The Big Story

Virtual machines, realpolitik

At one point, VMWare harbored ambitions — born of fear and arrogance — of competing directly with AWS. Eventually, after rhetoric that looks hilarious in retrospect, cooler heads prevailed.

VMware had to make some big changes to keep up in the modern enterprise sector. The company may have taken data centers by storm during the mid-2000s with its server virtualization technology, but more recently it has struck key partnerships with competitors like AWS, acquired talent it couldn't develop internally and adapted its product roadmap to reflect reality at a time when it looked like the cloud might flatten everything in its path.

Fast forward a few years to this week's VMworld 2020, and the market has come around to its view: Some enterprise applications will remain in self-managed data centers for the foreseeable future, and customers want options when it comes to finding the best home for the rest of their apps. (Disclosure: My wife works as a contractor for VMware.)

That's not to say that VMware has prevailed, exactly. The big cloud providers are getting pretty good at giving server huggers their own products and services for accessing cloud resources, sometimes in partnership with VMware and sometimes not. AWS is generating $10 billion in revenue a quarter — almost four times as much as VMware — and it is growing much faster.

But VMware is still forging ahead. The biggest news out of VMworld 2020 was the formation of a new partnership with Nvidia, which harbors its own ambitions of driving both cloud and data center trends over the next decade.

• Nvidia and VMware will integrate Nvidia software for running artificial intelligence workloads into several key VMware products, including vSphere and VMware Tanzu.
• The partnership will also help VMware customers set up future data centers to offload some tasks from general-purpose processors, like those from Intel and AMD, to Nvidia's AI-oriented chips.
• "A lot of times CEOs get together and say, 'Let's do something bold,' and it's another Barney announcement," VMware CEO Pat Gelsinger told Fortune, referencing the cuddly but useless purple dinosaur in describing many other tech partnerships. (That was a new one for me.)
• If Nvidia's acquisition of Arm closes, and the graphics chip maker realizes its vision of becoming the most influential chip maker of the next decade, this deal could be as prescient as VMware's decision to bury the hatchet with AWS and collaborate.

Speaking of AWS, VMware's not done there, either. It also announced several new services designed to work with cloud providers.

• Customers of VMware Cloud on AWS now have new services that help them move applications built around VMware to the cloud leader while improving security and networking.
• Azure VMware Solution is now generally available, giving Microsoft and VMware's joint customers a similar path to Microsoft's cloud resources as AWS customers have enjoyed for a few years.
• And Tanzu, VMware's managed Kubernetes service, is now available on AWS, with a preview version heading to Oracle's cloud services and a pledge of future support for Azure.

Rounding out the major announcements VMware also acquired SaltStack, adding to a parade of acquisitions it has made over the last several years.

• SaltStack helps its customers automate the painstaking but very important infrastructure maintenance tasks required to keep a modern internet business up and running.
• It also monitors that infrastructure for security issues, giving VMware additional tools to address one of the most pressing concerns for any modern internet business.
• Acquisitions like SaltStack, Carbon Black and Heptio help VMware provide long-running customers with modern options for managing their infrastructure, keeping them in the VMware orbit while extending their application deployment options to cloud providers.

It's hard to believe that all the major IT vendors of a certain age — VMware, HPE, Oracle, IBM and even VMware parent company Dell Technologies — will thrive over the next decade. But if the market has decided that the cloud isn't the answer for everything, there's opportunity for some of these infrastructure laggards to modernize their approach before it's too late.

I'll have more on VMware's plans for the future later this week on Protocol, following a one-on-one interview with Gelsinger.

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This Week On Protocol

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RISC-y business: Nvidia's landmark deal to acquire Arm put the spotlight on an open-source chip project called RISC-V, which also operates as a licensor of chip designs to other companies, including Nvidia. Progress has been slow, but RISC-V CEO Calista Redmond told Protocol's Shakeel Hashim that the group is just a few years away from its "iPhone moment."

D-Wave of the future? Companies that can't wait for general-purpose quantum computers might be kicking the tires on D-Wave's new Advantage quantum system, which takes a different approach to quantum computing than the one pursued by most of the industry. D-Wave's approach works for only a limited number of applications, but it might be attractive to companies looking for solutions to specific optimization problems.

Around the Cloud

• It was a rough start to the week for Microsoft, which scrambled to fix a widespread outage on Monday that involved Office 365 and Outlook as well as a host of other important Azure cloud services.
• That outage wasn't great publicity for Microsoft's big planto pitch Azure to telecom companies as a cloud provider for their 5G efforts.
• And Office customers might be in for another surprise if they're running Microsoft 365 on AWS or Google Cloud: New licensing changes could increase the price of self-managing the office productivity and communications software on non-Microsoft clouds, according to The Information.
• Still, Microsoft continues to work on improving its cloud infrastructure around the world, as seen in this presentation from Azure CTO Mark Russinovich delivered during Ignite last week. (That's all the Microsoft news, I promise.)
• HPE plans to increase the visibility of GreenLake, its application management software, across several different distribution channels as it seeks to gain ground against companies like VMware.
• Dell Technologies relies heavily on its 81% stake in VMware for its cloud strategy, and according to SDXCentral it's a little hard to tell how that will play out over the long term.
• Google plans to open four new European cloud regions in France, Italy, Poland and Spain as it expands a partnership around 5G with Telefonica.
• Nuvia is a secretive chip startup working on what's believed to be a brand-new design for data center chips, and it just raised an eye-popping $240 million series B round.
• The pandemic has helped cloud startups, not just the big cloud providers and big enterprise software companies. The post-pandemic shift to digital services means smaller companies are enjoying a wave of funding, according to The Wall Street Journal.

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