By Patrick Moorhead - November 14, 2023

The Six Five team discusses VMware/IBM/OpenShift.

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Patrick Moorhead: Dan, you spent the week in Spain and you had a lot of conversations. You went to explore. You met, I think with some Red Hat senior executives. What’s going on here?

Daniel Newman: Yeah, I think rather than just doing the VMware explore, which I’ll give a quick rundown, I wanted to talk a little bit about a very interesting sort of partnership and following on from our IBM conversation because there’s a lot of question marks right now. I think the world sort of wonders what’s going on. And by the way, I went and the whole reason I planned to go was to be there in the post-deal era, which by the way got sort of unwound because they didn’t end up finishing the deal. So we’re still out there holding, what was the word Pat, soon?

Patrick Moorhead: Yeah.

Daniel Newman: So soon was the public disclosure. Did spend some time with some of the Broadcom execs, spent some time with VMware execs, had a chance to talk this week with Red Hat CEO, Matt Hicks as well. And so had some great conversations in the multi-cloud slash hybrid private AI era.

And so takeaways from VMware explorer, Pat were, well, one, the big elephant in the room is what was it like? Well, I honestly feel like it was a little bit of a limbo. I just feel like nobody quite knew what to expect. So there just wasn’t a whole lot of, what’s the right word? It’s just people, there’s a whole lot of uncertainty about what’s going to go on, Pat. It’s pretty well public record at this point that offers have gone out. People are leaving, people are coming. Now different in Europe, by the way. They could not do those things in Europe from labor laws. From a labor law standpoint, they could not make those offers, could not make those transitions. So the stability of the labor force in Europe, for instance, is different than the changes that were being made in the US. But some of the new GMs were kind of brought out the people that will be the new GMs, and again, not going to disclose the details, but starting to introduce those people.

And Hock actually got on stage, Hock Tan, CEO of Broadcom, got on stage, talked to the whole group, talked about the three big ways that VMware intends to bring value to the customers. Also did a cameo for the analyst group and took some questions. So clearly there’s kind of this very mixed feeling. Is it moving? Is it not moving? And I think there’s still a pretty outsized confidence in all sides. And Pat, frankly for you and me, we hope just based on a lot of the things that have started moving forward that this deal gets done. But there’s nothing, if not going back to our Six Five summit conversation with Hock Tan, going back to some of the conversations that we’ve had at VMware’s more recent event, there’s probably not anything that’s been more exciting about what VMware is up to than what it’s trying to do with generative AI and it’s private AI offering.

Pat, there’s a whole side of enterprise AI that requires very thoughtful, especially in regulated industries, that is a very thoughtful architecture for what compute is done, where what’s, what’s moved to the cloud, how do workloads move in between what’s virtualized, what’s Kubernetes, and can you do all these things in an ecosystem? And VMware has painted a picture for this, but let’s be very clear, the picture they’re painting is one that is of mixed, I say etiology, but in all serious it’s mixed vendor. And so while you’ve heard a lot about VMware and Tanzu and vSphere and Cloud Foundation, what the company seems to be really leaning into, and actually Chris Wolf and Tarun Chopra of IBM actually came out with something together, but their private AI solution for generative really seems to be an amalgamation of VMware, Red Hat and IBM Watson X.

That was probably one of the coolest things that came out of this is VMware is not trying, while it does have a multi-cloud platform in Tanzu, it does understand that it needs to meet the customer where it is, and the customer is on vSphere and running virtualization with VMware, and they’re running multi-cloud and Kubernetes with OpenShift and taking these two technologies and these platforms and combining them with Watson X is a powerhouse. And so the companies, rather than coming out and trying to dig in and VMware saying basically, “You’ve got to use Tanzu, you’ve got to use vSphere, you’ve got to do it our way.”

They basically doubled down on a partnership to build generative AI in their private AI with IBM, with IBM and Red Hat, and be very clear, Red Hat runs very autonomously from IBM for just this reason. So in the meeting I had with Matt Hicks, he was basically communicating a very high level of confidence that they’re winning at the line of multi-cloud, meaning that while VMware has its legacy and has its strength in the Cloud Foundation, right now, the partnership is Cloud Foundation, Red Hat, and now they’re partnering up on top of it to be able to deliver and enable customers to do it with Watson X.

Very positive overall sentiment on this one though, Pat, the feeling is that companies that need to deal with this sort of private and on-prem, that this is the, and it matches what you were saying earlier about what Rob was saying about being able to be the kind of on-prem for enterprise generative AI, while more and more companies are making it cloud only or cloud led, that was really positive.

Patrick Moorhead: Good analysis, Dan. And I view this as a maturation of things. Markets mature and thought patterns. Everything starts as a winner takes all. And that’s just not the way it ends up. None of the on-prem software folks were partnering with AWS and AWS didn’t want to partner with them. They didn’t think they needed them. And then years later, once growth starts hemming and customers are like, “Listen, I know what you want to do, but I’m not in on all that.” Right? You guys need to get together. This is what we want you to do. And that’s where I think the VMware OpenShift stuff is coming to a reality. And I think it’s good. It’s good for enterprises. I think it’ll be good for these companies. It does mean that they need to maintain and have some really solid APIs and handoffs between that.

But listen, VMware and Red Hat are two powerhouses out there and vital to enterprises, not only in on-prem, but in the public cloud and also the hybrid cloud. I do think Red Hat needs to do a better job communicating and marketing and getting their value out, because quite frankly, VMware, their value add is very straightforward. I get Red Hat as it’s integrated into IBM M and IBM’s AI solutions, but I don’t know if they pulled back on marketing or it’s just a completely different thing. But it needs help and it needs changes, and I think they need to do this. I’ll just leave it at that.

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.