VMware to touch Rs 1000 Crore in India soon

VMware is the undisputed virtualization leader in India, but is starting to gain footholds in the cloud and enterprise mobility market.

Most industry analysts regard it as the father of virtualization. CIOs of large organizations in India like HDFC Bank, TCS, Delhi International Airport, NDTV, Dr Reddy’s Laboratories, Shoppers Stop and Hindustan Petroleum amongst others strongly endorse the sentiment. They are also joined by all the Fortune 100 (literally) companies and 99% of the Fortune 500 and Fortune 1000 companies. In today’s new world of IT, many regard it is an emerging leader in cloud infrastructure and business mobility. It has more than 500,000 customers and 75,000 partners globally. It also has over 93,000 certified professionals. Founded in 1998, today it employs over 17,000 employees across more than 50 offices worldwide. Not surprisingly therefore the Palo Alto-headquartered VMware with its 2014 revenues of $6.04 billion (growth of 16%), is now the fourth largest software company in the world behind Microsoft, Oracle and SAP.

The India Investments

India too has been a significant contributor to the overall VMware story. The journey began here in 2005 and in these last nine years offices have been opened in New Delhi, Mumbai, Bangalore, Chennai, Kolkata, Pune, Hyderabad and Ahmedabad, with R&D centers in Bangalore and Pune. The first significant investment happened in 2008 to the tune of $100mn. In April 2014, VMware announced a projected investment of up to $500 million in India over the next three years to help fund its growing operations in the market.

At the same time, VMware announced an investment of $120 million to build a campus in Bangalore. Existing facilities in Bangalore were consolidated into the new state-of-the-art premise, which covers 428,000 square feet of workspace and seats 2,700 employees. The campus, inaugurated recently by VMware CEO Pat Gelsinger, accommodates new and on-going product R&D, as well as a large staff contingent supporting VMware’s global operations and India’s sales teams. After all, VMware India today employs 3,300 people—there was a spurt in headcount in 2013 when the acquisition of Airwatch added people in Bangalore.

Virtualization Still Rules

In the last few years, VMware has emerged as one of the biggest software vendors in India. According to DQ Channels estimates, the company clocked Rs 731 crore ($119.8mn) in revenue last year, up from Rs 576 crore ($94.4mn) and Rs 501 crore ($82.2mn) the years before.

The lion’s share of the India revenues still comes from virtualization solutions. While it has been evangelizing its cloud gameplay now for some time, VMware is still predominantly perceived in India to be a virtualization company (proved by revenue numbers) , and not the kind of cloud services provider typically associated with the likes of Microsoft, Amazon Web Services (AWS), and Google.

VMware senior officials acknowledge that the bulk of the company's revenue today still come from its traditional virtualization compute business, but noted that the company has been communicating its growth in new business areas comprising networking, storage, management, and end-user computing. As a result, they claim that VMware is slowly changing the perception among customers as it played out its one cloud, any application, any device vision, and demonstrated its broader product portfolio.

While analysts more or less agree with this claim, they believe that VMware's success in one thing--namely, virtualization--has typecast the company and it would be tough to break out of this mold. They feel that it would prove difficult for VMware to shun a strong installed base that has produced a rich source of revenue and the large number of virtualization customers would keep the vendor focused on its past, rather than future.

Some industry experts and analysts feel that in India as with rest of the world, VMware is struggling to assert itself in the mobile and cloud realms. It has reasonable offerings in both places, but has shot to stardom in the virtualization space that it is now having trouble realigning its perception in the market. Though VMware has a good management team with a clear strategy and some aspirational marketing, but it is unable to shake the 'virtualization company' perception.

VMware Horizon 6 is the desktop and application virtualization solution to deliver and manage any type of enterprise application and desktop, including physical desktops and laptops, virtual desktops and applications, and employee-owned PCs. VMware recently announced a new release of VMware Horizon 6 which features advanced capabilities for application publishing, 3D application support through high-performance virtual desktops, enhanced Chromebook support, software-defined data center optimizations including network virtualization benefits from VMware NSX. Customers can use VMware Horizon 6 to leverage the power of virtualization and transform their desktops into secure virtual workspaces on their way to embracing business mobility.

