In-Depth

The Top 10 Virtualization Stories of 2016

VMware gets a new owner, Citrix gets a new leader and the future gets even cloudier. It was a busy news year.

Virtualization had a banner year in 2016. Lots and lots of stuff happened, including the biggest IT merger in history, and a historic IPO. In fact, the argument could be made that the year was a top-5 all-timer in terms of news that affected the virtualization industry.

There were way more than 10 big news stories this year, but we've narrowed it down to what we feel are the 10 biggest, most important stories. One note: Because VMware Inc. is the dominant company in this space, the vast majority of stories will revolve around it. That will be the case most years, but in 2016 it was especially so.

1. VMware Officially Becomes Part of Dell
The announcement came, appropriately enough, during VMworld 2016: Final approval came through for the mother of all tech mergers. Dell Inc., one of the world's biggest PC makers, purchased EMC Corp., one of the world's biggest storage makers. The price tag was $67 billion, and was nearly a year from initial announcement to the signing of the papers.

That's a long time to wait, but given the scope of the deal, it wasn't surprising. Over the years, EMC became much more than just a storage company, buying companies like RSA Security, Pivotal, VCE and Virtustream. But the jewel in EMC's crown was VMware (there was some speculation, in fact, that VMware is what Dell really wanted all along).

Along the way, there were plenty of hurdles to get over. They included Dell getting the financing together to pay for the massive deal, and securing various government approvals. There was even a rumor going around last spring that VMware CEO Pat Gelsinger was planning on leaving the company after the merger (the rumor circulated for a few days before dying fairly quickly).

Initially, investors were bearish on the move, and VMware stock tanked badly. It's recovered much of its value in the ensuing year, but there are still open questions about how quickly the integration of such gigantic companies can be accomplished. Another question: How will its stock ultimately shape up, given that its new corporate parent is a private company?

The biggest question of all -- at least from VMware's point of view, now that the deal is in the books -- is whether Dell maintains the same hands-off attitude toward VMware that EMC did (which is often cited as a key reason that VMware has done so well since its acquisition by EMC). Dell CEO Michael Dell was asked that question directly during a press conference at VMworld, and reiterated that he wouldn't interfere with VMware operations.

In fact, during a press conference at VMworld 2016, Dell said that there had already been a conflict between a partnership VMware wanted to pursue, and the fact that Dell considers the partner company a main rival. In the end, Dell let VMware make the deal with the competitor.

That fits with all indications as of the time of this writing; it appears that VMware is still operating independently, without interference from Dell in its day-to-day operations.

2. Kirill Tatarinov Is Named New Citrix CEO
This may not have made huge waves in the virtualization world at the time, but its long-term effect may be larger than any other on this list. Kirill Tatarinov was named president and CEO on Jan. 20, 2016, and took over Jan. 25. He replaced Interim CEO Robert Calderoni, who replaced Citrix Systems Inc. founder Mark Templeton in July 2015. Templeton helmed Citrix for 14 years.

Tatarinov took over at a crucial time for Citrix. The company, many felt, had ventured too far from its roots, and needed to focus on what it did best and most profitably -- use virtualization to drive remote computing. Citrix divested itself of, among other things, its GoTo line of virtual conferencing applications, and its cloud management products, CloudPlatform and CloudPortal Business Manager.

The changes stem from mid-2015, when Citrix gave activist investor Elliott Management Corp. a seat on its board. Elliott Management had been urging Citrix to spin off its non-core businesses to improve its bottom line. Citrix seems to have heeded Elliott Management's advice.

Tatarinov came to Citrix from Microsoft, where he'd been for 13 years, including his most recent stint as executive VP of the Business Solutions Division. He led that division's transformation to the cloud. Prior to Microsoft, Tatarinov served at CTO at BMC.

In his short time at the helm, Tatarinov has worked hard to reestablish closeness with Microsoft, and taken sharp aim at main competitor VMware in the virtual desktop infrastructure (VDI) and mobile device management areas. Whether all these changes will turn the company around, only time will tell.

3. Nutanix Has an IPO
A hyper-convergence vendor having an IPO? It happened in 2016, and it's a strong indicator of the meteoric rise of that part of the industry, and cloud computing in general.

Hyper-converged appliances combine storage, compute and networking in a single device, and are undergirding much of the exploding cloud computing infrastructure. Nutanix has long been considered one of the leading companies in this arena, and its well-received IPO confirmed that perception.

