the spin-out plans.
The scoop. Our sources say we might hear more about these developments on July 23 when VMware announces its second-quarter earnings, although there is a chance that VMware could wait until late August when it hosts its annual VMworld user conference in San Francisco. From what we have learned, this new company would include the following pieces:
Cloud Foundry: This is VMware’s platform-as-a-service offering that lets developers easily deploy applications built using a wide variety of programming languages, frameworks and other components. Thus far, Cloud Foundry’s associated open-source project has attracted more attention than VMware’s paid service, serving as the platform for AppFog, Iron Foundry (a .NET implementation) and ActiveState’s Stackato on-premise PaaS software. - Greenplum + Chorus: Greenplum is EMC’s big data division, which sells its namesake analytic database as well as two Hadoop distributions and analytics collaboration software called Chorus. Greenplum also sells preconfigured appliance, called the Big Data Appliance, on which to run all its software. Project Rubicon: This is the name of an EMC and VMware joint venture created earlier this year and appears to be the IaaS play. Rubicon has an independent board, but people working for it are paid by VMware or EMC. At its creation, the Rubicon employees consisted of the technical team behind Cloud Foundry, but not the marketing or operational staff. The venture was designed to help give the sense of independence from EMC and VMware for Cloud Foundry customers. Project Rubicon includes IaaS-type technology developed by the Mozy team. Mozy was a storage company acquired by EMC in 2007 and taken over by VMware in 2011.
We’ve heard two possible names to head the new company — both former Microsoft executives. One is Tod Nielsen, who is the co-president of VMware’s applications business and was previously the VP of Microsoft’s platform group. The other name we’ve heard bandied about is Mark Lucovsky, who is the VP of Engineering in charge of Cloud Foundry and was a Microsoft employee who helped build Windows NT.
Why a spin-out makes sense.
While VMware is a public company, EMC owns about 80 percent of its stock. That causes many to question how independent VMware can really afford to be, especially as it builds out services such as Cloud Foundry that might reduce overall sales of EMC gear to customers.
If VMware and EMC do spin out Cloud Foundry, as we hear they plan to do, it may be because they want to help alleviate the perception that EMC and VMware are heavily tied to Cloud Foundry. For many in the developer and enterprise community, the concept of cloud computing is built on the idea of virtualization and commodity hardware. EMC’s expensive storage boxes, which were used in building out Cloud Foundry, are at odds with that vision. Others are concerned that VMware’s ties to Cloud Foundry will mean that users get locked into the VMware ecosystem if they use the service.
Cloud Foundry was launched in April of 2011, and so far has attracted a lot of partners. But as it grows, the focus seems to be on helping developers build apps in Cloud Foundry that will be able to run on a variety of clouds. Thus, having Cloud Foundry under a separate company independent of VMware and EMC makes more sense.
The competitive picture. Most likely, the new company would focus its efforts on corporate customers and corporate developers. And that makes sense, as this is the big pot of gold for cloud companies. According to a recent estimate by research firm Gartner, companies will spend as much as $207 billion on public cloud computing in 2016 versus the $91 billion they spent in 2011. Amazon chief technology officer Werner Vogels, in a conversation at our Structure 2012 conference, pointed out that AWS, an early leader and pioneer in cloud services, is already in deep conversations with enterprises.
Despite near ubiquity in corporate data centers thanks to its flagship server-virtualization software, VMware needs to firm up its cloud strategy. It has all the pieces — vCloud, vFabric, PaaS, Cloud Foundry, Mozy and a suite of software-as-a-service applications (including from recently acquired big data startup Cetas) — but they haven’t yet coalesced into a cohesive offering. And now people are leaving.
Meanwhile, Microsoft has shaped Windows Azure into a fully functional cloud platform that includes IaaS, PaaS and hybrid capabilities, as well as a Hadoop service and a data marketplace. There’s also OpenStack, the open-source cloud software backed by companies such as HP, IBM and Red Hat, that aims to displace VMware’s cloud-management software in private-cloud deployments, and on which HP and other companies are already building their public- and private-cloud offerings.
Of course, Vogels’ AWS remains absolutely dominant in the IaaS world (it even lets users port VMware-based VMs to its cloud) and is always adding new features and services to suck in even more workloads. It’s also the go-to cloud for developers wanting a relatively easy way to get virtual resources on which to run their applications. This is true even indirectly because so many PaaS offerings (e.g., Heroku, AppFog and DotCloud) are hosted in Amazon’s cloud and pay a bill to AWS every month.
Big data big daddy.
With the new entity, though, EMC’s big data analytics platform from Greenplum could hold the keys to the kingdom. While analysts predict that spending on cloud computing will increase sharply, they predict even faster growth for spending on big data software and services. And as those two trends converge, with big data workloads moving increasingly into the cloud, the expected EMC-VMware spinout would seem poised to capitalize because of its internal knowledge base in both areas.
And if success in IT is all about who gets the most developers, EMC has been active on that front too. It acquired Pivotal Labs, and at the time of the acquisition, Greenplum boss Scott Yara pointed out that Greenplum was open-sourcing its Chorus software, which is a Facebook-plus-style platform for sharing data and data models within a company, to help build a community of developers that can create apps atop the platform.
Seen in that light, spinning out the Greenplum and Cloud Foundry assets makes sense. It gives EMC and VMware a platform that could tempt corporate users in a way Amazon Web Services or Google’s Compute Engine might not. With a big data play associated with its PaaS it has something corporate customers are increasingly interested in, on a platform that may even span multiple clouds. This spin out could help EMC capitalize on the cloud even as it cannibalizes its hardware business.
Additional reporting by Derrick Harris.
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