Cover Story: VMware's Maritz Aims To Run The Table In Cloud

As technology industry CEOs go, VMware's Paul Maritz is as unassuming as they come. But don't be fooled by his low-key disposition and kindly college professor demeanor. Maritz is a stone-cold assassin -- at least when it comes to dealing with IT industry competition. As it turns out, this skill is very well suited to the evolving chess game known as cloud computing, in which VMware and its rivals are essentially starting out at square one.

At Microsoft, Maritz was widely considered the No. 3 executive behind Bill Gates and Steve Ballmer, and by the time he left the software giant in 2000 his canny ability to checkmate one competitor after another -- think WordPerfect, Lotus and Netscape -- had become the stuff of company legend. During Maritz's tenure, Microsoft also came to realize that office productivity software was best sold as an integrated suite, as opposed to point products, and this led to the creation of Office.

These days, Maritz is making moves--and taking some calculated risks--to help VMware leverage its lofty position as the virtualization software market leader into a dominant one in cloud computing. And he's stepping up his game when it comes to pushing VMware's products as an integrated cloud infrastructure stack.

Maritz and company have just released the largest simultaneous product update in the company's 13-year history, which includes VMware vSphere 5, the first major update to its cloud operating system. Other parts of VMware's cloud infrastructure stack, including vShield, vCloud Director and Site Recovery Manager, part of the vCenter product family, have been imbued with features that automate IT processes that used to require human intervention. In other words, VMware has made them more cloudlike.

Maritz would probably cringe at the comparison, but there's an argument to be made that VMware is becoming the Microsoft of the cloud -- with a hand in everything from the cloud operating system to the applications -- collecting tolls for all the services it provides along the way. At any rate, VMware's aggressive charge into the cloud stands to dramatically impact the balance sheet of solution providers that have built huge services business around VMware virtualization software.

If virtualization is a cloud stepping stone, then VMware's updated cloud infrastructure stack represents a smoothly paved roadway, one that gives customers and partners the performance and scalability to build cloud services businesses and the security and disaster recovery to maintain IT operations on the back end.

If that weren't enough, Maritz has been busy gobbling up some of the industry's best and brightest IT talent, recruiting two of Google's top engineers to help build Cloud Foundry, a Platform-as-a-Service for the next generation of cloud applications.

"We're trying to shoot ahead and take some risks," said Maritz in an interview with CRN in late June. "We think there are big changes coming in both how applications are developed and how they're provisioned and consumed. And this is the time to try and get ahead."

Just how far ahead does Maritz want to get? To say he has his troops thinking big would be an understatement. In a YouTube recruiting video from the Americas Partner Operation Sales team, Bob Crissman, senior director, Americas partner operation sales team, said he sees no reason why the company can't move from $3 billion to $50 billion in annual revenue.

"We are not going to be just the infrastructure for the cloud," said Crissman. "We are going to be the cloud."

This kind of ambition comes with a price, however. In the case of vSphere 5, VMware customers are angry over licensing changes that will require some to pay more for the virtualization infrastructure they already have in place. VMware previously pegged vSphere licensing to the number of server cores, but vSphere 5 licensing is based on the amount of memory that customers allocate to virtual machines on the host.

VMware said the new licensing model better reflects the cloud delivery model. But selling the future is no easy proposition, and while VMware channel partners can grasp the significance of VMware's cloud infrastructure stack updates, not all are ready to commit to the investment that deploying it will require.

"Cloud is still an issue where people still don't quite know what it's going to mean for their organization, in terms of how to manage IT, structure internal IT departments, etc.," said Maritz.

NEXT: VMware's Cloud Conundrum

The strategic significance of VMware's cloud infrastructure stack can't be overestimated. VMware expects VARs to use it to build private clouds -- both for their customers and within their own organizations. VMware also expects service provider partners to use its cloud stack to build public clouds. In a sense, VMware's cloud stack will be the linchpin for the hybrid cloud service delivery model that VMware believes will become the primary way most enterprises adopt cloud computing.

