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Public Cloud Vendors in Race to Co-Opt Key Data Center Software Giants

What started with an AWS-VMware partnership to enable data center management capabilities in the IaaS public cloud has progressed into an all-out race by the data center mega-vendors to both deepen and expand their reach in the soon to be $140B global hybrid cloud market.

Never has technology created and destroyed vendor partnerships as quickly as in today’s rapidly evolving hybrid cloud marketplace. As recently as 2014, VMware and Cisco were partnering on the VCE offering, a combined VMware, EMC, and Cisco solution that leveraged each vendor’s best of breed capabilities in virtualization, storage, and networking. The VCE product was generating up to $2B annually as far back as 2012.

As VMware started to encroach upon Cisco’s networking space with the acquisition of Nicira, a software-defined network (SDN) pioneer, Cisco realized that VMware was entering its treasured networking domain, where it held a 50% market share. The Nicira acquisition has since morphed into the VMware NSX product line and is currently generating $1.3B in revenue annually with a reach of 10,000 customers per VMware CEO Pat Gelsinger.

Cisco has its own SDN killer application suite called Application Center Infrastructure (ACI) to compete in the multi-cloud space, claiming high praise from customers according to Cisco CEO Chuck Robbins.

Fast forward a few years and a few multi-billion dollar mega-mergers later, and VMware/Dell/EMC has created a veritable gold rush between itself and Cisco to be the solution of choice for the hybrid cloud customer seeking to seamlessly and efficiently move workloads between the data center and the cloud.

Recent developments of note include the following partnership announcements:

  • January 2019 – Cisco announces ACI Anywhere for AWS.
  • February 2019 – reports emerge of a cloud partnership between VMware and Microsoft.
  • February 2019 – continued innovation and product releases for VMware on IBM Cloud – Think 2019.
  • October 2017 – Cisco and Google hybrid cloud partnership announced.
  • November 2018 – announced Cisco Hybrid Solutions for Kubernetes on AWS.
  • January 2018 – Cisco extends partnership with MSFT to support Azure ExpressRoute.

Our Take

The rush to hybrid cloud environments has forced companies with a history of bitter and fierce competition to take off their blinders and forge partnerships in the new world of cloud co-opetition. Cisco holds a 53% global data center switch market share while VMware holds an estimated 91% market share of the virtualization market. VMware is also the leader in cloud system management software with a market share of 21.7%. How many IT shops likely depend on both Cisco and VMware to power their data center operations? The vast majority would be a good guess!

Thus, vendor lock-in for the hybrid cloud market would seem unavoidable for most prospective customers. The critical decision for IT leaders seeking out hybrid cloud functionality will be which way to go: VMware, Cisco, or other options such as an IBM/Red Hat multi-cloud solution? It would be impractical for most organizations to pursue a multifaceted approach to the hybrid cloud dilemma, as the sheer costs and investment in more than one technology and support resources does not pencil out.

This choice represents a critical juncture that carries an outsized impact on the organization's cloud strategy for the next decade. It is imperative to start delving into your hybrid cloud strategy to assess where the best technical fits exist today, to evaluate the product roadmaps of tomorrow, and to build the business case for going “all in” with your strategic vendor of choice.

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