VMware Chief: Cloud, Consolidation, and Beyond the Dell-EMC Merger

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(TORONTO) — VMware (VMW) may be in a holding pattern until July 19 when EMC shareholders vote on the Dell-EMC merger, but it hasn’t stopped CEO Pat Gelsinger from planning for a future where every enterprise uses multiple clouds and VMware plays a critical role in helping its customers navigate and connect all of the pieces.

At a media roundtable in Toronto last week, Gelsinger said that in his 36 years working in IT, this mobile-cloud era is the most transformative, and that everyone – from vendors to channel partners – will have to adapt.

“None is as significant as the period we are in right now,” he said. “You have consumer-driven technologies, the shift from on-premise to off-premise, the disruptive effects of mobile and mobile cloud, change of business models from perpetual and capitalized to subscription, all of these are creating such violent shifts that everybody, including us, needs to navigate to the other side of that.”

“We believe we have huge assets and opportunities to go through that but we like everybody else have to navigate our business, business model, customer relationships, to the other side of this tectonic shift in the industry.”

VMware Bets on NSX

One of these assets is the VMware’s NSX network virtualization platform for the software defined data center (SDDC) – a technology that he says is his number one priority.

“I compare NSX, our networking and security platform, to ESX of 2004. It is that big. It will be even more important than compute virtualization is. I see this as huge for us. We’re going after billions of dollars of potential markets,” he said.

READ MORE: New Partnership will Help Hybrid Clouds Span VMware SDDC and the IBM Cloud

One of the areas that will be less of a priority – at least for now – is containers. Gelsinger says that “containers are early in the hype cycle” and played down recent comments from HPE CEO Meg Whitman that suggested containers could make VMware irrelevant.

“We’ve announced a complete new product family, Photon, which is optimized for container environments. Sort of the thesis behind Meg’s [Whitman] comments were some of the things behind virtualization that have moved from the infrastructure to the application layer and as that moves you don’t need some of that in the infrastructure. We would agree.”

VMware Channel Partners

VMware and other vendors aren’t the only ones navigating these changes; in many ways partners are facing the biggest hurdle on the frontlines as they figure out what all of these changes mean to them.

“We talk about the disruptive cycle and what’s happening; they are absorbing that into their businesses. One of the big shifts that is happening is that business model shift from perpetual to subscription it affects the entire financials of their organization and how they look at their business,” Donna Wittmann, Executive Director, Channels, Alliances and Commercial Sales for VMware Canada said.

“They’re looking at compensation models for their teams and how do they drive the transition and get the right balance.”

“How did channel partners make money in the past? They’d deliver boxes, and then they supported the box and the integration of it and services. That was sort of the standard channel business model,” Gelsinger said. “Now it’s a cloud-delivered service. There’s no box. There are no services to install the box. All of the sudden, how do they work in that environment? It’s a very dramatic shift for a lot of those partners. “

“Some will make it through the transition and some won’t. Some will need to migrate in other different directions for their business models in the future,” he added.

Industry Predictions

As for the industry as a whole, Gelsinger said that the Dell-EMC deal is on the “front end” of a lot of industry consolidation.

“Obviously in this space there will be enormous scale, supply-chain efficiencies that will result,” he said. “Customers will be big winners in all of that.”

While Gelsinger acknowledges the important role that mega cloud providers play in enterprise cloud environments (he referenced a VMware customer, one of the top three car manufacterers in Germany that uses AWS, Microsoft Azure, and VMware) he said that there is “enormous diversity that will occur in this environment” that doesn’t often get addressed.

“I’m not trying to dismiss how big and exciting the mega-clouds are, but to say ‘there’s going to be four global cloud providers’ is dead wrong,” Gelsinger said.

Looking to the Future

The theme of navigation comes up a lot talking to Gelsinger: partners navigating through business model changes, enterprises navigating from on-premise to multi-cloud environments, and of course, VMware’s navigation through the impending Dell-EMC merger.

“When people talk about VMware in the case of these enormous, tectonic shifts that are occurring in the industry [my hope is] that we will have created enough evidence, the growth of those products and our strategy that everybody will say, oh, they’re clearly part of our strategic future,” he said.

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