In 2015, VMware’s End-User Computing business grew over 30% year-over-year, bringing the total annual bookings run rate to over $1.2 billion. India represents one of the top growth markets for VMware when it comes to End User Computing. With over 63,000 customers, including over 1,300 of Global 2,000, 9 of top 10 deals contained some component of End-User Computing. The company saw its strongest contribution coming in from the Asia-Pacific region with India being a key growth market.
In a detailed conversation, Sanjay Deshmukh, Vice President, End-User Computing, Asia Pacific & Japan, VMware, shares VMware’s mobile strategy, which has a huge focus on India, given the increasing adoption of enterprise mobility as a work norm. The company recently announced that it sold over a million licenses of its VMware AirWatch Mobile Device Management solution to enterprises in India for helping them manage the mobility needs of their workforce. Some notable wins in India include Air Works, Axis Bank, Fullerton, ICICI Bank, IDFC Bank, Mindtree, OYO Rooms, Wipro, and Zomato.
Some edited excerpts from the interview:
How have you seen VMware evolve with the trends?
VMware has innovation in its DNA. It continues to drive innovation in every single sector of the business including my business. Individual computing as an umbrella term at a very high level has got 2-3 kind of individual technologies within that. So, first is the desktop virtualization technology, which we offer under a brand called as Horizon. This is a traditional VDI opportunity for application virtualization. Our net new revenue that we add in terms of customers and licenses is much more than any other company. So, and this change that has happened in the last 2-3 years from being a relatively new entrant to a market leader is clearly what I would say is innovation. That is the number one reason that we are in this position. So, our innovation has happened both organically as well as inorganically. Organic means how I make this workload efficient on my datacenter infrastructure.
I will give you a classic example. We launched vSphere 6.0 and with that we were able to leverage a feature in our Horizon solution, we call it the just-in-time desktops. It is such a relevant feature to the customer, because it helps them improve the cost efficiencies of the implementation, as everything is provisioned just-in-time and you don’t need to keep everything ready for the users and so on and so forth.
What is the impact with respect to security?
The security paradigm also gets addressed with this feature. Let me give you an example on how the security impacts corporate site, which is a standard thing. Somebody somewhere will open an email and it will be email sent by some wrong sources and whatever and it will have some software code – it will get downloaded on the local machine and it will stay dormant. It will either ping or wake up after what weeks, months, years whatever and start spreading itself across the datacenter and start impacting the other assets. This is the standard modus operandi of any attack. We have seen that in many corporates. The beauty of this feature that I explained to you is that once that user logs out the session is destroyed, the desktop is destroyed. So, it doesn’t matter whatever that code that that person has downloaded however malicious that is. Because the desktop is destroyed there is no concept of the code sitting dormant there and waking up after few weeks to impact the other assets. So, then a lot of our customers don’t realize it – this is a feature which is a combination of Horizon, our desktop infrastructure technology and vSphere 6.0 the underlying hypervisor technology. Because we are able to spin out – so let’s say you are a user, you are trying to login to your office infrastructure- when you are trying to login, a VDI desktop will be created for you. You will not be assigned a dedicated desktop – it will be created for you.
So, let’s say a Windows 8 machine will be spun out. Your apps will be plugged into that desktop at runtime level. Your user environment settings that you have set, which means my background, my browser shortcuts, history, bookmarks, whatever that is, all those preferences, my printer settings, all those will be plugged in and then the desktop will be served to you. So, from a user standpoint you get a brand new desktop every time they connect. But what is new here is the fact that the desktop is going to get destroyed after you logout. And your apps will go back in the app stack; the user environment will go back and sit in the user environment study. The next time you logon it will be again assembled and served to you. So, it brings in a lot of cost efficiencies on the infrastructure side and it also helps you sell the security paradigm.
Will this be a standard feature of every VDI deployment?
