VMware Cloud On AWS: Vendors And Partners Weigh The Opportunity And Risks

As VMware Cloud on AWS approaches a still-indefinite launch date this summer, channel partners of the two enterprise behemoths are sizing up the offering and eager to learn more as they weigh the investment to bring it to market.

They see the tremendous market opportunity every day – enterprises are rapidly ramping cloud adoption, often driven by mandates straight from the C-Suite, and many are looking for the migration path of least resistance.

The long-term viability of the offering from the standpoint of both vendors and their channels, however, will ultimately depend on several factors beyond initial adoption, including the yet-undisclosed price, the extent of AWS feature integration by customers and channel buy-in.

The hybrid cloud service is officially a VMware product — sold, supported and managed by the virtualization leader. But the deal poses a risk for VMware by creating a smoother route for private workloads to enter the public cloud, said several partners, all who asked to remain anonymous so as not to jeopardize relations with the vendors.

"The long-term risk is they're outsourcing part of their VMware hosting over to Amazon," said the CTO of one AWS partner. "It seems sort of inevitable that a subset of that is going to wind up converting to Amazon-native service eventually."

A director of managed services at a large cloud consulting firm told CRN the once-unthinkable alliance would likely satisfy an immediate need for some VMware customers. But it could prove, in the long run, "a reverse Trojan horse."

VMware doesn't see that happening.

"We have worked closely with our partner AWS in scoping a compelling and competitive service offering that will drive value for customers. Customers that are getting value will not see a need to move," Mark Lohmeyer, vice president of product in VMware's Cloud Platform Business Unit, told CRN in response to emailed questions.

The CEO of a VMware partner told CRN the strategic relationship would only advance VMware's multi-cloud management and orchestration strategy. The deal positions VMware "as the glue" in the on-premises and multi-cloud hybrid world of the foreseeable future.

"I think it is a brilliant play by VMware," he said. "Their overall strategy is 'If you can't beat them join them.' When this comes to market they will no longer be able to boxed out by AWS – they will have hooks into AWS."

That CEO noted VMware is striking similar, although less consequential, deals with IBM, Microsoft and other cloud providers, "building technical hooks into all those platforms."

The industry took notice when AWS CEO Andy Jassy joined VMware CEO Pat Gelsinger on a stage last October to announce their alliance. Partners of both vendors, at the time, said it was both surprising and inevitable the world's largest public and private cloud providers would eventually find a way to make nice.

A few years earlier, in 2013, VMware had introduced a rival public cloud. But that service, vCloud Air, failed to gain traction. With its impending demise (the remnants of which were recently sold to French cloud provider OVH), VMware needed a public cloud story.

AWS, for its part, had a strong interest in reducing the pain private cloud users experienced in migrating to its infrastructure.

The market opportunity for the jointly engineered service is clear.

"Most enterprises have a percent-based goal to migrate from their data centers to cloud," Bailey Caldwell, vice president of customer success at RightScale, a cloud management software vendor, told CRN. Those cloud adoption mandates are even stricter across the public sector. "It started with the U.S. government," Caldwell said.

"There is a big push in the enterprise to get in the cloud and save money. There's a huge push, across the board to get out of data centers," said an executive at a large AWS partner.

IT departments are feeling the pressure. Many aren't confident they can rearchitect workloads in time to satisfy those mandates, either for lack of internal expertise or funding to hire consultants; or they're not interested in abandoning the VMware tools they know and love, like vRealize, vMotion and powerCLI.

Despite those anxieties, for a large percentage of enterprises and agencies, capital allocations for on-premises infrastructure will continue being replaced with funding for cloud operating expenses.

Some customers operating "large VMware farms" see VMware Cloud on AWS as the path of least resistance to get to the cloud, the director of managed services cited above told CRN, even if "you're not getting the full advantage" of the cloud.

Paul Bockelman, a solutions architect at AWS, summed up customer sentiment at a session he presented on the service at the AWS Summit in San Francisco in April.

Customers, especially in the public sector, who find themselves not ready to re-architect applications, think: "This gives us an opportunity to move the workloads to cloud, but still continue to operate the way we've been operating for years," Bockelman told partners and customers attending his presentation.

VMware's Lohmeyer told CRN the offering is targeting "multiple valuable customer use-cases" beyond lifting-and-shifting from on-premises to cloud. Those include application development and testing, application migration and disaster recovery, he said.

A channel partner of both vendors pointed to another driver of the alliance – Microsoft's Azure cloud as a common adversary.

It's far easier to migrate, without manipulation, VMware virtual machines, stored as OVA files, to Microsoft's Azure cloud, that partner said, then to convert them to Amazon Machine Images (AMIs). "For Azure, there's no barrier to migration," the joint partner told CRN.

That gave Microsoft a leg-up in selling Azure to VMware customers looking for a frictionless path to public cloud, something neither VMware nor Amazon were happy about, partners said.

That enmity might be evaporating – VMware recently reached a deal with Microsoft to offer its Desktop-as-a-Service, Horizon Cloud, on Azure.

While the availability of a full-bodied VMware environment in Amazon's cloud could ease pressing challenges stemming from adoption mandates, enterprises might only use it as a stopgap – buying time for larger cloud transformation projects.

Down the road, one potential trigger point for change will be the expiration of VMware licenses.

Whether customers that have grown more comfortable with cloud renew with VMware, or instead re-architect workloads, will depend on several factors, partners said, starting with pricing.

Since partners reached by CRN have not seen a price sheet yet, however, it's hard to gauge how financial concerns will influence decisions to maintain the VMware service or go all-in on AWS.

Another factor will be the extent of adoption of native AWS services. "As they want to try new capabilities for some of these new environments, and they're told VMware doesn't support that, they'll need to start building net-new functionality native to AWS," said the director of managed services.

The CEO of a technology vendor that's worked closely with both companies told CRN he's heard the engineering teams from both companies have done a masterful job in integrating the platforms.

The success on that technical front "could lead to users happily sitting on AWS for years without changing from VMs to AMIs," that CEO said. If that happens, "Amazon might cut a more long-term deal" with VMware.

Another factor that could make the VMware environment stickier for customers is the often-underestimated pain of cloud transformation projects, which usually prove more difficult than customers expect.

VMware might be counting on customers to "do the math and figure it's not worth the rearchitecting rework it would take to become 100-percent cloud-native," the CTO of the AWS partner said.

But, if that calculus proves faulty and many customers do "get tired of hybrid capability and just decide to go all-in on AWS," he said, it'll probably be three years before widespread defections.

Caldwell, of RightScale, described the service as "more old-school outsourcing" of the kind that has been going on for decades. That's different from a true cloud transformation, he said.

"Cloud is about transforming how you deliver IT services and taking advantage of the elasticity and innovation. So anybody meeting a metric by moving to VMware in an AWS data center is simply shutting down internal or pre-existing facilities, not moving to cloud," Caldwell said.

The joint partner told CRN that VMware should not count on the tools and interfaces of its virtualization platform to keep customers enraptured with the service. While those features are popular, maintaining them probably holds strong appeal to only 10 to 20 percent of his customers.

"If they have a path to transition 100 percent over to AWS and ditch spending on the 'VMware tax,'" he said, "that would be a strong motivator."