The past year hasn't been a good one for tech company IPOs in general: At the time of Nutanix's offering, there had only been 14 tech IPOs in 2016. It goes back even further than that, however; as the Web site Motley Fool wrote (bit.ly/2fe1NxG), "Prior to Nutanix's IPO, there had been a drought of tech IPOs over the past 18 months or so. Nutanix had even delayed its IPO by nine months since market conditions did not appear receptive. "

Conditions obviously improved, as shares of Nutanix closed 130 percent higher on its initial day of trading. MarketWatch (on.mktw.net/2fSje8o) called it "… the best first-day stock pop for a tech company since Castlight Health Inc. gained 149% in 2014 and the largest overall since Seres Therapeutics gained 186% in June 2015."

Although Nutanix's share price dropped some in the days following the IPO, it's mostly done well since then. Shares were originally offered at $16, and sat at just more than $31 at the time of this writing.

Nutanix is in a space with heavy competition, and its continuing strong performance bodes well for the future of hyper-convergence.

4. VMware Execs Race for the Door
This may or may not be related to the Dell acquisition, but at the very least, the timing was suspicious. The Dell purchase was announced in October 2015. Starting immediately in 2016, a slew of VMware executives announced they were moving on.

And they weren't mid-level managers, but high-powered leaders. It began with CFO/COO Jonathan Chadwick, who left in January and was replaced by EMC CFO Zane Rowe.

The next month it was Senior VP Martin Casado, who developed the software-defined networking (SDN) technology that eventually became NSX, one of VMware's most important products. Casado left to join venture capital firm Andreessen Horowitz as a general partner.

Literally the week after Casado's departure was announced came perhaps the biggest blow of all: COO Carl Eschenbach, the No. 2 man at VMware. Like Casado, Eschenbach left for a VC. He's now a partner at Sequoia Capital. He wasn't replaced by one, single executive; his duties were divided among four others. He'd been with VMware since 2002.

That's a lot of leadership to lose. Even though the executive exodus has slowed since then, losing so much extremely high-level experience can't help but have an impact on a company.

5. VMware Partners with AWS
VMware originally hoped its cloud platform, vCloud Air, would compete with the big dogs like Amazon Web Services (AWS) and Microsoft Azure. To put it politely, that didn't happen. While vCloud Air saw some success as an on-premises and hybrid cloud solution, it made virtually no dent in the public cloud space.

In the spirit of "if you can't beat 'em, join 'em," in October 2016 VMware joined forces with its former cloud nemesis when it announced "VMware Cloud on AWS." VMware products, including vSAN and NSX, will run on the AWS cloud. The service will be optimized to run on dedicated, bare-metal AWS infrastructure built specifically for the service.

The new partnership means that AWS will be VMware's primary public cloud infrastructure partner, and VMware will be AWS's primary private cloud partner, AWS CEO Andy Jassy said at the time of the announcement. The idea is that VMware Cloud on AWS will relieve both companies' customers from the need to choose between the two.

"Our customers faced a binary decision," Jassy said. "Either I use the VMware software and it's hard to actually use AWS for public cloud, or I use AWS and public cloud and I have to leave behind VMware software. Understandably, they didn't like that choice."

IDC analyst Al Hilwa sees the partnership as a "win-win" for both companies' customers. "It enables customers to run their existing applications using the two companies' products and services," he told Virtualization Review at the time. "I think that's what a lot of VMware customers are asking for, in terms of moving workloads in the cloud, but making as few changes as possible to their applications."

6. IBM and VMware Partner in the Cloud
AWS wasn't the only cloud partnership VMware entered into. Just six weeks earlier, at VMworld 2016, VMware announced a similar agreement with IBM. Through it, customers can extend their VMware workloads into the IBM cloud.

Although less impactful, given that the IBM cloud presence is considerably smaller than that of AWS, it still sent rumbles through the industry. At the time of the Aug. 29 announcement, more than 500 mutual clients had begun moving their VMware environments to IBM Cloud. They included such heavy hitters as Marriott International, Clarient Global and Monitise.

Moving on-premises workloads to the cloud without a major infrastructure overhaul is the goal. To reach it, IBM said it's training more than 4,000 service professionals to provide clients with the expertise to extend VMware environments to its cloud.

The news wasn't unexpected in this case. The original partnership was announced in February 2016 at IBM's annual cloud and mobile technology conference in Las Vegas, Nevada. Robert LeBlanc, senior vice president of IBM Cloud, told CIO Journal at the time that 80 percent of enterprise clients are looking for this kind of hybrid cloud strategy. "We're moving to the next phase of the cloud. And this is going to accelerate that shift."

7. VMworld 2016 Cloud Announcements
These cloud partnerships wouldn't be possible without the VMware infrastructure, which came in the form of two major cloud initiatives unveiled at VMworld 2016 in August/September: Cross-Cloud Architecture and Cloud Foundation. Cloud Foundation is VMware's Infrastructure-as-a-Service (IaaS) piece, while Cross-Cloud Architecture helps migrate and manage all the moving parts, most especially the virtual machines (VMs) that house the workloads.

