VMware sends a message: hardware is dead

It was only in April that VMware CEO Paul Maritz was dissing competition from open-source cloud platform OpenStack as “relatively immature”.

Four months later, with a new CEO addressing the vendor’s global partner and customer conference in San Francisco, VMware had become an open-source believer with a future in automating software, not hardware.

What does this mean for resellers? Well, if you have been making a good living consolidating physical servers into virtual machines, it could mean the end of one wave and the beginning of another. Whether you’re selling virtualisation from VMware, Microsoft or Citrix, the number of servers without virtualisation is finite.

The fact that the biggest player has effectively moved into an adjacent space suggests the remaining market is not large enough to sustain strong revenue growth. And where vendors go, partners must follow. But where to?

Looking for directions

Maritz’s nose-thumbing at OpenStack came just as the company reported a 25 percent growth in revenue year-on-year to a little over $US1 billion. Although OpenStack was supported by giants such as IBM, AT&T, Cisco, Dell, Yahoo and HP, Maritz was still looking at Redmond.

“We continue to believe that our greater, nearer-term challenge will probably come from Microsoft,” he told press during the company’s earnings call. But the virtualisation vendor was already looking to reinvent itself as an automator not of servers but of entire data centres.

At his outgoing press conference in August, Maritz said the market had moved beyond hypervisors.

“Right at the time when Microsoft is breathlessly announcing they’re ‘good enough’ for server virtualisation, we’re announcing that the game has changed, it’s about datacentre virtualisation,” Maritz said.

What does data centre virtualisation look like? At VMworld executives described how a bunch of services tied together by VMware would be the basis of a “software-defined datacentre”.

“In this ideal datacentre, everything – compute, storage, networking – runs as a service that can be managed by the same software platform,” wrote ZDNet’s Jack Clark in an article tellingly titled, “VMware prepares for an all software future”.

“This is a top-down model of datacentre administration, where the IT manager does not need to worry about a facility’s underlying hardware, but instead focuses on the technologies they are delivering to end users.

“VMware believes that companies are going to move away from buying IT from a single vendor and will instead operate a more heterogeneous environment.”

When vendors are handing out hypervisors for free, and VMware says it only cares about software, it begs the question – who cares about the hardware? All this talk of heterogeneous environments is going to make the name on the tin less and less important.

Any business, technology or otherwise, can measure its success by how relevant it can make itself to its customers. VMware and others are saying that hardware is no longer relevant. It’s time to move on, and software is the future.

The evidence is inescapable. Technology trends come and go but one that continues to build is the relentless commoditisation of hardware. Once it mattered whether you had an Olivetti or an HP or an IBM desktop. For years now people have had zero interest in the type of PC sitting on their desks (OK, Apple is a recent exception).

It now appears that soon IT managers will have the same disinterest in the type of server sitting in their data centre. The rapid spread of virtualisation from enterprise to SMB has no doubt hacked a path for server irrelevance.

And this is going to hurt resellers who still rely on break-fix revenue from the server closet. Combine this with the impact of software-as-a-service and the reseller community is in for a rough ride.

In last month’s column I covered Microsoft’s decision to retire the Small Business Server brand and encourage SMBs to move to Office 365 through Telstra T-Suite. Now VMware is sending waves downwards from the big end of town which carry the same effect.

A third event occurred last month which will be seen as a further assault on “private cloud” operators– the arrival of hosting giant Rackspace. The vendor will open a massive data centre in Western Sydney by the end of the year and Amazon Web Services is sure to follow suit.

The economies of scale driven by these two behemoths will put many hosters out of business. No-one can compete with Rackspace’s famed “fanatical support”, which includes 24/7 instant chat through their website using follow-the-sun callc entres staffed with subject experts.

Even VMware has moved away from safe territory selling “private cloud” solutions and into the open seas of public cloud. Maritz insisted the vendor already had achieved some success in the public cloud market with 1500 service providers using VMware’s public cloud licence.

Hardware is dead. Long live software. Long live services.

Of course, the world is not going to turn upside down tomorrow. SMBs will continue to buy and use their own servers for some time yet. But changing a business model, or reskilling staff, is not something that can be done overnight either.

Time to plan for the future. Resellers who still have a weighting towards hardware skills should look at upskilling to software-- automation, development, integration, anything. Consulting skills are always valuable. Even without servers, businesses still need advice on how to use technology to run more efficiently.

And a good consultant in a suit can charge $200 and up per hour versus $100 per hour for a techie in a polo shirt. There’s a question as to how many resellers have the capital, the drive and the stamina to invest in a world where servers and other hardware are mostly irrelevant.

Plus there’s the challenge of convincing your existing customers that you’re now worth double what you were yesterday. The secret to charging more is showing how the technology advice you provide will create savings or increase revenue in a business.

In other words, show business owners that technology is something that creates opportunity and should therefore be considered an investment, rather than a cost to be borne unwillingly. I’m sure you’ve heard that all before.

But in the past there was always the option to return to fulfilment and replace that ageing server or refresh the desktops. These opportunities will diminish as will the margins, small as they already are.

VMware has sent a signal to the market with all its talk about software and services. We are witnessing the end of the first wave of virtualisation. The second wave, data centres, won’t need as many resellers. Will you be there to see it?