This week at VMworld 2013, VMware announced the general availability of vCloud Hybrid Service (vCHS). vCHS has been in an early adopter program for the last couple of months but will enter GA on Monday.
vCHS is VMware’s public IaaS offering which will attract comparison against AWS, Azure Infrastructure Services, and other’s in Gartner’s Cloud IaaS Magic Quadrant. However, vCHS will be limited for a while. At launch, vCHS is a US-only hosted service, although sure to expand to Europe and Asia in 2014. Q4 of 2013 promises services like DR-as-a-service and Desktop-as-a-service, but more basic services that have come to be the norm at competing services like object-storage services will be missing for the foreseeable future. In fact, many developer-enhancing and cloud-native services (e.g. auto scaling, continuous deployment, packaging) are not part of vCHS at launch.
My expectation is that the interest from enterprise customers will be very high around vCHS, so what is my early take?
First, VMware had to create a public cloud service offering. AWS has changed the industry and created a market and VMware had no choice but to compete with a public IaaS offering. VMware is the private datacenter virtualization and private cloud behemoth. Yet, increasingly, customers are considering public cloud deployments for future state (cloud-native) applications. As organizations are using public clouds for cloud-native applications and dev/test workloads, an inflection point is on the horizon for the 80-90% of all other workloads possibly moving to public cloud environments. VMware did not want to find themselves left out of that future shift. Therefore, VMware had to try on their own to enter this market. If not that, then they would have had to find a way to partner with AWS. As of today, they’ve not found such a partnership.
Second, VMware has a compelling opportunity. Clients are hugely invested in VMware technology and there is reason to believe these same organizations are looking for quick and easy runways into the public cloud for traditional workloads. Migrating or converting traditional workloads into AWS or Azure has been minimal at best. No one vendor or provider has a better chance for success of “holding onto” VMware workloads than VMware itself. VMware understands the importance of the network in a hybrid cloud environment and their opportunity with SDN, the NSX offering from Nicira and the ability to cross connect into vCHS data centers will help their hybrid cloud story. Finally, a true hybrid cloud story centers around management, and VMware has a management opportunity in a better position than most major public CSPs who struggle greatly with native management.
Third, I don’t see vCHS impacting AWS negatively. I do see it impacting a large market of many smaller or regional vCloud providers. Because vCHS will be missing many of the features that AWS users have come to depend upon, I do not expect to see any exodus of AWS customers to vCHS. VMware claims that vCHS and AWS will attract different buyers and that AWS does not focus on enterprise-grade or compliant workloads. I disagree. From 2006-2012, AWS did struggle capturing the enterprise buyer, but every movement AWS has made in 2012 and 2013 (and all future movements) are positioned directly at enterprise buyers and enterprise-grade applications. Furthermore, few providers can compete with AWS on security and compliance capabilities. However, with the price point of vCHS and with the traditional VMware feature set, many VMware providers, including VSPP’s will face a very fierce new competitor in vCHS. VSPP’s will have to be extremely clear what value proposition they bring against vCHS (for example industry vertical specialization) or be relegated to reselling into vCHS.
Fourth, I’m intrigued by the vCHS franchise service design initially rolling out with Savvis. VMware must expand domestically and internationally quickly. They cannot do that on their own. vCloud Datacenter Services was VMware’s first attempt to do this, but it mostly failed due to the various providers differing enough to erode compatibility. With the vCHS franchise program, VMware owns and operates the vCHS architecture and the franchisees provide the location, network and facility hosting services. VMware does not have a large portfolio of datacenters to compete on their own, nor do they have any significant ownership in WAN networking or Internet peering. Savvis with Century Link brings the networking breadth to the relationship and other future franchisees will do much of the same internationally. Expect the cross connects to be similar to AWS Direct Connect and that is a win for customers. Both VMware and the franchisee can sell into the service and the benefit for the franchisee is potential viral hosting growth of vCHS in their facilities as well as the opportunity to upsell customers into managed hosting, colocation and network cross connects. Franchising will not be easy though. VMware will have to manage it very closely to ensure quality and consistency, much like McDonald’s corporate tightly oversees all franchise restaurants. It’s about ensuring a consistent and stable user experience and that should not be understated. But it is VMware’s opportunity to enter new locations very quickly. It would not surprise me if vCHS is in as many or more locations as AWS and Azure within 12-18 months through franchising.
Fifth, expect there to be growing pains. VMware hired a fantastic leader in Bill Fathers, formerly from Savvis. Bill brings a great leadership background in running services and is already pushing vCHS into a 6-week release cycle – a concept foreign to traditional VMware products. But vCHS is not a commodity, its a uniquely created service. Multiple vCloud providers have told me that VMware is in for a surprise with their own products in that VMware will start to find the breaking points of product scalability. Therefore, I expect vCHS to go through similar growing pains that other major CSPs have gone through over the past few years. vCHS will not be perfect, it will have outages and it may not be as seamless between franchisees as promised. Customers should know this and pay attention to how VMware responds in the midst of issues, rather than hold them to perfection. And if customers cannot accept this risk today, they should wait on the sidelines or look to a provider with more years in the market.
Finally, the public IaaS provider market is starting to show some interesting segmentation lines. AWS is the dominating force, but mega vendors in the form of Microsoft, VMware and Google have made their intentions known and the service development and innovation each company possesses is creating a line between mega providers and the rest of the market.
So what does vCHS mean to you? Well, I think long term, many organizations will not be able to avoid using it in some capacity. Even some of the largest AWS adopters will find a place where vCHS shines past AWS. Perhaps its the DRaaS or DaaS offerings on the horizon. Perhaps its simplified lift and shift of large pools of VMs. Maybe its more seamless management between the private datacenter and a public Iaas offering. Whatever the use case ends up being, there is plenty of room in this market for multiple providers and most organizations will want at least 2-3 strategic IaaS partners for properly placing workloads based on individual requirements. WIth the saturation of VMware in the enterprise, vCHS will surely be a logical endpoint for many of those workloads. But vCHS will come with a ramp up and improvement period. For organizations that want to assess it on day 1 and on-going, Gartner’s “Evaluation Criteria for Public Cloud IaaS Providers” can help you there.
What are your thoughts on vCHS?