On Aug. 22, 2019, VMware announced that it would acquire sister company Pivotal Software, vendor of a widely used cloud development platform, Pivotal Cloud Foundry. The transaction is reacquisition of software development assets that VMware spun out into a separate company in 2013 after struggling to integrate them into its primary data center management software business.
For customers, the immediate impact of the acquisition is minimal and positive. They can still turn to Pivotal for its leading cross-cloud development platform and application development and transformation services, and they can still turn to VMware for its leading software-defined infrastructure software and growing cross-cloud migration and management software. Both companies were already members of the Dell Technologies "family" of companies and sought to cooperate in servicing customers. Most recently, both Pivotal and VMware were investing heavily in helping customers transition from legacy development processes to modern, Agile software development and from traditional, virtualized, mostly on-premises infrastructure to container-based, cloud-deployed, and Kubernetes-orchestrated infrastructure.
VMware can now streamline that cooperation. It already jointly developed Kubernetes products with Pivotal while it steadily added container support to its own vSphere product line -- it hasn't always been clear which company built or sold the emerging container platform products. VMware can eliminate duplicate development efforts, reduce impedance in the sales cycle, and better direct its product and services strategy toward application development and development platforms as it aims higher up the stack to the application layer. (See Conway's law for more on the consequences of disjointed, separate organizations.)
That's the short term. In the long term, VMware will pursue greater value to customers than the two separate companies offered independently. Here's how to judge whether VMware is succeeding:
- Transition to software development platforms first, infrastructure second. VMware presented the Pivotal acquisition as a leap from its VM-based present into a future defined by containers and Kubernetes. That's a good start and puts some wood behind the arrow of "application transformation" that VMware has tried to message for a while. However, container development platforms with Kubernetes are already available from a range of powerful competitors, and just adding containers and Kubernetes to a virtualized IaaS platform doesn't help customers modernize applications. The Pivotal team understands developers and development platforms; VMware's leadership does not.
- Combine Pivotal with the VMware cloud-native business unit. Although Pivotal's revenue is less than one-tenth of VMware's, Pivotal has the relationships with developers and DevOps teams in some of the most innovative enterprises — the companies putting cloud-native development practices, architectures, and platforms in place. The Heptio and Bitnami acquisitions make more sense under the Pivotal brand. Watch for how VMware retains (or loses) Pivotal's key talent, which took a hit when Pivotal's valuation suffered a big decline in May.
- Invest in cloud-native platforms ahead of demand. VMware is right to center its ext act on containers and Kubernetes. Investment must be strong, despite relatively meager revenues flowing from the efforts initially. But investment must go beyond a great Kubernetes managed service to the platforms and services that help developers build new apps and modernize existing ones. Examples include Pivotal Function Service for serverless development on top of Kubernetes; Spring, Spring Boot, and Steeltoe for Java- and/or .NET-based microservices; and Pivotal Service Mesh. Kubernetes and containers are foundations only; the main event is application platforms and the programming model they enable.
- Embrace platform and application portability. In the cloud-native era defined by containers, Kubernetes, and rapid commoditization of infrastructure services, platform providers like VMware-Pivotal and IBM-Red Hat must run equally well on a broad range of cloud platforms to succeed. VMware's view of portability is "run on vSphere-managed infrastructure"; Pivotal is already an IaaS-agnostic (a source of friction between the two companies). VMware must get over its insistence on only its infrastructure if it hopes to serve customers as an alternative to IBM-Red Hat and the major cloud platform providers in general. Microsoft embraces Linux and Java workloads on Azure because they drive revenue via consumption-based billing. Look for VMware to embrace "Pivotal Everywhere" in a similar way -- if it spins VMware revenue dials. In the process, it creates an opportunity to migrate revenue it generates on its own to an adjacent market: the application platform.
- Target modernization of core business applications with a joint solution. Pivotal taught many enterprises how to build new cloud-native apps. VMware created a migration path for existing virtualized apps to move to cloud infrastructure mostly unchanged (AWS, Azure, or Google). But no one has cornered the market for platforms to help enterprises start to incrementally tear apart, refactor, and rethink existing core business apps. Much of this work will start on-premises, and many of these apps are VMware-virtualized already. VMware must make the case that Pivotal on VMware is the best on-premises starting point to containerize their customers' most important -- but crufty and complex -- business applications.
- Position a unified story for application and infrastructure development. Everything is now software, even some hardware. The successful enterprises of the future will develop applications and the necessary infrastructure in similar ways. Few technology companies can join the two worlds for their customers. VMware now can. It must promote software development skills, methods, and tooling to its huge base of existing infrastructure customers while it also strives to earn the trust of application developers. In its quest to promote a new model for joint infrastructure and application development, it will likely alienate some of the faithful followers in the church of VMware, but this is a move it must take. Orthodox modes of developing and deploying infrastructure and applications are already on an inexorable march toward extinction.
This post was written by Vice President, Principal Analyst Dave Bartoletti, Jeffrey Hammond, John Rymer; Principal Analyst Chris Gardner; and Vice President, Research Director Glenn O'Donnell. It originally appeared here.