Aware of the channel's power in driving customer demand, VMware plans to offer incentives to partners that sell and position its cloud stack as a suite of products to their customers, said Carl Eschenbach, VMware's president of customer operations.

"We're focused on building out a private cloud suite that includes all of our products, and over time we will package it as such so that it's easier for the channel to sell," Eschenbach told CRN.

Eventually, VMware intends to give its channel an all-inclusive private cloud data center SKU, although Eschenbach said VMware needs to integrate its cloud portfolio more tightly to make this possible. "Today there isn't a single SKU that pulls it all together, but that's the direction we're going as a company," he said.

The VMware Service Provider Program includes traditional service providers like Verizon and SingTel as well as traditional channel partners. Getting these two parties working in concert is one of the biggest near-term challenges VMware faces, as many solution providers are quite comfortable with selling private cloud but are less enthused about working with service providers.

VMware has mapped out several paths partners can take, one of which involves steering customers to public cloud service providers and collecting referral fees. Understandably, many VARs aren't keen on the idea of referring customers and potentially seeing them defect to these companies.

"By asking solution providers to evolve to collecting agency fees from service providers, will this erode margins and force us to either expand and become service providers, or shrink and reduce the transactional VMware business we've built our organizations around?" asked Dan Weiss, CEO and co-founder of Varrow, a Greensboro, N.C.-based VMware partner.

In another scenario, solution providers will resell a service provider's public cloud offerings to their own customers. But it remains to be seen if this option will take root as VMware envisions. One VMware partner and VAR500 solution provider said service providers aren't interested in working with partners because they feel they can get the job done on their own.

"Service providers don't want to have partners reselling their stuff because they feel like they'll be giving away margin to partners. So it really doesn't work in execution," said the solution provider, who requested anonymity. "Bottom line is that service providers don't want to partner."

According to VMware, VARs can also move to the cloud by renting co-location space from service provider data centers, and either offer their own white-label cloud offerings or set up a cloud offering in their own data center, if they have one.

VMware is aware of the uneasiness that's percolating in its channel and is endeavoring to explain how working with service providers will actually open up more business.

"We actually see this as a very big opportunity for our traditional partners to leverage and monetize the cloud, either themselves or in partnership with the service providers," said Eschenbach. "But we're not going to make it a competitive environment. We have to bridge the gap between the traditional service providers and our solution providers."

What about partners that either don't want to make the jump or simply can't make it work business-wise? Eschenbach said these VARs will not get left behind, estimating that 80 percent to 85 percent of apps will still be running in a private data center -- the traditional bailiwick of the VMware solution provider.

NEXT: Cloud VARs Of The Future

VMware's guidance on cloud has centered on the message that partners can find their niche in the new and unfamiliar landscape.

"They've told us that by allying ourselves with cloud service providers, we'll be able to transform our businesses and become cloud brokers in the future," said Weiss. "They've also said the solution provider of tomorrow may be a cloud provider with a more boutique, high-touch model. We don't all have to be Amazons -- there's also a need for channel partners that address a certain segment of the market."

Unsurprisingly, VMware partners that are already well established in the cloud aren't as concerned with the implications of the changing channel dynamic.

"What partners fear is the movement away from the private cloud, which is where they have control of the account. But those perceptions are off base," said Keith Norbie, vice president of sales at Nexus Information Systems, Minnetonka, Minn. "There are a number of service provider players that are going to make it very attractive for clients to move workloads into a public cloud."

VMware often talks about the IT spending "drag" that VARs can take advantage of when rearchitecting their customers' data centers for cloud computing.

Doug Smith, VMware's senior director of global partner strategy and operations, told CRN in March that $1 of VMware licensing generates an additional $15 in IT spending that partners can potentially capture. This obviously doesn't apply when VARs work with public cloud providers, but there are still ways that partners can form financially fruitful relationships with these companies.

