VMware: China-US trade dispute will split industry into two camps

With the China-US trade dispute unlikely to be resolved soon, technology vendors should be prepared to support two trading blocs--one that is heavily partnered with China and the other with the US, says VMware CEO Pat Gelsinger, while Dell CEO Michael Dell reveals the company has made "adjustments" to due to the conflict.
Written by Eileen Yu, Senior Contributing Editor

Technology vendors will have to decide how to operate in a global marketplace that is split into two camps, as the trade dispute between China and the US looks unlikely to be resolved anytime soon. This will mean running an ecosystem that supports China and another that supports the US and other western markets. 

This is what VMware already has begun to assess and adjust, according to the US company's CEO Pat Gelsinger. "We don't think the dispute will get resolved quickly [and], against this [backdrop], we see the world as becoming two trading blocs -- one heavily partnered with China, and one with the US and other western trading countries," said Gelsinger, during a media Q&A at the VMworld 2019 conference here Monday.

He said every organization would need to determine how it operated in this dual-world landscape, building out its supply chains as well as engagements with its customers and trading partners. 

In this aspect, VMware was committed to China and adjusting how it worked within that ecosystem, he said- At the same time, as a US company, it also was committed to the western trading ecosystem, said the CEO, adding that it would ensure compliance with the laws of both countries.

The US government last week announced plans to further increase existing tariffs on $250 billion worth of Chinese imports from 25% to 30%, with another $300 billion in goods threatened to see a similar fate. The move came after the Chinese finance ministry said it would enforce additional tariffs of 10% and 5% on $75 billion worth of US goods in two batches, starting September 1 and December 15. Beijing said it was "forced to take countermeasures" in response to the US government's move to impose the tariffs. 

The US President Donald Trump also issued an "order" for US companies to sever ties with China, saying via Twitter that his country could thrive without trade relations with the Chinese. 

As the Sino-US conflict continued to drag on, Gelsinger said other organizations -- like VMware -- likely were in the process of figuring out how to operate dual supply chains and in a dual-trading blocs world.

Dell Technologies, which owned a majority share in VMware, also had made changes to deal with the tariffs and would continue to make adjustments, said CEO Michael Dell, who was at the Q&A. 

Noting that the company had a "very substantial" business in China, Dell said: "Our first priority is to ensure continuity of supply for our customers, and we have been able to do that. We have factories around the world and have the flexibility to enable our business to continue to thrive both inside China and outside."

He also urged government officials from both sides to continue to work to find a successful resolution to ease the current tension, which he described as "not productive" for the business. 

Building modern applications a challenge in APAC 

While VMware worked to support two different ecosystems to accommodate China and western markets, what remained common amongst enterprises across all regions was the challenge of building and running modern applications as they moved to a cloud environment. 

They also needed a certain set of skills to help them move from a traditional on-premise environment to a cloud-native one, Bruce Davie, VMware's Asia-Pacific Japan vice president and CTO, said in an interview with ZDNet on the sidelines of VMworld. This was where the technology vendor hoped to step in and provide them the tools organizations needed to build and run modern applications, Davie said. 

Key to this, and major focus at the conference this week was VMware's pending acquisition of Pivotal--along with it Pivotal Labs--as well as its acquisition of Heptio, he said. 

Modern applications needed to be easier to build, run, and manage, and the technology vendor--which had been focusing on the "run" and "manage" components--now was tuning up the "build" piece with Pivotal, he explained. 

Specifically, VMware was looking to help pull together a company's IT operations and development teams. "You need to build bridges between these two communities so they can collaborate better...you can't have [these two teams working] separately," he said. 

Another priority for the vendor was to ensure customers had access to a "consistent VMware" across any environment, including on-premise, private and public cloud, as well as multi- and hybrid cloud. This meant partnering up with cloud providers, so its products were optimized to run on on all these platforms, be it Amazon Web Services (AWS) or Microsoft Azure, Davie said. 

Vmware currently has more than 4,000 cloud partners, including more than 100 in Southeast Asia and Korea, said Sanjay K. Deshmukh, VMware's Southeast Asia Korea vice president and managing director. 

This partner community included Alibaba Cloud, with which VMware collaborated on some engineering work to ensure tools such as automated networking tasks could run as they should on the Chinese operator's cloud platform, Davie said. This was similar to its partnerships with other major cloud players such as Microsoft and Google, he said, adding that this would be expanded at some point to include Alibaba Cloud services.

Deshmukh said VMware also would continue to grow its cloud partner community in the region, so its enterprise customers would be able to access its products on a cloud platform of their choice. VMware Cloud on AWS instances, for example, now were available in some regional markets such as Singapore, Tokyo, and Australia, but not yet in all Asean countries, he said. 

This was one gap it was keen to plug and would be looking to do so with local partnerships such as Thailand's INet, which was the country's largest cloud provider and first to be VMware Cloud Verified. 

Based in Singapore, Eileen Yu reported for ZDNet from VMworld 2019 in San Francisco on the invitation of VMware. 

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