Cross-Cloud Architecture, as explained by VMware CTO (and Virtualization Review columnist) Chris Wolf, uses a "selective single pane" of glass management, making it slightly different than the classic "single pane" of glass.

"That selective single pane of glass," he blogged on VMware's news site, Radius (bit.ly/2eGaIvC), "… will centralize the key functions required to successfully operate enterprise IT across multiple clouds, including:

  • An SLA/Availability dashboard
  • Policy-based placement and optimization
  • UI and API-driven cloud service broker
  • Automated discovery
  • Centralized multi-cloud cost accounting
  • Workload migration"

Cloud Foundation supplies the underlying plumbing. The main pieces are the vSphere hypervisor, vSAN software-defined storage (SDS) and NSX SDN. Those three components make up VMware's larger vision of the software-defined datacenter (SDDC).

It's a big bet -- and huge undertaking -- by VMware. But the company realized that it needed to be a major player in the cloud computing world, and with earlier efforts sputtering, the partnership angle may be the direction it's been seeking for years.

8. VMware Lays off 800 Employees
Earnings reports are usually pretty dull affairs. Not so for the VMware report of Jan. 26, 2016. In that one, two significant things were learned: No. 1, that CFO/COO Jonathan Chadwick had resigned (see item No. 4). The second major news to come out was that VMware was laying off 800 employees.

There was much speculation at the time that the layoffs, like the executive departures, were related to the Dell/EMC announcement.

Of course, company officials would never confirm something like that, but the timing was again suspicious.

"We are restructuring approximately 800 jobs over the course of the first half of 2016 and are reinvesting the associated savings in field, technical and support resources associated with our growth products," Chadwick said during the earnings call in explaining the reason behind the layoffs. The cuts represented just less than 5 percent of VMware's total workforce at the time.

9. vSphere 6.5 Is Released
vSphere 6.5, the latest version of VMware's flagship hypervisor, was announced at VMworld Europe 2016 in Barcelona. That surprised some, who expected it to be unveiled at the U.S. show in Las Vegas.

vSphere 6.5 officially hit the streets on Nov. 15, along with a bunch of related products, including vSAN 6.5, vRealize Log Insight 4 and vRealize Operations (VROps) 6.4. But the star of the show is vSphere 6.5, the key piece of infrastructure underlying datacenters worldwide.

One of the new technologies featured in vSphere 6.5 is vSphere Predictive DRS. "DRS" stands for "Distributed Resource Scheduler," and has been part of vSphere for a long time. Predictive DRS takes it a step further, by integrating with VROps for better planning. VMware Chief Technologist for Storage & Availability Duncan Epping gave an example of what Predictive DRS can do (bit.ly/2fWoPZV):

"You can imagine a VM currently using 4GB of memory (demand), however, every day around the same time a SQL Job runs, which makes the memory demand spike up to 8GB. This data is available through VROps now and as such when making placement/balancing recommendations this predicted resource spike can now be taken into consideration."

Other major upgrades include the vCenter Server Appliance (VCSA), which is deployed as a VM and uses Linux as the OS. With vSphere 6.5, VCSA becomes the official default method for deploying a vCenter Server. In addition, the new vSphere Client, based on HTML5, rather than outmoded and insecure Flash, was released.

10. Windows Server 2016 Hits the Streets
Microsoft is a strong second to VMware in the virtualization market; consider that Hyper-V sits side-by-side with vSphere in many datacenters, and Azure is the No. 2 public cloud platform, behind only AWS, and it's clear that when a new version of Windows Server is released, it's big.

Windows Server 2016 certainly fits that description. The final version came out Oct. 12, and the number of virtualization-related upgrades is significant. For instance, it moves gently into some hyper-convergence areas to compete more directly with VMware with Storage Spaces Direct (S2D). S2D uses internal storage in nodes to create Storage Spaces volumes, and challenges vSAN. Another: there's a new SDN stack, based on technologies born in Azure such as the Network Controller, Software Load Balancer (SLB), Network Function Virtualization (NFV) and RAS Gateway for SDN. While these are still immature and aren't yet ready to overtake VMware's SDDC, it gives Azure clients another option.

Windows Server 2016 also dives deep into containers, another burgeoning area for VMware. Hyper-V containers make their debut; each container runs in a lightweight, separate VM. They still boot very quickly, but provide the security isolation of a full VM.

That's only a taste of the virtualization goodness offered in Windows Server 2016; check out the September issue of Virtualization Review for a more complete account.

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