Partners: VMware Waving White Flag On EMC Virtustream Venture Creates Cloud Chaos

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Strategic service providers Monday said VMware's sudden decision to throw in the towel on its EMC-Virtustream cloud joint venture creates confusion and uncertainty around the virtualization market leader's cloud future.

The vociferous reaction came after VMware said it will not be participating in the formation of the Virtustream Cloud Business that it had agreed to be part of just two months ago.

The change in strategy was accompanied by the resignation of two members of VMware's board of directors: former Accenture CFO Pamela Craig, a two-year board member, and former Cisco CFO Dennis Powell, an eight-year board member.

[Relate: EMC, VMware Fire Shot Across AWS Bow With New Cloud Services Business Unit]

VMware also appointed EMC board member Donald Carty -- the former CEO of American Airlines who was appointed to the EMC board in January -- to the VMware board.

"This is confusing," said Jamie Shepard, senior vice president for health care and strategy at Lumenate, No. 145 on the CRN Solution Provider 500. "We had communicated the benefits of this venture to our customers, and they were looking forward to a vCloud Air-Virtustream business. Now you have a phantom roadblock preventing it from happening."

The biggest impact will be to the cloud services pipeline that Lumenate was building with VMware-Virtustream. "This was a big part of our pipeline for the first quarter," he said. "We were hoping to see the vCloud Air and Virtustream models integrated. Customers were applauding that. Now we have to readjust."

For strategic service providers advising customers on cloud strategy, it is a sure sign they can not rely on the "vendor community to define our cloud business model," said Shepard.

The uncertainty around VMware's future cloud strategy and direction comes in the wake of Dell's blockbuster $67 billion planned acquisition of storage market leader EMC, which owns 81 percent of VMware. 

Attempting to drive more shareholder value, EMC and VMware told investors just four weeks ago that they were creating a a new cloud services business jointly owned by the storage market leader and its VMware subsidiary. CRN reached out to VMware, EMC and Dell for comment and will update this story if we hear back. 

The centerpiece of the planned EMC-VMware joint cloud venture was Virtustream, the enterprise-grade cloud services business EMC acquired for $1.2 billion in July. The one-time 50-50 EMC-VMware-owned business was going to be run by Virtustream CEO Rodney Rogers.

VMware CEO Pat Gelsinger last week during a keynote address at the NexGen Cloud Conference downplayed the uncertainty created by Dell's pending acquisition of EMC.

Speaking just three days before EMC board member Carty joined the VMware board, Gelsinger said it doesn't matter whether there's a "D" or an "E" in front of the VMware name, as VMware will continue to have an independent board of directors under Dell as it did under EMC. "The result is, we will keep doing what we are doing," he said at the event, which is hosted by The Channel Company, the parent of CRN.

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