Decoding the signals around VMware’s cross-cloud vision, impending acquisition and renewed security focus

A seismic shift is afoot in enterprise workload virtualization.

VMware Inc. is the global market leader in the virtualization and hyperconverged infrastructure markets, with about 27% of the total virtualization market share across vSphere, VMware ESX Server and VMware vCenter Server. The lead stretches further in the HCI space, where the company boasts a 41% share and $1 billion in revenue, marking almost 8% year-over-year growth.

Amid all the profit, however, lies uncertainty. The news of chipmaker Broadcom Inc.’s intention to acquire VMware for a reported $61 billion has been hit with several regulatory roadblocks in the U.S., with only the European Union having given its approval. (More on that later.)

“For VMware, this means a dramatically different operating model, with financial performance and shareholder value creation as the dominant and perhaps sole agenda,” according to theCUBE’s industry analyst Dave Vellante in a recent Breaking Analysis segment. “For customers, it will mean a more focused portfolio, less aspirational vision pitches and, most likely, higher prices for customers that make smaller spend commitments to VMware.”

The company is also expanding its technological reach to connect multicloud, artificial intelligence and security. In that vein, VMware announced vSphere 8 last year, a cybersecurity enhancement where data processing units run infrastructure services separate from the workload domain.

With all of the internal changes going on, where is the company headed for the rest of 2023 and beyond? As theCUBE gears up for live coverage at VMware Explore, Aug. 22-24, we’ve compiled insights from SiliconANGLE’s ongoing coverage of VMware’s “key movements” throughout 2023 to paint a vivid picture of the company’s future.

This feature is part of SiliconANGLE Media’s ongoing series exploring the latest developments in the virtualization market.

Multicloud remains a strong priority

VMware’s messaging has consistently shown support for multicloud infrastructure, or what the company calls “cross-cloud managed services.” Its journey into cross-cloud services began in 2021 with the idea to mitigate operational complexity and support secure edge infrastructures.

At VMware Explore 2022, the company made a barrage of announcements focused on cross-cloud collaborations intended to bridge the gap between major cloud service providers in Microsoft Azure and Amazon Web Services Inc. Through its vSphere management layer, workloads can be deployed and new features released for applications in its Kubernetes platform, Tanzu.

Recently, the company also partnered with Hewlett Packard Enterprise Co. on the HPE GreenLake for VMware Cloud Foundation solution, Private Cloud Enterprise and Private Cloud Business Edition. With the integrated solution, users are offered a “performant, secure and economical solution on-premises,” according to Dave McGraw, vice president of the Office of the CTO at VMware, in an interview with theCUBE.

Importantly, VMware’s cross-cloud approach simultaneously attacks two problems companies often face in cloud transformation: the choice and skill problems.

“What we do on-premises is when we combine VMware’s Cloud Foundation with HPE GreenLake, we offer customers a consistent standard that in many cases they’re very familiar with managing a VMware environment. We extend that into the hyperscalers with VMware Cloud on AWS, Google, Azure, Alibaba, Oracle and so on,” McGraw explained. “We give customers choice. They use the same skills so they don’t have to re-skill people four or five different times. And we give them the mobility for the workloads. We give them automation tools that allow them to move the workloads around.”

“We expect that VMWare will continue to beat the multicloud drum loudly next week,” said Rob Strechay, lead analyst with theCUBE Collective. “In addition, we expect a lot of announcements about how organizations will be able to leverage VMWare solutions for AI. This is a place they have not really doubled down on yet, and there are a lot of differing opinions on how to use GPUs, bare-metal servers versus virtualized or containerized AI workloads.”

These days, the FTC looks at most acquisitions as problematic

Uncertainty is an enemy of all businesses — it’s bad for long-term goals and profitability. Earlier this year, Broadcom Inc. announced formalized plans to acquire VMware in a deal worth around $61 billion, structured as a 50-50 cash-and-stock arrangement and with Broadcom assuming around $8 billion of VMware’s debt.

