Pivotal acquisition foreshadows strategic shifts at VMware; VMworld announcements confirm them

VMware always risked having its brand too tightly associated with a technology, but after a series of announcements leading up to and during its VMworld customer conference, it seems like one more acquisition is in order: naming rights from The Container Store.

By outright acquiring Dell corporate sibling Pivotal Software and uncorking plans to completely transform its namesake infrastructure software into a container-first application platform, the company is simultaneously dragging its legacy customers into the future and trying to stay ahead of changes in the way cloud-savvy enterprises build and deploy applications.

VMware CEO Pat Gelsinger gave financial analysts a preview of the strategy and rationale last week when he reviewed  VMware’s Q2 2020 earnings. In opening remarks, Gelsinger said (emphasis added):

Kubernetes is driving the biggest shift in enterprise architecture since Java, virtualization and cloud, and Pivotal has begun a major shift to Kubernetes. Developers are adopting Kubernetes, because they want to ship software faster and more frequently with the goal of better customer experiences and ultimately drive business growth.

He added that the company had already added to its Kubernetes portfolio by acquiring Heptio, a provider of Kubernetes management software that was founded by some of the original developers of that cluster management software, last November. Then Gelsinger presaged this week’s significant announcements by saying (emphasis added):

At the VMware next week, we will describe a major R&D effort to evolve VMware vSphere into a native Kubernetes platform for VMs and containers. With VMware's enterprise, installed-base reach and credibility, we believe we can massively extend the customer potential. The opportunity is clear and significant. The transition to Kubernetes is under way and the time to move decisively is now. With the acquisition of Pivotal, VMware will go from the best infrastructure software company to the best infrastructure and developer software company.

Gelsinger reiterated these themes, often using language identical to that used with financial analysts, during his hour-plus keynote to open VMworld on Monday. Central to VMware’s strategy, built both organically through technology development, and increasingly through acquisition is a desire to provide an end-to-end portfolio that addresses the entire enterprise software lifecycle. As Gelsinger said on the earnings call (emphasis added):

We believe that the developer space is going through a massive transition and we view Kubernetes as this important strategic shift.  … What we see is the opportunity to be this full stack provider and we believe we need to own and control an end-to-end Kubernetes platform that allows us to build, manage and run Kubernetes environment. And maybe somewhat analogous to compute. We have a full stack with VMware, vSphere and vCenter or networking with NSX, a full stack of capabilities. And we believe this ability to own that full stack is something that gives us great market opportunity.

 

There’s obvious lock-in value of controlling an organization’s entire IT development and deployment stack, however Gelsinger said in both the earnings call and keynote that customers are eager for such single-vendor product integration. As Gelsinger told investors (emphasis added):

We're also clearly heard from customers, we want one place to come together for this technology pool and we believe that VMware can respond to that by owning and controlling a complete Kubernetes these platform.We also believe that customers are looking for in this very significant and massive transition. They want somebody who has enterprise credibility enterprise scale, enterprise reach and that's something VMware can really accelerate dramatically for Pivotal.… We believe we have the opportunity to bring these next-generation developer platform and infrastructure services all based around Kubernetes to a much, much larger market than was ever possible before. And that's where VMware's enterprise, credibility and reach will come to great benefit.”

Pulling legacy customers and their infrastructure into a containerized future

As I’ve uncharitably noted in covering previous VMworlds, VMware must walk a tightrope at these events dominated by legions of IT people who have, in whole or part, defined their careers by the accumulated expertise in a particular platform. The company must simultaneously cater to those wishing for incremental, evolutionary improvements to a platform they know and love while reacting to disruptive pressures from rapidly innovating competitors and open source projects that are creating the technology upon which tomorrow’s applications are being built and run.

Sadly for VMware, as the saying goes, it’s impossible to invent the lightbulb by continually improving the candle. Nevertheless, the company persists in attempting a similar feat by morphing its eponymous virtualization software into a cloud-native container system wrapped with enterprise management goodness via Project Pacific.

Gelsinger described the strategy this way in VMware’s earnings call (emphasis added):

We will be integrating Kubernetes constructs directly into vSphere. And you could also think about it, that we're going to rebuild vCenter and vSphere onto Kubernetes. So it's a very fundamental view of how we integrate Kubernetes into the core vSphere much more API driven, service driven as clouds are. And making that part of core vSphere. This I'll say, this was the most aggressive step we could take to embrace vSphere into or Kubernetes into the core of the VMware and we'll give you a lot more details on that next week.

Befitting the pre-release nature of Project Pacific, there are only a couple of breakout sessions on the effort, but evaluating whether they provide “a lot more details” will have to wait until I’ve had time to review the videos and associated slides and blogs. VMware Principal Engineer Joe Beda, an acquire-hire as one of Heptio’s founders who was also an early developer of Kubernetes at Google, did provide a few tidbits in a blog post. He writes that the company is redesigning vSphere to integrate Kubernetes within the system’s control plane, which yields several benefits:

• Transparent access to vSphere resources such as compute clusters, disks and networks via standard Kubernetes APIs.
• Centralized application management using “concepts that are more meaningful for application developers and operators.”
• A consistent set of APIs and management constructs for both containers and VMs using management software and interfaces already familiar to vSphere administrators.

VMware users, meet DevOps

The other primary elements of VMware’s app modernization strategy entails incorporating DevOps-style process automation, across the entire application lifecycle, into VMware’s infrastructure management platform under a new product brand, VMware Tanzu. While Project Pacific is designed for the “run” phase of the lifecycle, Tanzu Mission Control tackles the “manage” part of containerized applications that span various Kubernetes environments, whether vSphere, AWS, Azure or Google Cloud.

With Mission Control, VMware is again catering to its base by adding management features for Kubernetes, a famously knotty system to setup and operate, to an infrastructure management stack its customers already know and, if not love, tolerate. Mission Control also addresses the Dev side of DevOps by providing self-service access to container resources via presumably familiar Kubernetes APIs.

Pivotal Software via its Cloud Foundry PaaS addresses the “build” piece of VMware’s container strategy, but Gelsinger’s keynote shared no new details other than touting Pivotal’s growing, albeit still small base of 350 customers generating $690 million in revenue.

My take

Last week’s Pivotal acquisition was widely rumored and still perplexing on a financial and structural level. While Gelsinger provided a good rationalization for incorporating the company’s products under the VMware management umbrella, the fact that both entities are majority owned by Dell Technologies makes the transaction seem like so much financial engineering. Indeed, according to some slides presented detailing VMware’s recent acquistions, the deal looks like a convoluted way for VMware to gain full operational control of Pivotal and Dell to increase its ownership of VMware by a whopping 0.34%.

From a product standpoint, VMware’s aggressive pivot to container infrastructure and applications makes sense given the operational and efficiency benefits of automated container clusters. A significant open question is how successful it will be in simplifying the management of notoriously complicated Kubernetes systems and whether the change in architecture will leave behind smaller VMware customers that don’t have the need or resources for large container clusters. Perhaps VMware figures that these users will just migrate workloads to EC2 or Azure VMs rather than go through another upgrade cycle for servers and software.

VMware has made a bold move to reposition itself for a cloud future. Its success will depend on both the technical and marketing/sales implementation to convince its large customer base that its a future they should want.