Techaisle Blog

In this Techaisle Take analysis, I will discuss which customer challenges Red Hat is addressing with its cloud services, market differentiation, especially VMware, and why its significant value lies in providing a consistent full-stack development and operational experience.

The customer challenges

A successful approach to the cloud needs to be structured around its capacity to evolve, support changing business requirements and customer/partner/employee expectations, respond to competitive pressures, and embrace new opportunities for automation/integration of automated systems. Businesses may be comfortable pursuing a limited number of objectives, but these objectives are no longer static. One of the challenges to providing cloud services is that the cloud spans two significant disciplines. One of the challenges to providing cloud services is that the cloud spans two critical levels. At a strategic level, the cloud is a management issue, and at the execution level, it is an IT issue. In IT, there are two main actors, developers and operators. Both developers and operations teams hold promise to support cloud development and deployment. In response, businesses have turned to an approach to development known as DevOps. In response, businesses have turned to an approach to developing and operating systems known as DevOps. Because of the optionality and complexity of tooling, it can be difficult to source appropriate cloud support for DevOps at a practical level. Techaisle’s Container Adoption Trends survey data shows that 57% of commercial customers seek application modernization services, and 77% are currently engaged in application migration services. Yet, 22% of firms believe there is a lack of IT and business strategy alignment understanding related to DevOps practice. Although modernization is a business priority, determining the right approach, paying off technical debt, internal strife between scrum/agile teams, not well-understood data & application dependencies, and legacy SDLC processes slow down the modernization programs. The competing corporate objectives usually compel an organization to manage and deploy a mix of environments, including on-prem configurations, private cloud, and multiple public cloud services. These diverse environments result in the need for a hybrid approach.

As a result, businesses deal with many inhibitors when planning to add business value at a faster pace and compete in the digital economy. The big challenge is building applications faster, reducing time to value, and deploying on-prem in private or public clouds. Operations teams are specifically under pressure to control costs, reduce operational complexity, improve security, and consistently manage across multiple cloud deployments. Operations teams are managing legacy applications running in virtualized environments in the data center while witnessing explosive adoption of the public cloud and associated services. In addition, businesses are increasing edge deployments, specifically in the industrial and telco verticals.

The solution – Red Hat Cloud Services

Red Hat’s cloud services strategy is built to address the multitude of the above-outlined challenges. Red Hat OpenShift provides consistency across all cloud environments, helping developers in cloud-native application development and rolling out applications in containers faster, giving the operators the ability to have the same operating experience across every deployment footprint for every application in both on-prem and public cloud. In addition to the core OpenShift platform, Red Hat Cloud Services includes several tightly integrated application development and data services intended to help developers build workloads and applications within the OpenShift managed-service environments. These additional managed cloud services include an API management service (Red Hat OpenShift API Management), a Kafka and streaming service (Red Hat OpenShift Streams for Apache Kafka), a service to simplify access control across multiple database vendors (Red Hat OpenShift Database Access), and a data science service (Red Hat OpenShift Data Science) for AI/ML workloads. According to Techaisle’s Container Adoption Trends survey research, the additional services are likely to see an adoption growth of 68% among commercial customers within the year.

Candid conversation with Dell Cloud-Client Computing chief strategist

Jeff McNaught, Executive Director & Chief Strategy Officer, Dell Cloud Client-Computing and co-inventor of Wyse thin client had a candid conversation with Techaisle on his new product initiatives, focus on security, building solutions for small and medium businesses and renewed attention to channel partners. Jeff is deeply involved in software solutions which includes partner software - Citrix, Microsoft and VMware and is responsible for the cloud-client business which includes devices that Dell build’s exclusively for Citrix or VMware as well as new products and software security offerings. One of his major new initiatives includes simplifying and securing virtual workspaces better than anyone else.

Dell VDI converging on security, cost, complexity and channels

Based on extensive primary research with SMBs and the channel partners, Techaisle forecasts the US SMB VDI market to be US$13 billion in 2020 as VDI penetration increases to 34 percent from the current 26 percent and an increase in number of seats from users who have already deployed VDI. Most of the midmarket firms that have invested in VDI are still experimenting with the technology, and most small businesses are still several years away from even this level of preliminary adoption.

The allure of VDI is clear – but the technology itself and the path to realizing its benefits is still mysterious to many small and midmarket businesses. Techaisle research shows that there is a need for VDI vendors to embark on a messaging exercise that includes - real-world examples of successful deployment of VDI, ease of VDI implementation with the least pain for SMBs & simplification of understanding VDI technology by removing fear and complexity.

Over the last two years Dell has been trying to build a momentum to remove the mystery and reduce deployment complexity. Along the way it has had more successes than missteps and it seems that Dell has reached a stage where it reasonably understands the needs of the end-customers and how to work with channel partners to win business and deploy solutions. Dell has architected multiple VDI solution delivery models for SMBs of all sizes and levels of technology adoption.

