Sources: VMware Cutting Back On vCloud Air Development, May Stop Work On New Features

VMware has decided to cut back on development of its vCloud Air public cloud and may soon curtail work on major new features, multiple people with knowledge of the matter told CRN this week.

Two of the people said that VMware has already halted development on vCloud Air, and that it's unclear if or when work will resume. A third person said VMware is continuing development of vCloud Air for the time being, but has decided to stop adding new features to the public cloud service.

"VCloud Air is pretty much dead, at least in its current form," said one of the people, who didn't want to be named.

[Related: VMware (Once Again) Claims Its Public Cloud Performance Trumps Amazon Web Services, Microsoft Azure]

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The development cutbacks come just seven weeks after VMware parent EMC finalized its $1.2 billion acquisition of Virtustream, a hybrid cloud provider that competes directly with vCloud Air.

EMC is also under pressure from activist investor Elliott Management to spin off VMware, and has mounted an $850 million cost-cutting program aimed at better alignment between EMC and its federation of companies, which includes EMC Information Infrastructure, VMware, RSA, VCE and Pivotal.

A VMware spokesman said the Palo Alto, Calif.-based vendor will announce "exciting new vCloud Air offerings" at its VMworld conference next week. "Beyond that, VMware does not comment on rumor or speculation," the spokesman said.

VMware launched vCloud Air in May 2013, in part to counteract the trend of customers' moving workloads to public cloud market leader Amazon Web Services. But VMware hasn't shared sales figures for vCloud Air, and partners have told CRN it lacks key features and isn't generating much interest from customers.

VMware executives insist that vCloud Air offers better price for performance than anything else on the market. CEO Pat Gelsinger, in a recent interview with Virtualization Review, sounded upbeat about vCloud Air's prospects, noting that the offering is "positioned for success."

Meanwhile, VMware is shuffling leadership and responsibilities in the vCloud Air unit, and some teams are being downsized, according to the sources, who didn't want to be named.

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There has also been speculation in the VMware channel that Bill Fathers, executive vice president and general manager of cloud services, and head of the vCloud Air business, has been ousted from his role. But the VMware spokesman denied that this is the case.

"Bill Fathers continues to lead our vCloud Air business, and will be on stage next week at VMworld," the VMware spokesman said in an email.

Fathers has been with VMware since March 2013 and presided over the launch of vCloud Air (formerly known as vCloud Hybrid Service). He joined VMware from its service provider partner Savvis, where he was senior vice president of global sales and marketing.

Several partners that work with VMware and EMC told CRN they believe vCloud Air will live on in some form, possibly as part of a new EMC Federation company that includes assets from Virtustream.

"I think there will be a combination of Virtustream and vCloud Air -- that's the only way the Virtustream acquisition makes any sense at all," said one longtime partner of EMC and VMware.

An EMC spokesman declined to comment on whether such a cloud union is in the works.

"Virtustream represents a transformational element of EMC’s strategy to help customers move all applications to cloud-based IT environments. Beyond that, per longstanding policy, EMC doesn’t comment on rumor or speculation," the spokesman said in an email.

Many partners and Wall Street analysts were puzzled by EMC's acquisition of Virtustream, which sells managed private cloud services and public cloud Infrastructure-as-a-Service, because its portfolio overlaps with vCloud Air.

Fathers, in a blog post in May after EMC acquired Virtustream, called the deal "great news" for customers because it would expand the EMC Federation's cloud offerings to a wider range of customer scenarios.

Yet many VMware partners saw the Virtustream deal as evidence that EMC -- which owns around 80 percent of VMware -- was fed up with the slow pace of vCloud Air adoption and had decided to try a new approach.

"When EMC acquired Virtustream, that was the death knell for vCloud Air," said another longtime VMware and EMC partner, who didn't want to be named.