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What Drove VMware’s Fiscal 2Q17 Results?

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Part 9
What Drove VMware’s Fiscal 2Q17 Results? PART 9 OF 20

VMW Announces VMware Cloud on AWS

VMware Cloud on AWS is available

So far in the series, we discussed VMware’s (VMW) fiscal 1Q18 results as well as new offerings launched in the company’s recent VMworld conference. Industry analysts and the market keenly awaited VMworld, as many felt that VMware would provide details of its Amazon’s (AMZNAWS deal, which it entered in 2016.

VMware announced the alliance between VMware and Amazon, known as the VMware Cloud on AWS limited release, which should be globally available in 2018. By partnering with Amazon, VMware aimed to hit two birds with one stone. As a leader in the public cloud space, Amazon enhanced VMware’s position in the cloud space and, at the same time, thwarted Microsoft’s growth in the public cloud. If we look deeply at this scenario, VMware did not have much choice.

VMW Announces VMware Cloud on AWS

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Amazon’s undisputed leadership would benefit VMware

A majority of IT spending is moving toward the public cloud. So, VMware would find it extremely challenging to attract customers to invest in its flagship offerings when more than half the cloud space is dominated by Amazon, Microsoft, Google (GOOG), and IBM (IBM). This timely partnership with AWS eased VMware’s tension, as customers can use its offerings while still transitioning to the public cloud.

Amazon’s global footprint could also benefit VMware. Tech players like Oracle (ORCL), Microsoft (MSFT), and their peers are competing for data center growth to facilitate data storage and bring computing closer to their customers. The greater the distance, the longer the delay between issuing a direction and an outcome. Establishing data center operations closer to customers should speed up performance.

Although VMware is a leader in the virtualization space, it doesn’t have the funds, resources, or scale that Amazon possesses to succeed in the competitive cloud space. By partnering with Amazon, VMware can piggyback on Amazon without spending heavily on capital expenditures, which is a significant gain to VMware and its customers.

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