The Troposphere

Sep 9 2016   6:43PM GMT

Can Virtustream succeed as a niche public cloud?

Trevor Jones Trevor Jones Profile: Trevor Jones

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Virtustream – not VMware – is the lead public cloud infrastructure provider for the new Dell Technologies, but is its narrow focus enough to sway IT pros?

The company, which officially became part of Dell this week with the close of the protracted EMC acquisition, is taking a markedly different approach to a public cloud market where much of the focus and buzz is around the net-new. Instead Virtustream  is focusing exclusively on the less sexy legacy systems that still make up the vast majority of enterprise IT.

Virtustream tailors its public cloud to mission-critical and highly regulated applications, such as SAP and other ERP systems. The majority of its workloads are brownfield, lift-and-shift applications, and there’s often little re-architecting needed for this transition, said Kevin Reid, president and CTO of Virtustream, who spoke to TechTarget  at VMworld in advance of the completion of the Dell deal.

It may be a niche in terms of the services offered by the typical public cloud provider, but it’s a massive one for potential conversions — industry observers estimate it to be a multi-billion dollar market that’s just starting to ramp up.

Going solely after the enterprise market seems to be a good model for Virtustream, said Carl Brooks, an analyst with 451 Research, in New York.

“They have some specialties but mostly they give a highly defined level of service for managed services around the infrastructure,” he said. “Virtustream does it better than any of their customers do and usually by a pretty wide margin.”

Of course, Virtustream, with its circumscribed approach, isn’t alone going after this market segment. Amazon has pushed hard to get customers to offload some of their more burdensome IT assets on to Amazon Web Services (AWS), while IBM and Microsoft already have relationships with customers in this space. Even Oracle is seen by some as a dark horse that could push its way into the market.

Pitch to IT  pros: We’re better at this than you

Part of the argument for the public cloud is the ability to build redundancy into the application and scale as needed, and proponents argue that the lift-and-shift model never provides the full benefits of cloud computing. Virtustream freely admits it’s probably not the best place for new applications.

“When doing a greenfield app let me look at public cloud model and go cloud-native, built resiliency and scale, but if I’m going to work with something I’ve invested tens of hundreds of millions of dollars into there’s no justifiable ROI to rewriting that,” Reid said.

What often happens is enterprises make edge applications cloud-native while continuing to run the nucleus systems as stateful applications because of the investments on-premises and the lack of internal skills to rewrite applications to the cloud, Reid said.

Putting complex systems in standard public clouds involves extra integration engineering to make them run properly, Virtustream argues, because most of that infrastructure is standardized and commoditized to provide the lowest cost of entry. Virtustream is increasingly coming up against AWS and other large-scale public clouds, and its pricing is comparable when total cost of ownership is taken into account, Reid said.

So the question becomes, why move your on-premises workloads at all if they aren’t going to be rewritten? Virtustream’s response is that it’s better at running infrastructure than you. That entails better infrastructure utilization, improved application management via provisioning and automation, and built-in integration for security and compliance.

Virtustream and its place inside Dell

Virtustream  has evolved into the primary cloud services arm of Dell Technologies, but that strategy didn’t come about smoothly. Last fall Virtustream’s and VMware’s cloud assets were to be combined and reshuffled, with the infrastructure components handled by Virtustream and the software pieces overseen by VMware. That plan was ultimately scuttled amid investor concerns and the two remain separate companies, though Virtustream does plan to add NSX support later this year to better connect to VMware environments.

As a result of the failed merger, Virtustream’s strategy remains largely unchanged, while VMware has tweaked its roadmap to focus on software delivery and connectivity to other cloud providers. Lump that with the private cloud offering from Dell and platform-as-a-service provider Pivotal, also brought over through the EMC Federation, and Dell Technologies has an amalgam of cloud services targeted at enterprises with a hefty share of legacy systems. It’s a model that runs contrary to how larger providers such as AWS are extending beyond infrastructure to a variety of higher-level services all accessible through one umbrella.

“If they can leverage the SAP workload play and somehow do something [with VMware] that is less tightly coupled that doesn’t raise question around CapEx and opening more data centers, there’s a potential synergy there,” said Sid Nag, research director at Gartner.

Recombining all the sensibly related pieces of the federation would have provided a more materially significant offering as opposed to what is now essentially a service catalogue, Brooks said.

But EMC has served as a good pipeline for Virtustream business, and ideally the various business units under Dell will be able to have some level of connectivity to the other assets, which have such a huge footprint within IT, Brooks said.

“Overall I don’t know if that gives them anything flat-out remarkable,” Brooks said. “There’s not any world-beaters here but you can definitely say that to the extent that they can reduce that friction, it never hurts if it’s easier to get gear and customers.”

Trevor Jones is a news writer with TechTarget’s data center and virtualization media group. Contact him at tjones@techtarget.com

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