The rise in virtualization has been driving an accompanying demand for converged infrastructure or hyperconvergence: products that combine processing, storage and networking into a robust and scalable unit that can support and respond to the options inherent in virtualization. While the migration from separate server, storage and networking products to converged infrastructure is still in its early stages, the Techaisle SMB virtualization & converged infrastructure survey shows that it is beginning to gain traction, especially within more sophisticated SMB accounts.

Scale computing, launched in 2008, based out of Indianapolis with development in San Francisco bay area and offices in London, Paris, Toronto and Dubai made its SMB focused hyperconvergence launch at VMworld in 2012. Since then Scale Computing has implemented over 6,000 systems in a little over 1,600 customers.

As per Techaisle’s SMB virtualization and converged infrastructure survey, the key barriers to adopting hyperconvergence within SMBs are high cost of implementation, infrastructure disruption during roll-out, greater-than-anticipated time and resource investment, and the complexity of integrating new infrastructure units with existing infrastructure. For example, a pet peeve of SMBs when using VMware on HP Proliant DL380 G8 is their inability to use cloud migration to upgrade or add G8 or G9. These are the issues that Scale Computing is trying to address. In defense of VMware, although the initial code base of ESX was never built to be self-aware, VMware is working on it.

VMware has been in the news recently – a valuable asset for Dell, caught between the Dell-EMC deal (see analysis of the deal here). Just a couple of months ago VMware had its VMworld, a forum for VMware to articulate its strategy to customers, partners, media and analysts. VMware’s 2015 theme “Ready for Any” was centered on the challenges that IT professionals are facing today - security, mobility, application delivery and hybrid cloud – and the company’s strategy of supporting “One Cloud, Any Application, Any Device” as a means of empowering IT management to respond to these challenges. VMware’s vision is to “enable an architecture that lets IT deploy or consume capacity from a cloud without having to worry about the physical location or who the vendor is. To do this VMware wants make sure that different form factors of the cloud (private, public, managed, etc.) connect or are transferable”.

Hybrid IT, including hybrid cloud, is no longer an appealing future proposition; it is a current reality as workloads increasingly run internally on a highly-optimized virtual environment connected to a public cloud, and public cloud resources are being widely used for developing and testing applications to be deployed on private or hybrid clouds. Many workloads process data in the public domain and simultaneously store sensitive data in the traditional data center to meet regulatory and compliance guidelines. Techaisle’s SMB & midmarket cloud adoption survey shows that within SMBs, use of hybrid cloud will continue to increase as both a conscious strategy and as a reaction to use of both public and private resources within a single infrastructure; hybrid use is expected to top 40% within the small business market, and will be used by two-thirds of companies with 100-999 employees.

Over the last two years, as virtualization penetration within enterprises has been slowing, VMware has been broadening its solution portfolio to deliver solutions for management and delivery of on/off-premise IT infrastructure. As a result, VMware’s product line has grown beyond compute: it rolled out vSAN for storage, NSX for network, and vRealize for management. Last year, VMware announced its vision of software-defined data center (SDDC) and introduced EVO:RAIL, which ties VMware software to partner hardware for a hyper-converged appliance. In the most recent VMworld this vision was extended to EVO:RACK: while EVO:RAIL was positioned as "SDDC in a box" suitable for midmarket businesses, EVO:RACK (now marketed as VMware EVO SDDC) is aimed at large enterprise customers. In Techaisle’s view, vSAN and EVO:RAIL are also relevant solutions for SMB customers looking to adopt hyper-converged infrastructure.

In 2014, VMware had announced integration between on-premise vSphere and VMware's own public cloud (vCloud Air) enabling businesses to migrate workloads to a VMware-based public cloud. In 2015, VMware extended the narrative to announce Unified Hybrid Cloud - built on SDDC and vSphere - to enable IT professionals run, build, deliver and secure any application, anytime and anywhere. Despite new offerings it is common knowledge that VMware still lags Amazon Web Services and Microsoft Azure in the public cloud market.

VMware is continuing its investment in network virtualization and in the future of NSX. It announced NSX 6.2 with added features such as inter vCenter NSX support, universal firewall rules and security groups, and Trace flow. Techaisle assumes a bigger game changer to be the integration between virtual and physical networks when VMware and partners such as HP complete the support of OVSDB in NSX to manage hardware virtual tunnel end-points (VTEPs).

Key market context

While enterprise market may be saturated, virtualization adoption within SMBs is far from over. Techaisle’s SMB & midmarket Server Virtualization adoption market trends study shows that US SMB server virtualization penetration has reached 54 percent (un-weighted), up from 41 percent two years ago. Within midmarket businesses the penetration has reached 88 percent and another 7 percent are planning adoption in the next year. Across the entire SMB community, there has been a 45% increase in off-premise virtualized servers in the past two years, an enormous shift that highlights the broader shift towards remote management of infrastructure resource. VMware has positioned itself to capitalize on the immense SMB opportunity, however, it needs to have a sales motion that is specifically targeting net new customers within SMBs rather than “mining” the installed base as in enterprises.

The real VMware SMB story is in EUC – enabling untethered mobility

The real story and opportunity for VMware, though, is in end-user computing.