The Cloud Conundrum

VMware in India is slowly changing perception among customers as being only a virtualization vendor as it played out its one cloud, any application, any device vision, and demonstrated its broader product portfolio. The results are yet to come, but a trend is gradually emerging. vCloud Air service, though now a fraction of the total VMware base services, is gradually emerging as number two behind Amazon Web Services (AWS). The broad network of partners we're enabling is unquestionably the second largest set of cloud capabilities in this industry.

Compared against its competitors such as Microsoft and AWS, analysts feel VMware's cloud strategy is very enterprise focused and it is able deliver on what it promises in this aspect. However, its market play is not as prevalent in India where it still has only a small footprint. Some experts though feel that VMware should not be compared on similar grounds against AWS and Microsoft, adding that the vendor would "fail, badly" if it tried to out-compete AWS in the public cloud space. They argue that each player in this space serves different purposes, and enterprises will need to assess their options and choose the right tool for the job.

That said, VMware has a lot of work to do to gain market share in the public cloud market, which are led by AWS and Microsoft. Even IBM is making good progress here. VMware is in a horse race with literally hundreds of other cloud providers for a different corner of the market than AWS commands today."

In 2014, VMware announced the rebranding of VMware vCloud Hybrid Service to VMware vCloud Air. The name change underscores VMware’s commitment to deliver value added as-a-service solutions, such as Infrastructure as a Service, Desktop as a Service, Disaster Recover as a Service and such, to customers on its hybrid cloud platform. “This service is delivered to our customers directly through VMware as vCloud Air and through our partners as VMware vCloud Air Network. Our Hybrid Cloud and SaaS revenue comprises over six percent of total revenues with year on year growth greater than 100%,” informs Arun Parameswaran, MD, VMware India.

vCloud Air is a secure public cloud service operated by VMware, built on the trusted foundation of VMware vSphere. Unlike other public cloud services, vCloud Air enables an organization to extend its private on-premises IT infrastructure seamlessly to the public cloud. The resulting hybrid cloud is compatible with a customer’s existing applications and allows them to build new cloud-native applications, delivering agility and efficiency to the business in a secure, reliable and compliant manner.

vCloud Air is increasingly expanding its global footprint with data centers in North America, Europe and Asia. In Asia specifically, VMware announced its hybrid cloud expansion in Japan and China. VMware recently announced the announcement of general availability of vCloud Air in Germany and Australia. In India, VMware presently does not offer vCloud Air in the market but it leverages 30 vCloud Air Network partners like Netmagic and Sify who offer their services built on VMware infrastructure.

Compute, Network & Storage Triumvirate

Software Defined Data Center (SDDC) is broken down in three components--compute virtualization (traditional server virtualization), network virtualization and storage virtualization. And the cloud management is on top of it. As one looks at the SDDC footprint, one gets into complex deployments involving orchestrating private cloud and then creating the hybrid flavor into public cloud. 

SDDC has come to India faster than most of the technologies. India traditionally lacked technology evolution by at least four to five years.  SDDC is around two years earlier to the market than expected. Full SDDC, an organization which is completely virtualized–compute, network, storage and on the cloud—is not going to happen anytime soon, believes analysts.

Adds Parameswaran, “For the first time in India, we see organizations that now understand that automation does not mean throwing hundreds of motor bodies at the problem. Automation is using software and redefining organizational processes and structures to deal with this new phenomenon that is SDDC. Silos of servers and networks have fallen off with network virtualization. Most organizations have collapsed all the three: Network, storage, and server. We have seen the organizational structure being realigned with the advent of SDDC.”

Philosophically, and in terms of architectural viewpoints, top CIOs may have realized that that the software-defined enterprise or software-defined datacenter has arrived. However, mass adoption of SDDC will take time.

The Airwatch Gain

With a growing preference for smartphone devices amongst end users in India, VMware is also witnessing a strong interest and success for AirWatch, the enterprise mobility management and content management solution, it acquired two years back. AirWatch by VMware was recognized by Gartner as a leader in its 2014 Magic Quadrant for Enterprise Mobility Management. With India being a highly mobilized economy, the region is a huge opportunity for offerings by AirWatch. “We are seeing high interest and large deployments for AirWatch in India and have recently increased and strengthened the sales team”, says Parameswaran.

