Sources: Apple Dumps VMware Licensing Agreement, Will Step Up Deployment Of Open-Source KVM Virtualization

Apple has decided not to renew an expiring VMware enterprise licensing agreement and will be stepping up deployment of KVM, an open-source alternative to VMware server virtualization, multiple sources with knowledge of the matter told CRN this week.

Apple has been using VMware server virtualization and cloud management software to run parts of its corporate IT infrastructure, according to the sources, who all spoke on condition of anonymity because they're not authorized to speak publicly about the matter.

The sources said Apple's decision to cancel the VMware ELA came about a month after its representatives had verbally agreed to extend the deal, which was first signed in 2011 and renewed for two years in 2013. One of the sources said the VMware ELA extension would have cost around $20 million.

The abruptness of Apple's decision may indicate that it wasn't satisfied with the licensing terms VMware offered for the ELA extension, said the sources.

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Michael Thacker, director of corporate public relations, said the vendor doesn't comment on the status of customer ELAs or other agreements. Apple declined to comment.

KVM, short for kernel-based virtual machine, is emerging as a lower-cost alternative to VMware's ESXi hypervisor. IBM, which inked a landmark enterprise mobility partnership with Apple last year, is a big proponent of KVM, as is Red Hat.

Apple's decision to use open-source KVM could save the company millions of dollars in licensing costs as its scales up its cloud infrastructure in the same manner as cloud computing behemoths like Amazon Web Services, Google and Facebook.

Apple has talked publicly about how it uses Apache Mesos, an open-source cluster manager, in its back-end infrastructure for its Siri digital assistant. One source close to Apple told CRN the vendor is looking to lower its VMware licensing costs by adopting additional open-source technologies.

"Apple has been quite vocal about getting off VMware," said the source.

Apple has been evaluating OpenStack, a set of open-source software tools for building infrastructure-as-a-service clouds, said the sources. But they said it's unclear if Apple is planning to use KVM and OpenStack to completely replace its VMware private cloud infrastructure, as PayPal has done.

Several VMware partners told CRN that their customers are looking at KVM and OpenStack as a way to lower their VMware licensing costs. While OpenStack and KVM aren't easy to deploy, large organizations can afford to hire the necessary talent and expertise, solution providers said.

"While most companies don't have the technical chops to ditch VMware and go with KVM, ones with mature IT departments may look at this and reconsider their VMware strategies," said one longtime VMware partner executive, who didn't want to be named.

One source with knowledge of Apple's VMware account described it as "complicated," in part because individual Apple business units would often buy software outside the ELA. It's not clear if they'll continue doing so now that the ELA extension has been canceled, said the source.

VMware ELA costs have been an issue for many large customers. As CRN reported in June, the U.S. Army has seen higher-than-expected costs from an ELA it signed with VMware in September 2013. The Army National Guard, for budgetary reasons, declared a moratorium on VMware purchases that remains in effect today.

In June, VMware and reseller partner Carahsoft agreed to pay $75.5 million to settle a civil lawsuit for allegedly overcharging the federal government for VMware products and services over a six-year period.

Software maintenance accounted for about 50 percent of VMware's $6 billion-plus annual revenue in fiscal 2014, and has risen as a percentage of VMware's services revenue every year since 2008, according to the vendor's 10-K filings.

Google, Amazon Web Services, Facebook and others have shown that it's possible to run massive-scale services on open-source software and commodity hardware. Now it seems that Apple has decided it's ready to take advantage of the efficiencies that can come from such a strategic shift.

VMware partners said the Apple example suggests that the competitive threat posed by KVM server virtualization is going to continue posing problems for the virtualization giant.

"Large cloud providers have no need for VMware's cost overhead," said one source close to VMware. "A portion of Apple's IT is effectively a mega-cloud now."