VMware CEO touts ‘One cloud, any app, any device’ plan

VMware CEO Pat Gelsinger talks up new hybrid cloud strategy, SDN, OpenStack, partnering with Google and competing with Amazon and Microsoft

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JG: Pat, I wanted to follow up on an original question from Brandon. I think the software-defined data center strategy has had some really important announcements that have moved that strategy along. But how are you measuring customer adoption of this? What are the benchmarks you have and can you tell us a little bit about what you're seeing from customers on the uptake of the overall vision?

PG: Some of the public data that we talk about is on the earnings call, but I'll expand from that just a little bit. Some of the things that we look at would be management adoption inside of the large footprint of vSphere customers, and what we've said on our earnings call so far is that we have 14% adoption. We're also carefully monitoring how many of our customers are taking three or four of the legs of the software-defined data center. So 14% now take management and we're now saying -- how many of our customers take vSphere management and networking? vSphere management networking and storage? And that's one of the metrics that we're monitoring very closely.

So how many of those customers have we taken into full production using all legs of the software-defined data center. And obviously something like that starts as a trickle, turns into a stream, and finally it's a full-blown river of adoption. We're seeing all of the right trends with regard to NSX adoption, the storage adoption and the adoption of those in conjunction with each other. And that to us is when we have the full-meal deal.

Note: In the earnings call last week, VMware reported it has 400 paying NSX customers, up 60% quarter-over-quarter. NSX bookings doubled in the second half of 2014 compared to the first half and the product has over a $200 million annual booking run rate. VMware reported it had 1,000 paying customers using the VSAN storage platform.

BB: You've talked about NSX as a real differentiator for VMware. Do you get the sense that customers are ready to adopt that technology? And also, what would you say is the focus for NSX now? At VMworld it seemed like you were talking about NSX a lot more from a security standpoint compared to the software-defined networking standpoint that it had been defined as before. How do you define NSX with customers now and do you think they're ready to adopt this cutting-edge technology?

PG: If there's any doubt on that question, look at our earnings call and the adoption numbers we're seeing, the momentum we're seeing with customer pick-up, the revenue acceleration we're seeing. So unquestionably, we're crossing that point on the curve in adoption. The two primary use cases are application agility and micro-segmentation or security. Nominally they're 50-50'ish for customers to date. And one is the fast road and one is the complete road. The fast road is micro-segmentation: You walk into the customer and you say - do you have any assets that are less protected than you'd like them to be? And if the CIO doesn't say yes to that question, you know he's not going to be there a long time anyway, right?

Everybody has their most critical assets that are the best protected, and with NSX you start to lay out how you can quickly bring micro-segmentation as an additional layer of protection into those environments. You don't change the network architecture, you don't even necessarily need to invite the network admin to the meeting. It's a software overlay technology, you have the CISO and the vAdmin all on board very quickly. And after they've begun isolating some of their highest valued assets and getting some operational experience with it, then you would like the network admin because now we're ready to have a conversation about how we fully deploy the value of network virtualization.

The other question is really one about transforming the network operations so that applications can be deployed with all of their incumbent firewall provisioning, routing, and rules in a fully automated way. That takes application deployment times from weeks to hours or minutes. Those are the transformational use cases that we've seen at places like eBay. And those are the two drivers. Both of those are going extremely well with customers. The reason we've ended up talking a lot more about micro-segmentation and security is it's just so easy for customers to adopt it and deploy it in a very targeted and highly beneficial way.

JG: I wanted to follow up on NSX: In order to make this hybrid VMware vCloud Air service work, does that mean you're working in conjunction with carrier partners and that they're deploying NSX as well?

PG: There are multiple pieces to that. Does the customer have to deploy NSX on premise? Does the carrier have to deploy NSX? And is the cloud service deploying NSX? What we announced is that vCloud Air has now implemented NSX and is making those services available to customers. That was the key piece of the announcement.

From a service provider, from the network provider perspective, they don't need to do anything, because it really is about getting my pipe connected up to vCloud Air across whatever network service I have. However, we're increasingly finding those service providers enhancing their service offerings via NSX. They're offering those as differentiated VPN services or MPLS connectivity for their enterprise customers. So they don't have to, but increasingly they're seeing that they can differentiate their service offerings to enterprise customers by adopting and deploying NSX as part of their network offering.

On the customer side, they don't need to do anything other than access those services through standard protocols like OSPF and BGP and others. Now, if they have deployed NSX internally, there's more elegant things that they can do with it, but it begins by a simple onramp, the standard protocols that they're already deploying and using today.

JG: So a customer doesn't have to commit to NSX, they can just take advantage of its benefits?

PG: Correct. Just access those services through standard network protocols and services that they've most likely already deployed and are highly mature on. Over time, we'll do more if they have put NSX in place, but that's round two of the discussion. Round one is -- can I now start to view the vCloud Air service as a segment, a compatible extension of my data center, that's entirely network compatible without modifying any of my security, firewall, rules, anything else? And that's now this absolutely unique capability that we're offering in the marketplace.

BB: I want to ask about EMC's federation strategy. There's been a lot of talk in the market about whether EMC might break up its federation of EMC storage, VMware, RSA, Pivotal and now VCE. Activist investors Elliott Management Group have been pushing for that. Where do you stand on that? Would you like VMware to spin out from EMC? And as a follow-up to that, there’s been some discussion about EMC Chairman Joe Tucci’s potential retirement. Would you ever want to replace Joe Tucci as chairman of the EMC federation?

PG: We're very pleased that the truce was announced with Elliott and EMC, the agreement is in place and we're happy with that. And the reason we're happy is, as I've gone on record and said a number of times, we think that the federation model is the best model in this period of high tumult change, etc. in this phase of the industry.

We think being bigger and more strategic as a federation is an asset for the companies, for EMC as well as VMware as well as Pivotal, and we believe at this phase of our journey that it's absolutely the best way to go and we expect that to continue for years to come. We do, in many, many circumstances, find that customers simply say -- I want you guys to work together, partner together, deliver me more value together into my environment, and I want to view the federation as one company. And we are getting that strong response from customers and some of our biggest Q4 wins were a direct result of the federation partnership.

So we're very comfortable and happy that this came together as it did and pleased that at least that's been taken off the table for at least 2015. With regard to me personally, those decisions are made by the board, of course, and I'm thrilled and excited by what I'm doing at VMware and hope to do it for many years to come.

JG: Are there any other aspects of the announcement, or anything else that you would like to touch on or want readers to know about?

PG: We talked about the vSphere 6, which is a huge announcement. We didn't spend a lot of time talking about virtual SAN and virtual volumes, the storage technologies, but we view those as very, very substantive technology improvements. I think you guys got it with respect to VIO, and we covered that pretty effectively. And then I'll say there is this profound differentiation of the hybrid network, and taken together, SDDC is the foundation for one cloud, any app, any device. The components are in place, customer uptake is strong and we've got years of innovation in front of us that's turning me and my engineers' cranks every day.

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