With Dell exploring a spin-off of its VMware investment by September 2021, datacentre operators might be forgiven for wondering if this will force changes across their technology roadmap, and whether they should plan accordingly.
Simon Michie, CTO at colocation operator Pulsant, says VMware’s role in the datacentre is “hugely important”, partly because of its reputation for reliable support of workloads at scale. “The majority of workloads sit on a VMware platform of some sort,” he says.
Importantly, people with strong VMware skillsets are “broadly available” and much of the perceived enterprise value is in software and services anyway – not the underlying hardware.
With the growth in task-optimised platforms that can sit alongside a VMware core, the supplier looks to be on the up again, having shown it can continue to innovate under Dell’s ownership.
Michie notes that migration to a different platform would therefore need to be a strategic decision. Such a move would require different IT operating models and skillsets that would probably cost a lot to set up and support, affecting a whole ecosystem of datacentre customers and service providers. Some might prefer to move VMware-based workloads to private and hybrid cloud environments as a managed service.
“Platform migration is uncommon,” he says. “I’d want to be sure the benefits outweighed the cost of change and any risks were considered and mitigated. More commonly, we see clients integrating their VMware-based workloads with new cloud-native applications running on Kubernetes or engineered using proprietary hypercloud functions and services.”
Michie says he would be surprised if Dell divested itself entirely of its 81% controlling stake in VMware in any case. In fact, if there were some kind of spin-off, VMware might innovate even faster, swallowing shares of direct competition as well as continuing along its current path of acquiring emerging technologies. Dell would surely be likely to try to retain something for itself out of all this, even if there is a spin-off or spin-out.
Michie adds: “I think the interesting questions are: what would Dell do with the money? Would they just pay down debt or would they make alternative investments? If so, what would they be? And to what extent has VMware been held back under Dell ownership? If they can plan and execute on a move like this effectively, it should be good for both shareholders and clients of both organisations.”
Dell itself has indicated that any spin-off would look to benefit both companies, without trashing gains from existing arm’s-length commercial arrangements and close operating relationships across go-to-market, services, research and development, and intellectual property agreements.
A dynamic duo?
Meanwhile, Dell and VMware have continued working together towards integrations that target growth in the hottest areas for the datacentre. A recent announcement was VxRail, a hyperconverged, ruggedised Dell-VMware system with software for data-intensive edge environments. In June, this came hard on the heels of multiple acquisitions from Octarine to Tanzu and beyond.
Eric Hanselman, principal research analyst at 451 Research, part of S&P Global Market Intelligence, says: “Dell Technology Cloud is that shift towards a much stronger connections through and with VMware to provide cloudy capabilities on Dell equipment. And in fact that the organisation has been creating tighter bindings and better integration between Dell products and VMware.”
Once upon a time, “tighter bindings” often meant less interoperability, even supplier lock-in. But that is not so much the case in 2020. A full Dell/VMware integrated environment offers automation for many mundane operating tasks, such as updating firmware, managing rolling updates across linked infrastructure, and day-two operational capabilities.
“The automation and orchestration elements sit together more tightly and work together more smoothly,” says Hanselman. “It’s not something that excludes other vendors. If you’re running other vendors’ equipment, whether or not that’s Cisco UCS or HPE, these will still work well and, of course, VMware has a very strong incentive to make sure all those systems work well in their environment.”
Both technically and as a sales organisation, VMware continues to stand on its own feet, complemented by a strong ecosystem. It will not be easy to sway or displace, especially while transitioning to other environments remains costly and difficult. Although VMware is often considered expensive, and Dell may look at other relationships, and the IBM/Red Hat connection may also go forward . . .