World Wide Technology, Maryland Heights, Mo., helps service providers architect their public clouds and works with customers to build private clouds. WWT is formalizing partnerships with several cloud service providers, and channel conflict hasn't been an issue, said Scott Miller, director of business development for virtualization and cloud.

"In today's market, we're seeing cloud service providers pretty focused on making money on Infrastructure-as-a-Service exclusively," said Miller. "They haven't shown interest in evolving into managing IT-as-a- Service because that takes a different level of expertise than what they've invested in, and hence, comes with more risk."

WWT is developing marketing collateral that spells out how to team with VMware service provider partners during the sales cycle. "Cloud service providers don't have that go-to-market capability. Most of the ones that went to market initially thought they were going to go direct, but now they're realizing that a lot of the demand comes from the channel and that they need an offering that makes sense," said Miller.

Mike Strohl, president of Entisys, a Concord, Calif.-based virtualization solution provider, agrees. "A lot of the cloud offerings from service providers lack clear direction about how to overlay the technology that will make them function at a level that meets customer requirements," Strohl said. "The reseller opportunity is to provide the consulting and integration services between on-premise systems and those that sit in the cloud, wherever it may be."

Ahead, a Chicago data center solution provider, is another VMware partner building relationships with multiple cloud service providers. Eric Kaplan, vice president of engineering, is helping clients understand the requirements for hosting applications in the cloud, the cloud pricing models and how service level agreements are structured.

Armed with this knowledge, Ahead is starting to help clients host applications in service providers' data centers, paving the way to a hybrid cloud deployment model.

The Next Step: VMware Cloud Foundry

VMware is gaining momentum in leading its traditional channel into the cloud, but there's another barrier: legacy enterprise applications. Maritz has pointed to older application code as the most formidable obstacle standing in the way of customers' cloud migration. Cloud Foundry, the open-source Platform-as-a-Service VMware unveiled in April, is a bid to become the PaaS of choice for developers to rewrite older apps so they'll run well on private clouds.

VMware is piloting a commercial multitenant public cloud PaaS service that's slated for launch in the first half of 2012 and is leading an open-source Cloud Foundry project under the Apache 2 license. Cloud Foundry reflects its belief that the popularity of programming frameworks like Spring, Ruby and Node.js will continue to grow.

"Our view is that there's a new generation of developers who will be building a new generation of applications, and we're trying to accommodate them on our platform and also have the business opportunity," Maritz said.

Cloud Foundry is based on technology gained from VMware's 2009 acquisition of SpringSource, and it includes the collaboration of Mark Lucovsky, technical director, and Derek Collison, chief architect of the Cloud Services division, both of whom VMware recruited from Google.

"Our view is inevitably someone would do something like Cloud Foundry, so rather than wait for it to happen and have to react to it, we're putting our hat in the ring and pre-emptively offering something there,"said Maritz.

The challenge VMware faces with Cloud Foundry is that, for the most part, its traditional channel doesn't have in-house development expertise. "The only partners doing Cloud Foundry are super-high-end, and it will take awhile before it gets down to the level where everyone can adopt it," said one VMware partner, who requested anonymity. "We're looking for VMware to wean the market and show us how to monetize Cloud Foundry. They're able to explain how it works for them, but so far they're not able to explain how it's going to work for me."

Eschenbach expects Cloud Foundry to appeal to VMware partners with cloud infrastructure expertise that are ready to take the next step into app development. But he acknowledged that Cloud Foundry will be driven, at least in part, by partners with which VMware hasn't worked in the past.

In the end, Maritz believes that VMware's track record with virtualization can help convince customers and partners that despite the uncertainty over moving to the cloud, it's a decision they won't regret.

"This is an issue that we increasingly have to come to grips with as we talk to our customers and explain to them that there are different ways to think about this. My sense is that cloud is where virtualization was four or five years ago. We're going to see the same cycle play through," he said.