The issue, however, has been regulatory blocks hampering the acquisition in the U.S — despite the European Union and United Kingdom having already given the green light. Initially fraught with antitrust concerns that Broadcom could restrict its hardware competitors from accessing certain VMware capabilities in an effort to increase its own market share. Regulators expressed this could potentially raise prices and stifle innovation. The European Commission signed off on the proposal based on several conditions — one of which is an appointment of an independent trustee to ensure Broadcom maintains interoperability within the EU.

When the acquisition eventually materializes, there’s an expectation that Broadcom will streamline VMware’s operations by reducing headcount and de-levering non-strategic assets, as evidenced by Vellante’s analysis.

“Remember also that VMware’s growth has been under pressure, so it has been buying companies — dozens of them: AirWatch, Heptio, Carbon Black, Nicira, SaltStack, Datrium, Virsto, Bitnami and on and on,” Vellante said. “Many of these were to pick up engineering teams, which will definitely be scrutinized by Broadcom. Where does VMware go from here? Fantastic distribution channel. But, slowing growth, limited developer affinity, a far-flung R&D agenda and increasingly fighting multifront wars with cloud companies, Cisco Systems Inc., IBM Corp. and Red Hat … Running VMware has become a heavy lift, and Broadcom will likely simplify operations.”

With both companies combined, the resulting entity’s revenue stands at around $40 billion. Broadcom has also signaled a pro forma earnings before interest and taxes target of $8.5 billion as a result of the VMware acquisition. Perhaps more importantly, the deal represents a bold statement of intent from Broadcom to become as dominant in software as it’s been in hardware. The company believes that computing is shifting from being CPU-focused to becoming connectivity-centric through a combination of hardware and software. Value, therefore, is being driven toward core infrastructure to manage data centers and multiclouds — and Broadcom is carving out a piece of that pie for itself.

Doubling down on security

In rubber stamping its vision for operating in the multicloud, VMware has shown an awareness of the urgency to build out robust, resilient and secure solutions that can thrive in today’s sprawling enterprise threat landscape.

Earlier this year, VMware researchers uncovered a new form of “name-and-shame” cyberattack tactic, where information about victims is disclosed in a ploy to blackmail them into paying a ransom. The threat stemmed from the 8Base ransomware group that, despite being relatively new, has displayed a penchant for skillful data encryption and social engineering.

To help companies better protect their data and stay ahead of such events, the company, at this year’s RSA Conference, debuted a new slew of cybersecurity features aimed at fending off hacking attempts. One of those is VMware Secure App IX, a tool that’ll facilitate the regulation of traffic between an organization’s cloud applications. Companies often limit what kinds of data can pass between their applications according to pre-established rules, but implementing those rules has historically been manual and tedious. Secure App IX aims to simplify that process.

Another example is its NSX networking platform, which saw a new feature released into general availability that allows companies to deploy NSX on data processing units, which themselves are designed specifically to speed up cyber and networking use cases. NSX is traditionally used by companies to manage on-premises and cloud-based traffic, but it also packs a set of nifty cybersecurity features, which have received a welcome boost.

The company is also taking steps to advance the “confidential computing” idea. Based on a fledgling processor concept called the “trusted execution environment,” it seeks to help maintain the confidentiality and integrity of data being deployed either in the cloud or edge servers that might be operated by third parties.

In practice, VMware will work through the “Certifier Framework for Confidential Computing,” which is an open-source project aimed at standardizing a streamlined application programming interface for building and running confidential computing applications. Notable hardware names such as Samsung Electronics Co. Ltd., Advanced Micro Devices Inc. and the RISC-V Keystone community have joined in, creating the pathway to enable confidential computing on the x86, Arm and RISC-V processor architectures.

With the Broadcom acquisition not likely to close until November 2023 or later, this year’s VMware Explore will likely feature less aspirational visions and more practical solutions that extend Tanzu and Aria to support multicloud along with incremental solutions to core products such as vSphere, vSAN, NSX and security. 

Photo: Robert Hof/SiliconANGLE