Partners: vCloud Air Sale Clears Deck For VMware's AWS Strategy

Partners say VMware's decision to sell its vCloud Air business marks a long-awaited turning point in the virtualization giant's cloud strategy, and serves as a signal that VMware's cloud energy will be concentrated on its new partnership with Amazon Web Services and Dell EMC's Virtustream service.

vCloudAir, VMware's one-time AWS competitor, is being sold to privately held hyper-scale cloud provider OVH. The deal, announced Tuesday, comes just six months after VMware signed a public-private cloud partnership with its former cloud infrastructure rival, AWS.

Terms of the deal, which is expected to close in the second quarter, were not disclosed.

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vCloud Air is VMware's enterprise hybrid cloud offering. The company said in a statement that it has "evolved its business strategy to focus on providing hybrid and cross-cloud software and services. Given this evolution, VMware is transitioning vCloud Air U.S. and European data centers, customer operations, and customer success teams to OVH."

Rob Steele, a systems engineer with Cincinnati-based RoundTower Technologies, a large solution provider that works with VMware, said partners struggled to make sense of vCloud Air and often felt locked into the service unnecessarily. "It's better for the VMware core business" to sell vCloud Air," he said. "They're competing with themselves by having it. They've partnered with Amazon, I don't think it was producing a lot, and by having their own [cloud service], it was a direct competitor from an AWS standpoint. This lets AWS know they're getting out of the cloud business. It helps them have true hybrid cloud with any provider and no vendor lock-in from a software perspective."

"The day they acquired Virtustream was the death knell for vCloud Air," added the the data center chief at a large solution provider that works with VMware, and who asked to remain anonymous. "The whole vCloud Air thing (which was formally launched four years ago) was an effort to appease the board of directors. The board wanted to be in the cloud. I, for one, told them 'Don't do this. It's a race to the bottom. Sell picks and shovels, don't get involved in the gold mining.' I guess they thought they could always sell it. They kept saying there weren't enough globally distributed, tier-one service providers that had VMware, and they thought they were losing the cloud race to Microsoft. There just wasn't enough business there to justify doing what they did."

VMware did not comment Tuesday morning when contacted by CRN. Rather, it deferred to a conference call planned for later in the day.

VMware built a network of more than 4,400 vCloud Air service providers, but sales of the vCloud service, which started under the name vCloud Hybrid Service, were hit hard by the rise of Amazon Web Services.

VMware parent EMC fired its own shot at vCloud Air with its $1.2 billion acquisition of the mission-critical cloud services firm Virtustream in 2015.

Last October, VMware signed a strategic partnership that enables VMware users to move workloads to the AWS public cloud. The AWS VMware services, which will roll out midyear, is a sharp turnabout from VMware CEO Pat Gelsinger's plea to partners four years ago not to let any workloads go to AWS. In fact, at that time, Gelsinger told partners that if "a workload goes to Amazon, you lose, and we have lost forever."

VMware began backing off vCloud Air within months of EMC's acquisition of Virtustream, sources told CRN at the time, although VMware said it would continue to operate vCloud Air while partnering closely with Virtustream.

VMware also offers VMware Services on IBM Cloud, as well as VMware Cloud Foundation, a unified software-defined data center cloud management platform, which is available through IBM, OVH and others.

After the acquisition closes, OVH will operate vCloud Air as "vCloud Air Powered by OVH," will continue to use VMware cloud technology, and will partner with VMware on go-to-market strategy and customer support.

"It's kind of blah, really," a top exec at a large solution provider that works with VMware said of vCloud Air, and who also request anonymity. "It's obvious why they're selling it; It's not getting any traction. They're aligning themselves with Amazon, and that kind of cannibalizes their own solution."