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VMware vCloud Global Connect and commoditization

At VMworld, VMware has announced vCloud Global Connect, a federation between vCloud Datacenter Provider partners.

My colleague Kyle Hilgendorf has written a good analysis, but I wanted to offer a few thoughts on this as well.

The initial partners for the announcement are Bluelock (US, based in Indianapolis), SingTel (Singapore), and SoftBank Telecom (Japan). Notably, these vendors are landlocked, so to speak — they have deployments only within their home countries, and who probably will not expand significantly beyond their home territories. Consequently, they’re not able to compete for customers who want multi-region deployments but one throat to choke. (Broadly, there are still an insufficient number of high-quality cloud providers who have multi-region deployments.)

These providers are relatively heavyweight — their typical customers are organizations which are going through a formal sourcing process in order to procure infrastructure, and are highly concerned about security, availability, performance, and alignment with enterprise IT. I expect that anyone who chooses federation with Global Connect is going to apply intense scrutiny to the extension provider, as well. At least because the vCloud Datacenter architecture is to some extent proscriptive, and has relatively high requirements, in theory all federation providers should pass the buyer’s most basic “is this cloud provider architected in a reasonable fashion” checks.

However, I think customers will probably strongly prefer to work with a truly global provider if they need truly global infrastructure (as opposed to simply trying to globally source infrastructure that will be used in unique ways within each region) — and those with specific regional needs are probably going to continue to buy from regional (or local) providers, especially given how fragmented cloud IaaS sourcing frequently is.

It’s an important technical capability for VMware to demonstrate, though, since, implicitly, being able to do this between providers also means that it should be possible to move workloads between internal vClouds and external vClouds, and to disaster-recover between providers.

Importantly, the providers chosen for this launch are also providers who are not especially worried about being commoditized. Their margin is really made on the value-added services, especially managed services, and not so much from just providing compute cycles. Each of them probably gains more from being able to address global customer needs, than they lose from allowing their infrastructure to be used by other providers in this fashion.

I do believe that the core IaaS functionality will be commoditized over time, just like the server market has become commoditized. I believe, however, that IaaS providers will still be able to differentiate — it’ll just be a differentiation based on the stuff on top, not the IaaS platform itself.

In the early years of the market, there is significant difference in features/functionality between IaaS providers (and how that relates to cost), but the roadmaps are largely convergent over the next few years. Just like hosters don’t depend on having special server hardware in order to differentiate from one another, cloud IaaS providers eventually won’t depend on having a differentiated base infrastructure layer — the value will primarily come higher up the stack.

That’s not the say that there won’t still be difference in the quality of the underlying IaaS platforms, and some providers will manage costs better than others. And the jury’s still out on whether providers who build their own intellectual property at the IaaS platform layer, vs. buying into vCloud (or, some future OpenStack-based stack, or one of many other “cloud stacks”), will generate greater long-term value.

(For further perspective on commoditization, see an old blog post of mine.)

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