What Pushed VMware to Exit the Public Cloud Space?



The cloud space continues to be consolidated and competitive

Earlier, we discussed VMware’s (VMW) sale of its vCloud Air to France-based OVH. With this sale, VMware has joined the ranks of Hewlett-Packard Enterprise (HPE) and Cisco (CSCO), who have also exited the public cloud space.

The cloud space, which grew 25% to become a $148 billion market in 2016, is dominated by Amazon with its 40% market share. Although IBM (IBM), Microsoft (MSFT), and Google (GOOG) can’t match Amazon’s share and scale in the space, they saw a combined 5% rise in their market shares between 2015 and 2016.

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Rising competition in cloud space makes it difficult for smaller players to operate

Microsoft, Google, and IBM increased their market shares in the public cloud due to smaller players losing share to larger players, as the above chart by Synergy Research shows.

It’s this competition in the public cloud space that forced HPE and CSCO to exit. Growing competition and a struggle for funds and scale also forced Rackspace to relent on its sale to Apollo Global Management.

VMware followed the partnership route to remain in the consolidated and extra-competitive cloud space. It joined with Amazon to boost its offerings in the public cloud. Amazon, on the other hand, gained entry into the hybrid cloud space through this partnership.


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