VMware and the other "Clouds" we know

VMware is preparing (we think) to announce a layoff of up to 5% of its workforce ~900 jobs. EMC Federation owns ~85% of VMware pre Dell – EMC merger. There are potentially several factors in play here, including the standard stuff: disappointing last quarter earnings; Dell and EMC positioning for close of $67 billion acquisition and jumping through hoops to try to manage the investors, especially VMware investors.  We already saw layoff announcement at EMC earlier and recently at VCE - as it was folded into EMC as a business unit and got a new CEO.

Acquisition of Virtustream by EMC has a significant part to play here. Recent changes in plans, of joint 50-50 ownership of Virtustream by EMC and VMware have evolved into VMware vCloud Air business to be merged into Virtustream business unit within EMC. It remains to be seen how vCloud Air business vs. Virtustream will evolve.

Other key factors that have effect on VMware are: maturing of the OSS cloud platforms like OpenStack etc. and underlying virtualization technologies. These OSS choices seemingly provide a low-cost alternative to vSphere and provide customers a sense of flexibility, openness and interoperability to build a cost-effective and open cloud environment.  

Yet another factor is maturation of Microsoft as a provider of virtualization (Hyper-v) technologies and cloud infrastructure (Azure). This takes away some of the competitive advantage of VMWare and also takes away some of its lunch.

In a recent Barron’s blog, Tiernan Ray talks about a bigger – across the industry layoff, by Trip Chowdry of Global Equities Research. Chowdry predicts 330,000 layoffs in the next twelve months across the following companies: Cisco (CSCO), EMC (EMC), F5 Networks (FFIV), HP Enterprise (HPE), HP Inc. (HPQ), IBM (IBM), Juniper (JNPR), Microsoft (MSFT), Network Appliance (NTAP), Oracle (ORCL), Symantec (SYMC), VMware (VMW), Yahoo (YHOO), Yelp (YELP).

It sounds pretty scary and spreads doom and gloom. His argument is that this is because of “shift-to-cloud” computing, which eliminates a lot of IT talent that is focused on “back-end” operations of IT. While some layoffs will happen as a result of this shift, this year, but I doubt it numbers will be this high. Having successfully managed / survived through at least two technology disruptions, I disagree with his premise. It will take much longer in the enterprise for such fundamental transition. Remember there are still a lot of legacy products in the data centers. Which need support and maintenance and generate $100s of million if not billions in revenue for these manufacturers.

Some consolidation in the broader cloud market is expected but different reasons will influence shifts in the cloud companies. Today there is sufficient room for consolidation of cloud technology companies.  There are also overlapping and competing projects within these organizations. For example, last I checked Cisco had over 6 OpenStack initiatives. And lastly, don’t forget that we are now starting to see clear leaders in cloud emerge, which will force changes and consolidation in the rest of the companies.