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VMware Poised For Public Cloud Splash, But Partners Still Reeling

With VMware poised to jump into the public cloud space, the vendor's vCloud service providers are wondering what impact this will have on their businesses.

The word "zephyr" is defined as a gentle breeze coming from the west. That description doesn't quite fit Project Zephyr, the code name for VMware's public cloud infrastructure-as-a-service, which is about to give VMware's service provider partners a jarring wake-up call.

Project Zephyr will mark VMware's entry into a public cloud market in which Amazon, Microsoft and Google are well entrenched. It's a bold move, and perhaps a necessary one, but VMware partners are concerned about the prospect of channel conflict.

"We're really not happy about this," one vCloud service provider partner told CRN Friday. "Not only will we be competing with VMware directly, we could also find ourselves competing with smaller partners that have made little or no investment in cloud infrastructure."

[Related: VMware's 'Project Zephyr' Challenges Amazon, Microsoft In Public Cloud Battle ]

VMware service providers are also irritated by the lack of communication they're getting from the vendor. Of the half-dozen that CRN spoke with this week, none had any advance warning of Project Zephyr, nor have they heard anything from VMware since CRN first reported on the project Wednesday.

VMware could not be reached for comment Friday, but has previously said it does not comment on rumors or speculation.

VMware has purchased a large chunk of data center space in Nevada and for the past few months has been using it to run a beta of the Project Zephyr service, according to sources with knowledge of the matter. The service runs on VMware cloud software and EMC Avamar storage gear, with Cisco USC as the computing platform.

VMware dominates the server virtualization and private cloud markets, but it has found the public cloud a tougher nut to crack. Its original plan was to tackle the public cloud by partnering with service providers like AT&T, Bluelock and CSC, but that hasn't been happening quickly enough, sources said.

Sources told CRN VMware believes that waiting any longer could cause it to lose market share, and its pricing for Project Zephyr will determine how quickly it can lure customers away from Amazon and Google.

Project Zephyr isn't as much of a worry for partners that have adopted a specialized approach to the market. Shawn Mills, founder and president of Green House Data, a Cheyenne, Wyo.-based vCloud service provider, expects VMware to enter the public cloud market with aggressive pricing but isn’t concerned about his customers defecting.

"We compete against Rackspace and Amazon every day, and we win business by offering a high-touch, boutique feel and access to engineers," Mills told CRN. "All service providers are going to have to differentiate themselves no matter what VMware does."

NEXT: Parallels Between VMware’s Project Zephyr And Microsoft’s BPOS


There are some clear parallels between VMware's Project Zephyr and Microsoft's Business Productivity Online Services suite, which is now part of Office 365.

Microsoft's unveiling of BPOS at its 2008 partner conference elicited howls of protest from partners, particularly because it ushered in a commission and recurring revenue model that at the time was new to most of Microsoft's channel.

Over time, Microsoft's partners have embraced BPOS, but some smaller, niche focused partners couldn't make the adjustment to the new model. And, Microsoft's aggressive pricing for BPOS and Office 365 has eroded traditional margins while also opening the door for services-oriented partners to move higher in the stack.

One VMware vCloud service provider, who requested anonymity, is concerned that VMware will follow in Microsoft's footsteps in its pricing for Project Zephyr.

"Microsoft made BPOS dirt cheap, and I fear that VMware will also low-ball its pricing," said the source.

PUBLISHED AUG. 3, 2012

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