VMware’s future post VMware Explore 2022

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VMware held their annual conference a few weeks back. This conference was rebranded from VMworld to VMware Explore and held in San Francisco. While there were a number of announcements at the conference, a few things stuck out.

VMware is well known and widely used in the enterprise space as a virtualization tool. While much of the value comes from the virtualization and management tools that surround the core product, VMware has made inroads into other areas including support for cloud-native applications. 

Major Discussion Points

Unlike many conferences where the conversation centers on the company’s announcements, at VMware Explore, much of the conversation was about other things.

Tanzu is Misunderstood: Based on the discussion at the conference, the discussions about Tanzu appeared somewhat misguided. After the conference, I had a chance to speak with James Urquhart, a long time fellow clouderati and now part of the Tanzu team, about Tanzu to get a clearer picture. Tanzu is a portfolio of products, not a product in itself. Tanzu’s Applications Platform (TAP) and Application Service (TAS) provide customers with the ability to run cloud-native applications on a cloud management platform based on Kubernetes. Between TAP and TAS, customers have the flexibility to leverage building blocks or a more complete Kubernetes-based platform. The combination of these two along with the rest of the Tanzu portfolio…and connections to VMware’s core applications provide a broad opportunity for enterprises transforming their application portfolio.

Aria: The announcement around Aria as a potential rollup or rebranding, and the conversations that ensued around it, lead to quite a bit of confusion. In the end Aria is a rebranding of vRealize and CloudHealth with new functions added to support hybrid and multi-cloud environments. Aria is VMware’s answer to managing an increasingly complicated hybrid and multi-cloud environment.

Broadcom Acquisition: The Broadcom acquisition dominated conversations. The conversations focused on the implications of VMware and its customers with the Broadcom acquisition on the horizon. The concern had more to do with the future innovation potential and acquisition by a company that is perceived to have few synergies with the VMware value proposition.

CIO perspective

For the CIO, there are many questions as to VMware’s role in the enterprise moving forward. VMware’s virtualization tools will continue to be widely used for some time. The combination of value alongside the migration of applications away from virtualized environments will create headwinds for this aspect of VMware.

Tanzu, on the other hand, provides an opportunity to build cloud-native apps on a Kubernetes-based platform. The combination of TAS and TAP along with the integration into VMware’s core products provide a valuable integration opportunity.

However, the Broadcom acquisition brings a moment of pause to all of this. Broadcom has telegraphed confusing messages on where they intend to take VMware. That will impact the core VMware virtualization products to a lesser degree but could have a limiting factor on Tanzu’s investment in growth.

Investor Implication

VMware continues to provide strong revenue, and I would not expect that to disappear anytime soon. VMware’s virtualization product is a solid…and core component of the enterprise landscape. Growth will likely come from customers expanding their existing footprint versus net-new customers moving to a virtualized environment.

VMware’s Tanzu portfolio has the potential to take VMware into the next chapter but the Broadcom acquisition and long-standing perception around value based on the virtualization products will hinder growth without a clearly stated direction.

Competitor Implications

VMware continues to dominate the virtualization space and that should not change. Tanzu’s cloud-native platform has existing competition from other platforms. Plus, as customers shift more toward buy over build, higher functioning platforms will gain favor over parts. That being said, there is opportunity for a provider to truly manage the platform from edge-to-cloud.

Overall Summary

VMware is in a quandary with no clear direction. The Dell partnership and consequent divestiture took a toll on VMware’s future beyond virtualization. VMware has had a couple of strong acquisitions with Nicira for software defined networking and Pivotal for cloud-native app development. However, neither has received the attention it needs to reach escape velocity and create a future pathway for VMware. Tanzu is based on the Pivotal technology and while an interesting solution, it will need additional investment. Coupled with that, the Broadcom acquisition paints a murky picture, at the moment, as to VMware’s future.

A couple of potential outcomes could be a) Broadcom invests heavily into VMware and leverages VMware as a beachhead for a new software division or b) Broadcom spins out the Tanzu portfolio as a new separate company or sale to a suitor more closely aligned with the role Tanzu plays within the enterprise. While both may be feasible, the latter option provides new opportunity for investment and customers while keeping the virtualization components as a cash cow business.

Overall, VMware needs clear direction for existing customers and net-new customers. Branding is strong for their core virtualization products, but not for their newer solutions. The Broadcom acquisition is creating more confusion to their next steps and where this goes. VMware has been a strong player in the enterprise data center for decades. The next few years will be very telling for VMware’s future.

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