This will be part of any standard VDI deployment, but the value of this is very high to anybody who is concerned about security, efficiency and cost effectiveness. So, yes companies in sectors such as financial services, IT services will appreciate the feature more, but having said that anybody who does a deployment of VDI using our architecture they will benefit from this. But yes, anybody who is considered about cost efficiencies and security will appreciate the feature more than others. So, the reason I gave this example is to drive home the point that these are the innovations that we did organically. Some of the other organic innovations are that we have an asset in storage virtualization. The primary problem with VDI deployment has been, even though the technology promise is very good, adoption, relatively speaking, has been slow in the past because of the cost issue. If I buy a physical desktop, I get it for 500 dollars or something in the range of 600-800 dollars. But if I have to setup a VDI infrastructure for the same set of users, the cost was higher in terms of capex.
How much more would it cost than a physical infrastructure?
It was in the range of 30 to 35% more than the physical. But in spite of that customers would invest in it, because of the security value proposition and the business case was always positive when you started adding the OPEX cost to it. Because the way you manage the VDI infrastructure, was very different than the way you manage a physical PC. So, the customers who were not able to justify to the finance organization that even if the CAPEX is 30% higher, I will eventually save 30% in the three years, the Finance didn’t accept that business case many a times.
For customers who use our Horizon solution in combination with our VSAN solution, it reduces the cost of storage by almost 40%. As a result of that, the efficiencies that you get because of the just-in-time desktop and other features what happens in the CAPEX cost of virtual desktop now becomes very close to the physical desktop. So, think about it you as a CIO and there is a department that comes to you and says that they have to refresh thousand machines and if they are able to provide them the same VDI infrastructure almost at the same CAPEX cost and 40% on the OPEX in three years’ time, it is a relatively easier business case.
What are the clear benefits of this approach, besides the costs?
It’s a straightforward business case and because of its security benefit and the mobility benefit, which means you can work from anywhere it becomes an added advantage. So, those are some of the examples of how we have done organic innovations of leveraging VSAN and vSphere. Today, we also have the combination of Horizon and NSX. As you know, NSX is our network virtualization solution. Now customers are looking at an improved level of security on virtual desktops with micro segmentation. So, when you combine the micro segmentation value of network virtualization and the Horizon solution, what you get is pure magic. I’ll give you a classic example. Companies in the IT services and the ITES sector, are trying to create a borderless ODC infrastructure and this Horizon plus NSX becomes the foundation of the borderless ODC infrastructure. We have done this deployment at some leading companies. Again, if you talk to the CIO he will share more insights with you on what benefits they have got. Compare the earlier infrastructure where you had an ODC infrastructure dedicated for every customer. If a customer like GE outsources a process, then the service provider has to procure 100 desktops for the GE project. If a Bank of America outsources the process, then 100 desktops will be required for Bank of America. These are Chinese walls between each of these ODC infrastructures. It creates so much of inefficiencies.
What is the maturity level in terms of the customers to accept the different physical network? If you look at the clauses earlier they are specifically saying that the physical network needs to be separate?
Very valid point. You are aware of the domain and hence you raise this concern. So, what that means is that there is a lot of effort required on our part and the IT servive provider’s part – I am taking Wipro’s example as a service provider here to educate their customers. The good news is that these customers are the Global 500s and the Fortune 500s and all that. They are already hearing this from us and from analyst so they don’t think of this as hey, what is this Indian IT company trying to do. They don’t look at it like that. They look at it like okay I recognize that these are the new technologies that are there in the market. Our service provider is trying to innovate using those technologies and offer me value. So, they are getting convinced.
But yes, you are right. The contracts, they are traditional, and are based on the old terminology that you talked about which is physical separation of network, people and everything else. Once we are able to prove to them on the technology front, we will be able to not only give them the same level of security, but more. Conceptually, If I’m a service provider and my cost of infrastructure was 100 dollars and if I’m doing this at 80 dollars now, and I pass on that 10 dollars to the customer, reduce the price to them and keep 10 dollars with me, my profit goes up and their cost goes down.