Sangeeta Gundala was recently appointed as the India business leader for AirWatch and VMware has added additional employees in Bangalore to help address the fast growing enterprise mobility opportunity in India. The AirWatch R&D team in India makes a significant global contribution to the company’s growing EUC portfolio and continues to innovate in the local market.

VMware’s Workspace Suite is an integrated platform for managing applications, data and devices. VMware Workspace Suite offers a single, integrated portal to access AirWatch by VMware mobile and content management solutions, and VMware Horizon. For end-users, the result is a unified experience across mobile and desktop devices, while IT gains a comprehensive management solution.

While VMware's acquisition of AirWatch is significant in its own right globally, analysts believe this development will fundamentally change the future of VMware's end user computing business especially in Asia/Pacific. As the most mobilized region in the world, Asia/Pacific has been painfully slow to adopt enterprise mobility outside of a few pockets of developed countries and organizations.

Going to market with something as complex as enterprise mobility, where both technical challenges and business drivers are highly ambiguous, is difficult to say the least. This, of course, has not deterred vendors from trying to enter the region. At last count, MobileIron, AirWatch, SAP, Citrix, VMware, IBM and many others have significant resources dedicated to enterprise mobility in Asia/Pacific including India.

However, the underlying challenge for enterprise mobility vendors is that most customers in Asia/Pacific (including a significant majority in India) are simply not ready for sophisticated mobility solutions from the likes of SAP, Citrix, and to some extent, VMware. Most enterprises in India are still stuck in the Ad-Hoc phase (the most initial phase of mobile maturity), which means they are struggling with basic mobility challenges like Bring Your Own Device (BYOD) and Device Security.

Most customers are really looking for is an easy-to-digest solution that can get them started on enterprise mobility such as Mobile Device Management (MDM), application management and security. And this is why MobileIron and Airwatch, with their lower cost, user friendly and easy–to-adopt solutions combined with their impressive partner enablement and support models, command the lion’s share of the enterprise mobility market in India and Asia/Pacific in general.

VMware has tried to break into the enterprise mobility market in India for the past few years. As one of the leaders in the client virtualization market, VMware has always placed a high amount of investment in developing solutions for the mobile platform. However, most of these developments were aimed at delivering the virtualized desktop experience onto the mobile platform, which has yet to take off due to high cost, complexity and poor user experience. Since the middle of 2013, VMware has made available its own enterprise mobility solution, the Horizon Mobile suite.

While Horizon Mobile is a capable solution, analysts feel that VMware's confusing multiplatform approach (different management solutions for iOS and Android) and the lack of a simple MDM solution meant VMware is rarely considered for enterprise mobility deals, especially apparent in India where customers always look for MDM to start the enterprise mobility discussion.

What the acquisition of AirWatch proves that is VMware can transform itself to becoming an enterprise mobility powerhouse in India and overall Asia/Pacific fairly quickly. And unlike IBM's acquisition of Fiberlink and Citrix's acquisition of Zenprise, VMware does not have to invest heavily to build up the Asia/Pacific mobility business (including India) since AirWatch already has a significant presence here. VMware has started leveraging AirWatch to continue to develop the enterprise mobility market in India, as well as leading customers down the path to mobility.

Converged Infrastructure Evolution

VMware recently announced the availability of VMware EVO:RAIL for the Indian market through its qualified EVO:RAIL partners. VMware EVO:RAIL is a hyper-converged infrastructure appliance that helps IT organizations streamline the deployment and scale-out of software-defined IT infrastructure at the speed of business. 

Dell, EMC and HP have also announced the availability of their VMware EVO:RAIL based offerings for India. Fujitsu, Hitachi Data Systems and NetApp have partnered with VMware for EVO:RAIL and will make their respective appliances available over time. VMware EVO:RAIL will be offered by these partners’ channel as a single SKU covering hardware, software, and support and services costs, with single point-of-contact support being offered by the Qualified EVO:RAIL Partners. 

The challenge with converged infrastructure is that everyone had their own vision of what components and software tied them together. Explains Parameswaran, “If a company bought three different converged infra stacks, there were three different platforms for hardware, network storage, and server and the three software stacks.” All of them, predominantly, had VMware beneath them but they had orchestration layer and some different minute things. The customer did not want three different clouds. VMware built the software recipe that sits on top of these but underneath the customer still gets choice.

