Tag Archives: watchers

CloudHealth’s Kinsella weighs in on VMware, cloud management

VMware surprised many customers and industry watchers at its annual user conference, VMworld 2018, held this week, with its acquisition of CloudHealth Technologies, a multi-cloud management tool vendor. This went down only days before CloudHealth cut the ribbon on its new Boston headquarters. Joe Kinsella, CTO and founder at CloudHealth, spoke with us about events leading up to the acquisition, as well as his thoughts on the evolution of the cloud market.

Why sell now? And why VMware?

Joe KinsellaJoe Kinsella

Joe Kinsella: A year ago, we raised a [Series] D round of funding of $46 million. The reason we did that is because we had no intention of doing anything other than build a large public company — until recently. A few months ago, VMware approached us with a partnership conversation. We talked about what we could do together. It became clear that the two of us together would accelerate the vision that I set out to do six years ago. We could do what we set out to do faster, on the platform of VMware.

How will VMware and CloudHealth rationalize the products that overlap within the two companies?

Kinsella: The CloudHealth brand will be a unifying brand across their own portfolio of SaaS and cloud products. That said, in the process of doing that, there will be overlap, but also some opportunities, and we will have to rationalize that over time. There is no need to do it in the short term. [VMware] vRealize and CloudHealth are successful products. We will integrate with VMware, but we will continue to offer a choice.

What was happening in the market to drive your decision?

[Enterprises] have settled on a nuanced approach to leverage a broad portfolio of cloud options, which means many public clouds, many private clouds and a diverse set of SaaS products. Managing [such] a diverse portfolio is incredibly complex.
Joe KinsellaCTO and founder, CloudHealth Technologies

Kinsella: Cloud management has evolved rapidly. What drives it [is something] I call the ‘three phases of cloud adoption.’ In phase one, enterprises said they would not go to the public cloud, despite the fact that their lines of business used the public cloud. Phase two was this irrational exuberance that everything went to the public cloud. [Enterprises in phase three] have settled on a nuanced approach to leverage a broad portfolio of cloud options, which means many public clouds, many private clouds and a diverse set of SaaS products. Managing a single cloud is complex; managing [such] a diverse portfolio is incredibly complex.

What’s your view today of cloud market adoption and how the landscape is evolving?

Kinsella: Today, the majority of workloads still run on premises. But public cloud growth has been dramatic, as we all know. Amazon remains the market leader by a good amount. [Microsoft’s] Azure business has grown quickly, but a lot of that growth includes the Office 365 product as well. Google has not been a big player until recently. It’s only been in the past 12 months that we felt the Google strategy that Diane Green started to execute in the market. Alibaba has made some big moves and is a cloud to watch. Though Amazon is still far ahead, it’s finally getting competitive.

But customers don’t really just focus on one source anymore, correct?

Kinsella: I’ve talked about the concept of the heterogenous cloud, which is building applications and business services that take advantage of services from multiple service providers. We think of them as competitors today, but instead of buying services from Amazon, Google or Azure, you might build a business service that takes advantage of services from all three. I think that’s the future. I believe these multiple cloud providers will continue to exist and be differentiated based on the services they provide.

Vendors vie for a piece of the SD-WAN market share pie

Most industry watchers still consider the software-defined WAN market an emerging one. This makes sense, given SD-WANs currently account for only a small percentage of enterprise networks. There are signs SD-WAN market share is increasing and maturing, however. The first is the recent merger-and-acquisition activity: Cisco acquired Viptela, and VMware scooped up VeloCloud. The other sign is the vendor landscape has started to settle down, with a few clear leaders in the pack.

Recently, Cliff Grossner, senior research director of cloud, data center and SDN at London-based IHS Markit, released his data center networking equipment quarterly market tracker for the first quarter of 2018. This report covers a wide variety of technology, including SD-WAN.

Editor’s note: The IHS report referenced in this article focused on the SD-WAN vendors that sell SD-WAN appliances and accompanying control and management software to gain revenue, excluding those that offer subscription licensing or software-only approaches. The total SD-WAN market share for the first quarter of 2018 reached $162.1 million.

VMware-VeloCloud and Aryaka battle for the top

The most notable point in the IHS report is a two-horse race is emerging. This quarter showed VMware-VeloCloud with 19% of SD-WAN market share — the same it had in the fourth quarter of 2017. In the meantime, Aryaka — an SD-WAN provider with its global private network — moved to 18%, up 1% from last quarter.

With only 1% separating the two, VMware and Aryaka are now neck and neck for market leadership. It would be easy to assume VMware’s size and channel would allow it to break away from the competition, but VMware has stumbled in networking since it acquired SDN vendor Nicira. The company wisely left the VeloCloud brand in place, as it was one of the premier names in the SD-WAN space.

Aryaka has a solid grip on the No. 2 spot in the SD-WAN market and has a chance to jump into the top spot if VMware-VeloCloud stumbles with any integration challenges. Aryaka has a unique offering that uses its global private network instead of the public internet, making it the product of choice for global companies.

One of the perceived advantages of SD-WAN is its use of internet connectivity for transport. This might work when connecting from New Jersey to Chicago, but a global company that needs to make a Dubai-to-Seattle video call will experience much better quality riding Aryaka’s private network, compared with making a bunch of internet jumps. In his report, Grossner pointed out that Aryaka customers have seen a significant performance boost for cloud-based applications, like Office 365.

Silver Peak and Cisco-Viptela vie for position

Expect to see this as a highly contested market over the next few years.

Silver Peak edged Cisco-Viptela out of the No. 3 spot in the SD-WAN market, with just under $1 million more than Cisco in first-quarter 2018 revenue. There’s no question Silver Peak has done a great job of making the pivot to SD-WAN from WAN optimization and is all-in on SD-WAN. Its EdgeConnect product lets customers move to a hybrid network, then quickly migrate to an all-broadband WAN. Most of Silver Peak’s revenue comes from enterprises, but it has been building a stronger book of business with service providers.

Cisco’s position in SD-WAN is curious, as its success with Viptela is bad for its Integrated Services Router (ISR) business unit — one of the largest revenue sources for the company. In the past, Cisco would have done everything in its power to fight the SD-WAN tide, but CEO Chuck Robbins is directing Cisco to be much more in tune with what customers want versus what Cisco wants customers to want. I believe Cisco will be willing to cannibalize its ISR base to win SD-WAN business. Currently, Cisco has only 12% of SD-WAN market share, but I expect it to be a major player over time.

These four vendors are the only ones with at least 10% of the SD-WAN market share, according to IHS. Outside of these four, the largest amount of revenue in Grossner’s numbers comes from the “other” category. I expect to see more consolidation in that area, with one of the current leading vendors — or perhaps another following behind — rolling up several smaller vendors to gain share.

For now, VMware remains in the top spot, with Aryaka nipping at its heels. Expect to see this as a highly contested market over the next few years. This should benefit customers, as the vendors will push each other on innovation and bring more features to market faster. The SD-WAN market is real, and it is showing signs of maturity, but don’t expect it to slow down.