I will give you two areas where the service provider will see immense value. One is just the simple logic that instead of investing in multiple routers, multiple network infrastructure, multiple PCs and all of that, now you are having a common pool of infrastructure and you are giving the required isolation or security through micro segmentation and virtualization technology. So, that’s the obvious straightforward benefit.
Now whether it is a saving of 30-40-50% it depends on the infrastructure that the customer has and how many customers they are serving. The more ODC customers they have there will probably be more benefit. What if somebody had just one ODC customer then the benefits are different. So, that’s why I’m not able to quote a number, but these are the obvious benefits in the first place, which is infrastructure.
The second benefit is in terms of scale out. Imagine this – your outsourcing customer has a new project that comes up, they say ‘I want you to add 100 seats’. In this infrastructure, with this solution the service provider will be able to do it overnight. It’s all about an administrator provisioning everything from one console including the networking part of it. In the earlier world, they could do in terms of storage in the VDIs, but the network and other infrastructure had to follow. Whereas here, everything will be automated. Not just the VDI infrastructure which is one part of it, but everything right from apps to networking to the other infrastructure. So, that’s a second benefit in terms of I would say simply in terms of time to market or agility.
What is the opportunity from the VMware point of view?
The ODC model innovation has come from India. It was never done anywhere else. This model does not exist in other markets. But what we are doing is we are taking this template – I can say the solution template and trying to see if we can apply that to the financial services customers in Japan who are more paranoid of security than anybody else. And I think that is the most exciting part of I would say in my role here that I get to see what the good of one market is and apply that into the other market. So, yes in a way India is helping us be this innovative geography and build innovative use cases. In India, we can see these new deployments and new concepts and apply that in other markets. And this example that I shared with you is a classic example.
We have taken the model as an ODC template, taken out the ODC use case from that and we are trying to apply that in other sectors in different markets. So, that is a thing that has happened. Now another important area where India is trying to lead in innovation in the use cases here is the graphic use cases. So, if you look at India as a market there are 2-3 types of companies here – automobile companies, service providers for the automobile markets and the third is this generic category of IT service providers who have practices for this sector. These are the large three consumers segments. Now, between these three segments you have lots of not only automobile sub segments, but also manufacturing. You have a lot of users who are using the graphics application and traditionally they are using it on a desktop.
A graphics desktop – not on a regular one, but a workstation. Now, this has been the traditional way of using it. And why? Because the regular PC does not give the power that a graphic application needs only a workstation can give and this is the VGPU card and the memory and all of that stuff. Every customer using it whether it is a manufacturing a company trying to use it in a foreign design firm or automobile companies are the largest consumers of these solutions. They all recognize that this is a highly inefficient infrastructure in their entire organization, because the cost of the workstation is very high. The utilization of this infrastructure when you compare them between the groups of users is extremely low and that’s why it’s inefficient is what I meant. This is the classic example going back 15 years when we started having server virtualization conversation. You had a server for each application, utilization was low and hence the efficiency was not there. We said why don’t you virtualize it and then you will get the efficiency. So, graphics use case is another exciting one where we partner with end VDI. And this use case was not virtualized in the past. The primary reason was not that VDI technology wasn’t available – this VGPU technology which is used in the workstation – that was not virtualized. Today, what end VDI has done and what we have done on our vSphere infrastructure on the hypervisor we are able to leverage these innovations and virtualize this entire workload. So, this is another area where I will say, I will point out two markets India and Japan are trying to lead. We have automobile companies like Honda in Japan where their entire design center or rather I would say entire graphics user workload is virtualized on the VMware Horizon infrastructure. Similarly we are trying to do that work in India also. So, that’s some of the innovation.
So, it can be a virtual model everywhere?
