VMware Enters the ‘Tornado’ Phase of Virtualization
VMware’s original core business was all about vSphere and compute virtualization. At this point in 2016, while server virtualization remains a foundational element of VMware’s business, it is a declining component as new areas such as cloud, network and storage virtualization continue to accelerate.
VMware announced its second quarter fiscal 2016 earnings on July 18, with revenue reported at $1.69 billion, for an 11 percent year-over-year gain. Net income was reported at $265 million, for a 54 percent gain over the second quarter of fiscal 2016.
Looking forward, VMware is providing third quarter fiscal 2016 guidance for the midpoint of total revenue to be $1.763 billion.
Among the most striking elements of VMware’s second quarter is the continued decline of the company’s standalone vSphere server virtualization business.
In the second quarter, standalone vSphere represented less than 30 percent of VMware’s license bookings and the company expects this figure to continue to decline.
The decline of standalone vSphere is a strategic move, though, as VMware emphasizes its NSX networking, vSAN storage and cloud-related offerings.
NSX and vSAN VMware’s Rock Stars of the Quarter
“Generally, the rock stars of Q2 were NSX and vSAN, and they were just fabulous,” VMware CEO Pat Gelsinger said during his company’s earnings call. “In Networking, we had another great quarter, with NSX license bookings more than doubling and the number of customers now exceeding 1700.”
For vSAN, Gelsinger said there are now approximately 5,000 customers now using the product, up from about 3,500 just a quarter ago. There is also interest among VMware customers for containers, specifically the VMware Photon platform and VMware vSphere integrated containers.
Additionally, Gelsinger commented that VMware’s OpenStack distribution, VMware Integrated OpenStack, is being increasingly adopted as the only enterprise-class implementation of OpenStack.
During the earnings call, Gelsinger was asked if VMware’s sales teams are being directed away from vSphere in favor of NSX and vSAN. Gelsinger replied that generally VMware biases its sales teams to the new product areas.
“Clearly, the growth in new products are the ones that we give them the highest multipliers,” Gelsinger said. “Whereas mature products, like vSphere, they get paid for those, they retire quota for those, but clearly not at the same level that they would for the new product areas.”
The new product areas are set to expand further in August with new products that will be announced at the VMworld conference.
“These new services will provide customers with unparalleled connectivity, security, and visibility across multi-cloud IT resources, regardless of whether the underlying infrastructure is VMware based,” Gelsinger said.
Overall, when looking at where VMware now sits on the business adoption spectrum, Gelsinger’s view is that his company has crossed the initial chasm and is now in the tornado of adoption of adoption phase for the Software-Defined Data Center (SDDC).
“I think we’re definitely past the bleeding-edge adoption into the early market adoption and as Jeffrey Moore, a longtime friend says, the ‘tornado phase,’ I think, is now upon us,” Gelsinger said.