Aviatrix CEO On Potential Post-Broadcom VMware Layoffs And Why On-Prem Market Is ‘The Titanic Going Down’

Aviatrix CEO Steve Mullaney talks to CRN about potential VMware layoffs ahead, why the on-premises market is sinking and Aviatrix’s rapid cloud growth.

Steve Mullaney On VMware-Broadcom, On-Premises Vs Cloud And Aviatrix Growth

Former VMware executive and now Aviatrix CEO Steve Mullaney believes massive employee layoffs are in store for VMware once Broadcom acquires the virtualization superstar for $61 billion.

“They’re going to fire 20,000 VMware people,” predicts Mullaney. “How else are they going to get that profitability Broadcom wants? … There’s only two ways to do it: grow revenue or cut costs. I know what they’re going do. They’re going to slash people.”

Mullaney was the CEO of software-defined networking pioneer Nicira, which was acquired by VMware in 2012 for $1.3 billion. He was senior vice president and general manager for VMware’s networking and security business until he retired in 2014.

[Related: VMware CEO: Sanjay Poonen To Take Cohesity ‘To New Heights’]

Mullaney came out of retirement in 2019 after he witnessed the explosion of cloud demand from enterprise to become president and CEO of Aviatrix.

Santa Clara, Calif.-based Aviatrix is a cloud networking provider delivering advanced cloud networking, network security, and operational visibility required by enterprises. The technology directly programs native cloud constructs to maintain the simplicity and automation unique to each cloud provider, including for Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform, Oracle Cloud and Alibaba Cloud.

Mullaney’s career spans three decades in the IT industry, including roles such as Nicira’s CEO, interim CEO of Palo Alto Networks, as well as vice president of marketing for both Blue Coat Systems and Force10 Networks.

Over the past several years at Aviatrix, he has doubled sales each year, won over 65 net new Fortune 500 customers, and expanded the company’s employee base to over 500 people.

In an interview with CRN, Mullaney talks about Broadcom’s acquisition of VMware, Aviatrix’s cloud market differentiation and the current state of the on-premises IT market for vendors and channel partners.

“The on-premises market is the Titanic going down,” said Mullaney. “It’s going down and supply chain issues are only accelerating people going into the cloud. The recession is only accelerating people going into cloud. COVID is only accelerating people going into cloud.”

“When the Titanic went down, it sucked you down with it. The problem for these channel partners is: you’re going get caught,” he said.

Click through the slideshow to see more of what Mullaney had to say.

As a former top VMware executive yourself, what do you think will happen once Broadcom acquires VMware?

They’re going to fire 20,000 VMware people.

How else are they going to get that profitability Broadcom wants? Do you think VMware’s going to be increasing revenue that fast?

There’s only two ways to do it: grow revenue or cut costs. I know what they’re going do. They’re going to slash employees.

Anybody at VMware is fooling themselves thinking, ‘Oh, this is all going be fine.’ No, it’s not. Most of the people at VMware are not going to be there.

Think about those people at VMware that have been there for 20 years. Where are they going to go? Most of them will only be able to work at VMware, but VMware is going away now. So now what are they going to do?

You think Cisco is hiring a bunch of people? Nope.

Maybe a few of them will get into Google Cloud or AWS or whomever, because maybe they’re hiring people.

I mean, I’m sure Broadcom is not telling them anything. It’s like, ‘You don’t talk about Christmas until Thanksgiving.’

Talk about the future of the on-premises IT market and channel partners selling on-premises solutions.

The on-premises market is the Titanic going down.

It’s going down and supply chain issues are only accelerating people to go into the cloud. The recession is only accelerating people go into cloud. COVID is only accelerating people going into cloud. Like, the game’s over.

Now, not to say that on-prem goes away. It won’t go away, but the growth is going to go away.

You’re not going to have any more big growth—those days are over. Dell’s not growing at 40 percent like the cloud companies are.

When the Titanic went down, it sucked you down with it. The problem for these channel partners is: you’re going get caught.

So all these people that are selling Cisco and reseller partners that are getting points on a deal—you move to the cloud, it’s all in their Marketplace.

There’s no value around, ‘I have availability of the product.’ There is no product to sell software. They go on the [cloud] marketplaces. So what’s the channel partner value?

If your value is, ‘I have the vendor’s box. And you buy the box from me.’ There use to be value to that.

Now with software, customers can just log onto the AWS Marketplace and download the software.

It’s now all about partners providing services. It’s going be 100 percent services.

It’s your intelligence, your ability to help customers design, architect, and maybe even run their network for them. Managed services is a huge value for partners.

Partners selling boxes are going to go down with the Titanic. … If you don’t start getting with the cloud, you’re not going to have a job.

The channel needs to get going and start learning cloud. You better go figure out how to have business value in the new world because it will just move past you.

Why did you come out of retirement in 2019?

Because this big thing is happening that started like three and a half years ago. I saw the conversation with enterprises completely changed.

It went to security and compliance and auditing and troubleshooting and all these things that IT cared about and I said, ‘Holy crap, they now are saying they’re going to cloud. It’s no more fun and games. They mean it. They talked about five years previously, but didn’t do anything about it.’

Enterprises moved like a herd. They all decided basically the same day to do the same thing. The herd moved.

The businesses and the CEOs said, ‘We have an existential threat to the survival of our company. We are going to digitally transform and become a technology company. We don’t make sneakers [for example] anymore.’ or ‘We don’t make beer [for example] anymore. Yeah, we do those things. But we’re a technology company. In order to do that, we’re going to we’re going to move to the cloud.’