This is limited to the imagination of the customers. For example, earlier access to talent was more in terms of where you have infrastructure and where you have your office and so on and so forth. And you really didn’t think about it as – you had boundaries and here it kind of dismantles all the boundaries. You can take that concept and apply it to rural BPO. You can apply it to healthcare in terms of consultation, and education.
So, I will give you an example of a hospital in Australia where the entire hospital infrastructure is virtualized. We have integrated our solution with the healthcare service provider’s application. So, what that means is that as a doctor I will have a badge, I get into the facility, I can go anywhere to any endpoint in the hospital. All I do is tap my badge so there is a reader which authenticates me and it brings up a session of my desktop wherever it was. I mean whatever place I have left it right and then I can access my records whether it is survey of X-rays or whatever they are. Give my feedback to the application and just log off. The doctor can be next to the patient or in the administration area or any other place.
Compared to other markets, how fast has India been in terms of other markets?
There are two reasons why India has achieved this faster than others. Because we have a billion subscribers. Getting to a million is not difficult if you look at the percentage of that. And second is that this is the nature of Indian companies. When they come across an innovative concept or a technology and it seems to be proven or acceptable their ability to latch on to it and adapt it is much faster than others.
India has always been like that in the last I would say two decades or so where every time whether it was manufacturing side, mobile or the IT side, we have adopted the technologies faster. And I said the momentum and excitement here is huge and what is interesting is that that is also driving the adoption of our Horizon technology.
So, the way I look at it is that we are in a sweet spot. I mean A) from a customer standpoint the relevance of this technology is that the portfolio of the technology that we have is the highest because of the business impact it has. B) The vision that we have and the platform that we have is unique because of the points I talked about of leverage of datacenter and cloud and mobile and network team and that is driving all the growth. So if you look at now, if I can just step back of our revenue results, like last year we declared for the first time the standalone numbers for our business units.
So the end user company today is a 1.2 billion dollar business unit within VMware globally. We are growing more than 30% year on year and this is at a backdrop where either companies are flat or negative growth and our revenue is growing 30%. If you look at our Q1 results the shareholders have recognized now and the investors have recognized that VMware is transitioning from being a hypervisor vSphere type company to a company that is selling a portfolio of solutions. So, our vSphere revenue is down to about 35% and the rest is all new solutions which is end user computing growing at more than 30%, NSX network virtualization, again a massive aggressive growth there and unique value proposition; VSAN growing at more than 200%. These are the three kind of – I would say three new engines which are driving the growth for VMware.
Do you see this as a similar opportunity to what you had in server virtualization a decade back?
Before I talk about how big an opportunity end user computing is and whether it is as big as vSphere or not, let me quickly comment on VSAN and NSX. In our view NSX could be potentially the next vSphere just because of the value it offers and because networking has not changed for the last 20 years.
If you look at the way people have built networks it has been the same, what has changed is the capacity and probably the throughputs and things like that, but the base infrastructure has been the same, the way the network has been designed and network virtualization. The VMware NSX solution changes that completely and that is exactly what our story was when we introduced vSphere. So NSX clearly is if I can say the next vSphere or bigger. VSAN, the world is going hyper converged.
I mean customers have realized that the way they have architected the datacenters they need to get again more efficiencies by using hyper convergent infrastructure for specific workloads like VDI and other applications or for some generic workloads also and VSAN again offers you that value proposition; we are seeing huge growth in adoption. The new release of VSAN that we did this year will take us to the mainstream category now. So, again that is a huge opportunity. So that is a quick comment on NSX and VSAN and how that can drive the growth for us. Coming back into EUC, the fundamental shift that is happening and this is probably four or six months I would say is that in the past you had standalone markets, VDI where the old world market leaders were Syntax, Microsoft and vendors like that and the new world leader is VMware. That is in VDI standalone. The second category is the EMM Enterprise Mobile Management. In Enterprise Mobile Management AirWatch has been a dominant leader for the last four, five years and the gap between us and the number two has widened a lot.
