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Director, OpenShift Strategy at Red Hat. Founder of Rishidot Research, a research community focused on services world. His focus is on Platform Services, Infrastructure and the role of Open Source in the services era. Krish has been writing @ CloudAve from its inception and had also been part of GigaOm Pro Analyst Group. The opinions expressed here are his own and are neither representative of his employer, Red Hat, nor CloudAve, nor its sponsors.

8 responses to “VMware Pushes Hard With vCloud Integration Manager”

  1. Clark Updike

    Can you elaborate on the tie-in between CloudFoundry and VMware’s future in the infrastructure market? I didn’t think CloudFoundry had any dependence on the VMware stack. Thanks.

  2. Mathew Lodge


    I run the vCloud team at VMware that, among other things, prices and packages our software for service providers. We’re also responsible for vCloud Integration Manager.

    A generally thoughtful post, except when it comes to your economic argument: “There is no way they can compete with service providers using open source infrastructure platforms on commodity servers when they shell out huge licensing fees to VMware”

    There are two things wrong with this statement:
    a) The assertion that open source is less costly because there are no license fees
    b) The assertion that “huge” VMware licensing fees make or break a service providers’ business case & economic model

    Here’s the deal about delivering cloud service: however you achieve it, you need to rent the services of some extremely capable software engineers — lots of computer science PhDs, in other words. There are three main ways that cloud service providers do this today:

    1) Rent the services of a lot of computer science PhDs by directly employing them. This is the approach of service providers who choose to build their own cloud stack (often incorporating open source software). Hiring and retaining these people is difficult and expensive, which is why only a handful of providers have done this, notably including Amazon Web Services.

    2) Get other people to pay for the computer science PhDs, and rent their work for free through an open source project. This is the OpenStack approach. There is an additional cost, though: to make the cloud stack operational and functional, they must also rent a set of smart engineers through direct employment to fix up, modify, integrate and customize the open source code. This is still difficult and expensive, though not as hard as employing everyone you need directly.

    3) They rent the computer science PhDs of firms like VMware, by licensing software. Almost everyone except AWS does this, including Rackspace who licenses both XenServer from Citrix and vSphere from VMware.

    The net? You need to rent the expertise, whether you pay directly in salaries or license software. Service providers choice the blend according to their business strategy. There are no short-cuts. Direct employment requires substantial investment in salaries well ahead of actual revenue, so also suffers from the cost-of-money burden in any financial calculation. Also, you need to budget for ongoing maintenance of any code or configs you create, so there’s a cost long after the code has been written. If you want support of open source code, you need to budget for that too. That’s what all the aspiring OpenStack start-ups are banking on: they they will be the ones collecting those maintenance fees. Licensing (at least, if you use VMware’s service provider program) has no up-front investment — you pay in arrears, based on actual usage. Maintenance and support is included in the price.

    On to the second assertion: that VMware licensing makes or breaks the economic model for SPs with “huge” licensing fees. VMware’s SP licensing is ratable, paid in arrears based on the amount of virtual RAM used per month, and works out to be approx 5-10% of the raw VM service revenue (not including any value-add). In the economic models we have validated with our 6000+ service provider program membership, the top three costs are:

    1) Hardware — servers, storage, switches etc.
    2) Operational costs — administrators, engineers, management overhead
    3) Sales, marketing, general & administrative. Sales forces are expensive — whether they’re yours, or belong to a channel partner.

    Put another way, you could have an EC2 based on VMware for pricing that is 5-10% higher, and get all the additional benefits that VMware provides in its cloud stack — like storage and network I/O controls to stop noisy neighbors, persistent VM file systems, HA etc. etc. For comparison, EC2 customers today are happy to pay >100% more for a dedicated instance that doesn’t suffer from noisy neighbors on the same host.



  3. Mathew Lodge

    Thanks for the clarification. You can run VMware on commodity hardware. We have plenty of SPs in the VMware program who do exactly that today: white box servers, commodity NFS storage, white box networking gear. I won’t get into the pros and cons of this approach, but to assert that it isn’t possible is false.

  4. Adron

    I’ve been in this industry a solid 15 years now, and I have to agree with you Krishnan. The pricing is brutal at this stage. A lot of VMware’s products are modeled around when your office suite cost ya $400 bucks, it came in a box, and you installed it on Windows only…

    So needless to say with the comodity pricing of AWS, Rackspace, and others, there will have to be some rebalancing after this disruptive change. 🙂

  5. Massimo Re Ferre'