So it was the business side that said to the IT people, ‘Get off the train tracks, we’re going to run you over if you don’t get off. We are going to cloud.’

That happened three and a half years ago, and I went, ‘OK, the computing model shift is on.’

How big is the cloud market going to be relative to previous major IT market trends?

Every successive computing model is 10-times bigger than the one before it.

So cloud is going to be 10-times bigger than the client server. Client server was 10-times bigger than mainframe.

It’s not because of the lift and shift, it’s because of the new applications that happen. When you get every company in the world saying, ‘I’m going to become a technology company move to the cloud,’— what do you think the TAM now is for cloud computing?

Why is it that AWS is now at an $80 billion run rate and growing at 40 percent year over year—that’s unheard of. We are recession proof.

We haven’t even started yet. That’s the crazy thing about it.

That’s why people like me come out of retirement because this is the biggest wave I’ve ever seen.

We are going to be bigger than Cisco. Why? Because cloud is going to be 10-times bigger than the market that Cisco had to generate. The opportunity is 10-times bigger. That’s why I came out of retirement. And we’re just at the start of this, but it’s happening.

These big enterprises are still really only 5 percent or 10 percent in the cloud. The amount of money is going to be enormous.

Just a case in point: in Microsoft’s recent earnings call about Azure, they talked about customers that are signing $100 million dollar commitments. And they also talked about customers signing $1 billion dollar or more commitments.

Think about that. They’re actually counting now, the number of customers that are that are signing up with billion dollar commits. So it’s just starting.

Where is Aviatrix’s cloud strategy in this new era?

Multi-cloud networking is going to be a layer in the technology stack. It is not going to go all-native.

Cloud service providers do very primitive networking functionality. Each cloud is different.

Enterprises need somebody to give them advanced services that layer on top of the primitive stuff that the cloud providers give. And more importantly, give them one architecture that they can do multi-cloud with, because they’re not going to have five different architectures.

I can’t low-level program to AWS to Azure to Google to Oracle to Alibaba to whatever. The skills gap and skill shortage is a real thing. ‘I don’t have the people. I don’t have time. There’s no way I can do that. I need someone to abstract and create a layer above.’

We are going to be the architectural standard for networking in the cloud.

I know who it’s not going to be: Cisco and Juniper. Why?

When all of a sudden everyone says they’re going to cloud, incumbents cannot deal with that extreme flip-flop overnight. It takes them five or 10 years to figure things out. That’s just the way it is.

It’s got to be somebody new.

I was on the board of Aviatrix, I said, ‘Why not us?’

What is Aviatrix’s special sauce?

We simplify networking. So your other alternative around us is to leverage the low-level native constructs of each of the clouds.

It’s very primitive services. Yes, AWS has networking, but it’s only really good for like small and medium businesses. Enterprises have very demanding requirements in what they do. They need visibility and control, and be able to troubleshoot.

There’s two things that every enterprise needs more than anything else: visibility and control. Visibility first. Then they have to control the security, control the performance, control the cost—if you don’t give them ability to have that visibility and control, they’re flying blind.

We provide the agility of the cloud and visibility control—that’s what they get from us.

So it kind of gives them the best of both worlds. They get that cloud native operational model, but then they get the visibility control that they need from networking and a network security perspective.

Think of us as the next generation of Cisco. We’re not a better Cisco, we’re a different Cisco.

You can’t have five different architectures for networking and security. You need one that abstracts away all the details underneath. Because there’s no way you’re going to have enough people that are going to understand AWS, Azure, Google, Oracle, Alibaba cloud, etc.

We abstract that away so you don’t need to know the low level details. So it looks like one network to our customers. They go, ‘Oh this is great. I can handle that.’

It’s all infrastructures as code, it’s all very software-defined, and very cloud-like where you’re not manually managing things.

Now we can make it such that, instead of 200 people managing the network, they only need two. And those two people don’t even need to know much about networking.

How much has Aviatrix grown over the past few years?

We used to be doing a couple million in annual recurring revenue. We had about 100 customers, none of them enterprise, they were all smaller customers.

That was the market back then. But then one day on every enterprise said, ‘Now we’re moving to the cloud.’ I said, ‘My God.’

So now you fast forward: we have over 600 customers. We have 68 Fortune 500 customers. We’re dealing with the elite of the elite of enterprise software.

We will be over $100 million this fiscal year, which ends in January. We’re more than doubling every year.

I’ve raised a bunch of money for us. We raised $200 million last September. I still got $180 million in the bank.

We’re at a $2 billion valuation. We’ll be IPO in a year and a half timeframe. And we haven’t even really started.

You said you have about $180 million in the bank. Where are you going to invest?

Most of it will be on people. We have got over 500 people now.

So most of it’s for people, a little bit of marketing. We’ll probably raise money at some point but we’re not in any rush. Now is not a great time to raise money anyway.

We don’t need to raise money. So we’ll wait until the market gets a little better. We could probably go IPO on the money we have.

Where do you see Aviatrix in five years?

We’ll be a public company. We’re at $100 million now, and we’re doubling that every year.

In five years, we’ll be doing more than $3 billion in revenue, probably have a $50 billion in market cap

We’ll be a horseman of the new infrastructure. All these other companies that used to be great are going to be gone. They’ll be new people like us.