“Whether you buy EVO: RAIL from Hitachi, Dell, Fujitsu, HP or others, the implementation is common as the software piece that ties them together is common. There is a breed of customers which is 80 to 90 percent virtualized on VMware and they do not need different stacks. They are fine with hardware variants. But in a software-defined world, they want the uniformity in software,” he adds.

The Channel Situation

VMware probably suffered from over-penetration in the channel ecosystem. Last year, it had 85 direct managed partners (Tier 2) which did not make much sense and there was a lot of ‘hit and run’ across the market. The company cut that down to 45 and now the number is down to 36 direct managed partners.

Simultaneously,VMware however expanded its footprint with systems integrators. There is a probability that VMware might quadruple the SI team in terms of resources this year focused on Tier 1 and Tier 2 SIs. With many Tier 2 partners bidding for government deals there is this need to increase coverage across both tiers. 

Earlier, VMware had named accounts in (enterprise and government) and the general business. The earlier separate departments of general business and channel departments have been collapsed into one as it made sense to have a single face as general business GTM is driven through partners. However, VMware continues to work around ISV ecosystem across ISV verticals like telecom, BFSI, and manufacturing. And it is focused on driving additional programs with ISV partners.

There is a logic behind VMware reducing the number of channel partners. The strategy from 2010 to 2013 of going to the market with one solution of server virtualization made sense with high market proliferation through a large set of partners. But customers buying into datacenters now need partners with well-toned skillsets across virtualization to cloud to SDDC.

Hence, VMware has to pick and choose a limited set of partners to ensure they have the right skillsets. It does not mean it will not work with other partners, but there is a definite agenda of upskilling specific skillets for managed partners. As the network complexity increases, the company has to upskill the channels and hence the number of dedicated partners will simultaneously reduce too.

R&D Catalyst

R&D has definitely been the biggest jewel in VMware India’s crown till date. The company’s R&D and support operations in India are second in size and scale only to those at VMware’s headquarters in Palo Alto in US (bigger than the one in UK). VMware’s R&D operations in India make a significant contribution to the company’s portfolio of virtualization and cloud computing products, all designed to help VMware customers navigate the journey to a new era of IT. “In fact, developers in Bangalore and Pune contribute important components of VMware’s key technologies – the software-defined datacenter, hybrid cloud and end-user computing,” reveals Parameswaran.

VMware, which currently has 3300 employees in India, plans to add 16% or above 500 people to its Indian workforce this year. Out of this, about 250 people will be hired in the R&D wing of the company, which currently has 1300 employees in India. “India is a substantial element of our global R&D activities and almost everything we do has a representation in India. India plays a critical role in all of VMware's strategic imperatives,” substantiates Pat Gelsinger, CEO, VMware.

The Storage R&D team in India is making significant contributions to upcoming releases over the next two years in core storage and areas relating to policy based storage management in the cloud Infrastructure. The 50+ hybrid cloud R&D team in India is an integral part of the PA team and is contributing to key software components to realize the implementation of the Hybrid Cloud. The Cloud Management R&D team in MBU is a team with prolific inventions. They have owned the Cloud Chargeback Management that is now an integral part of the ITFM. “Significant work around networking and security is alsodone from our Pune R&D center as well as work on leading edge vShield Management & Security fabric related areas,” reveals Parameswaran.

The new campus in Bangalore features an Executive Briefing Center (EBC) to showcase VMware’s entire portfolio of solutions, providing customers and partners across Asia Pacific with the opportunity to see the company’s products and services in action, and discuss them face to face with executives and engineers. The Bangalore center has close to 600 engineers and is specialized in the core vSphere platform, quality assurance and sustenance engineering. Other areas of focus in Bangalore include storage virtualization, application virtualization, application management and cloud services. “The new facility is a mini-version of the world-wide VMware that is represented in India,” says Gelsinger.

“India may be perceived as a late adopter of new technologies, but we are seeing rapid transformation in the country. Customers here are enthusiastically adopting our advanced cloud infrastructure and end-user computing technologies. Our customers are transitioning to a new model of IT that is fluid, instant and secure,” adds Parameswaran.