VMware in talks to buy Novell (or a part of it): implications

Posted by virtualization.info Staff   |   Friday, September 17th, 2010   |  

The rumors of a two-parts deal reached by Novell to sell its assets continues to be the top discussion of the week.
Apparently, the deal will be finalized within 3-4 weeks. Most analysts suggest that Novell’s strategic buyers may be VMware, Oracle, Red Hat and CA.

A new article published yesterday by the Wall Street Journal confirms that VMware is indeed interested in the SUSE Linux Enterprise Server (SLES) business unit:

Novell Inc. is in advanced talks with at least two buyers, including VMware Inc., to sell the software company in separate pieces, people familiar with the matter said.

Gartner Vice President of Research Chris Wolf weighs in, suggesting why the SUSE acquisition would make sense for VMware:

JeOS wasn’t seeing wide acceptance in the enterprise. Many of our clients with strict OS certification and support policies were only comfortable supporting specific Linux distros (e.g., SUSE and RHEL) within their organization. For some special purpose VM appliances, JeOS had success. However, for many use cases JeOS was not acceptable due to factors such as integration with operational software (e.g., security and backup).

Three of VMware’s major competitors – Microsoft, Oracle, and Red Hat – are offering a hypervisor as part of a vertical stack that also includes their own supported OS. VMware is at the mercy of OS vendors and it’s understandable that its competitors would optimize their own OSs to work best with their hypervisor offerings.

VMware’s Open PaaS strategy is designed to give organizations the option to deploy Java applications to a variety of cloud providers as well as to internal infrastructure. When you deploy an application internally, it has to be on an OS accepted and supported by the IT organization. JeOS wasn’t a sure bet, so VMware needed more. The logical answer is SUSE.

VMware already can achieve most of this with the OEM agreement just signed with Novell. But problems arise if the SLES assets go to an uncomfortable partner, like Oracle or Red Hat for example. 
Rather than being trapped in an agreement with a competing vendor (both companies above offer a fully featured virtual infrastructure), VMware may prefer to buy SLES. The alternative for the vendor would be to create its own Linux distribution, which has a lot of downsides.

Novell was already for sale when the OEM agreement was signed, and this means that the virtualization vendor already considered the scenario above. Maybe the announcement of the deal was just a way to test the customers and partners reactions before proceeding with a full acquisition.

The acquisition of SLES won’t imply that VMware instantly becomes an OS vendor, interested in a direct competition with Red Hat. Wolf clarified this pretty well:

Acquiring SUSE Linux is not about what VMware is doing over the next 2-5 years. They’ll continue to do very well running Windows OSs as VMs. However, over the next 5-10 years, the stakes will change. Microsoft will work to more closely integrate the Windows OS and its Hyper-V hypervisor.  Paul Maritz knows that as a platform for Windows apps in a market where Microsoft is a direct competitor, VMware will eventually succumb to Microsoft.

There are two key points to highlight here: the OS business is the one that the VMware’s CEO knows better, but his company has no credibility as an OS vendor and not a strong credibility in the open source space.
At the moment, for VMware, the SLES asset makes sense primarily as another component of the end-to-end software stack that it’s trying to build.

Anyway, the most important implication of the SLES acquisition is another: customers being equipped with a full software stack will probably demand for more. 
With the ownership of an OS, VMware would control all layers but the hardware one. If Cisco (and Egenera) are right, and the sales figures of UCS seem to confirm this, we are slowly moving toward a phase where fabric computing (or unified computing as the industry calls it today) is trendy again. In a world where having to deal with a single vendor for support and licensing is more important than a potential technology lock-in, there’s no reason for customers to have one management solution (from BMC, CA, HP or IBM) to control the physical layer and one (from VMware) to control everything else.

Eventually, the market will offer the conditions for VMware to extend its domain to the physical layer, as virtualization.info already suggested more than one year ago.
A close look at the company’s portfolio will reveal that many of its products can already monitor and manage physical assets, despite VMware is artificially limit that management capabilities to the virtual layer. Even vSphere has some raw capabilities to monitor the ESX servers. 
The missing key component, a Configuration Management Database (CMDB), was kindly provided by the parent company EMC without much clamor: Service Manager, already rebranded and available for purchase, albeit still disconnected from the rest of the offering.

In other words, the acquisition of SLES should be more concerning for the big four than for Red Hat, which instead would become an instant acquisition target.

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