CEO Pat Gelsinger says VMware is gaining share against the likes of Citrix and other competitors in end-user computing as the virtualization and hybrid cloud star lays out its plans to double down on its AWS partnership.
“Overall in our end-user computing business, we've been gaining share vis-à-vis from Citrix and everybody else in that category,” said Gelsinger, in an interview during Bank of America’s 2020 Global Technology Conference last week.
VMware is coming off a successful first fiscal quarter 2021, which ended May 1, despite the coronavirus pandemic financial disruption. The Palo Alto, Calif-based company generated US$2.73 billion in sales, up 12 percent year over year, along with subscription and Software-as-a-Service (SaaS) revenue up 17 percent to US$1.23 billion.
CRN breaks down the six boldest statements Gelsinger made during the conference around end-user computing (EUC) momentum, if COVID-19 is changing the cloud versus on-premise debate, his relationship with Microsoft CEO Satya Nadella and how VMware plans to ‘expand’ its AWS partnership.
‘Gaining Share’ From Citrix
Overall in our end-user computing business, we've been gaining share vis-à-vis from Citrix and everybody else in that category. First quarter 2020 was not a share shift. Q1 was everything rosy, right? When customers were trying to replace Citrix with VMware, it is all about, ‘How do I grow my footprint very rapidly to meet the needs of my work-from-home and distributed workforce?’
Overall though, we think our broader portfolio -- and now that we're adding Carbon Black to it -- we're just in a very good position to do management security, PC, Mac, iOS, Android, both the end-user experience. And I think that whole category overall, we're in a multi-year cycle where that growth rate of that category is going to be increased. Because now everybody is saying, ‘How do I do work-from-home better?’ But also, it's now become part of their resilience strategy as well.
End-User Computing Surge ‘Doubles The Market Potential For VDI’
I think this nominally doubles the market potential for VDI in the marketplace. Every firm -- every single firm that I've interacted with is going to have a meaningfully increased work-from-home portion of their workforce. In the case of VMware, I was 20 percent [work from home] before COVID-19. On the other side of COVID-19, I believe, I'm going to be over 50 percent of my people working over 50 percent of the time from home. I mean, it's going to be one of those game changing kind of things. I'm going to have more access to talent and less carbon footprint. If you commute one-day a week, that's good enough. We're here for team meetings. You can work remotely or maybe one week a month, be closer to your parents, lower cost of living, or whatever it might be. This is good for everybody in that regard.
So we believe that we're going to see a step function increase in the amount of distributed workforce for the world, period. Also, in education, in telemedicine -- in every one of these categories, you're going to say, ‘It's just better this way.’ … This is a new plane of changing how we work, how we learn, how we live, how we care for. All of these are going to be systematically changed. And VDI is going to be an increasing use case inside of that as one of the model.
VMware’s ‘Game-Changing Partnership With Amazon’
We’re all super optimistic about the game-changing partnership with Amazon and VMware. … I said it takes two years or more for any product to become enterprise successful. We thought we could do better than that and guess what? It took two years. Almost exactly at the two-year mark, right late last year, it starts taking off. And we saw that momentum continue into Q1.
I’ll say three things: one is you have to hurt awhile for an enterprise product. Secondly, the networking here is a pretty robust thing because you’re connecting public cloud, LAN and private data centers together. We have learning to do in the networking area. And third, is the power of the AWS channel, AWS, EDP (Enterprise Discount Program) solutions becoming part of that integration. So we have to turn on AWS as a reseller of the solution. All those things have now come together and we're seeing great takeoff.
And now AWS is building a dedicated sales team that all they do is partner with VMware and sell our solutions as well as they're seeing a takeoff -- so that's powerful. I now have big banks that are doing this for references. I got essentially the mortgage industry is all on this solution. The insurance industry is starting to take advantage of it. Supply chains are coming on it. So we're now seeing the global reference accounts show up.
Strategy To Growing VMware And AWS Footprint
I say the three things that we need to do this year with the AWS offering is, one, get a lot more land expand capacity. We need to make it easier and easier for customers to get onto the platform and then grow up over time. And some of that is we're going to have some lower end offerings that enable lower friction ways to get onto the platform -- shorter-term credit, card-based solutions to enable that velocity motion into the platform.
In the bigger scope of things, we just don't have that many customers yet. But the customers that we've had or those who have now started [will] grow very big. So we've clearly seen – get customers on, we can grow them very big. When they start moving, they move like big classes of workloads come our way, we start to build. So we have to expand that land expand motion and higher velocity of onboarding. We have to scale the AWS resell. It has to become part of every geography, every sales team globally that they have because they're just in a lot more places than we are. They've been here a lot longer. So we have to make that work.
The third is expand the use cases. While we're very happy for data center, extension data center migration, Disaster Recovery -- we want to go build out more of those [AWS] use cases, we'll soon be offering Tanzu on VMC (VMware Cloud on AWS). So now you can start attracting the developer use case. We also want to improve areas like DR and backup. So we can start attaching it to on-prem deals into the cloud as well, and get Dell more turned on to some of those solutions. So let expand those use cases.
The platform is now mature, stable, customers are coming on to a velocity, but now it’s ‘How do we go faster?’ So more use cases, more sales capacity through AWS and lowering that bar for a land and expand.
Gelsinger’s Relationship With Microsoft’s Satya Nadella
I like Satya and I've known Satya (pictured above). Microsoft and Intel sort of were concurrently with each other as we came across the way. So we get to talk about Windows NT stories, the first Intel servers and different interactions. So we've enjoyed a good collaboration over time. He’s a very thoughtful leader. He really is somebody who wants to understand the strategy and the vision and at the core of it, somebody I respect, and I like working with him.
When he and I stood on stage announcing the plan to partner in cloud and client, it was like the Arab-Israeli peace treaty, because remember -- Microsoft and VMware [were competitors] for 20 years and now we’re working together. I mean everybody was sort of like, ‘Wow.’ We've just been building sort of brick by brick, and now as they announced a couple of weeks ago, the AVS, the Azure VMware Solution 2.0, that's sort of like, ‘Okay, now we're really delivering to bring cloud together and bring customer interests in that offering.’
And everybody wants an Amazon or an Azure or both capability, and having VMware as a common solution across their private data centers to the two leading Hyperscalers -- but also the Google offering, the IBM offering, soon to be release Oracle offering, the Alibaba offering and all of our other cloud partners -- wow, this is pretty magic.
COVID-19 ‘Doesn’t Change The Bigger Picture’ Of Cloud Vs. On-Premise
I believe COVID-19 will cause a bit of acceleration in cloud, SaaS subscription. But if a customer was going to run their on-premise data center, [for example if] Bank of America said, ‘Hey, 90 percent of my workload is going to be on-premise, did COVID-19 change that?’ No. … If I felt I needed to be on-premise for cost or regulatory reasons, certain geographic requirements, or I needed it to be in the edge and in the factory, because of speed of light and latency -- well, COVID-19 didn't change speed of light latency or all of those kinds of things. So I think fundamentally it doesn't change the bigger picture.
However, on the margin, it will drive more cloud and SaaS. In fact, just this morning I had a call with about 20 of VMware's most important customers. And we asked that exact question, have any of you changed your data center strategy? What's private versus what's public as a result of this? And one out of the 20 or so said it will. Everybody else said, ‘Oh no, it's the same.’ And so on the margin, I think there'll be some incremental acceleration, but overall we see this idea of public and private hybrid, multiple cloud offerings, and being able to enable our customers at the [Infrastructure-as-a-Service] and at the application and developer level to be able to harness private and public in a seamless integrated fashion. That's a winning strategy.