Virtustream – the cloud for mission-critical enterprise apps

PAC recently attended a briefing with Virtustream, a very interesting company that  occupies a completely unique position within the cloud ecosystem.

Whereas the well-known hyperscale clouds have focused on a number of classic use cases  - test and dev, variable workloads, and generally less-critical applications -  Virtustream targets an almost diametrically opposite set of needs. 

The company specialises in providing cloud environments that are engineered for mission-critical business applications, and targeted at the Enterprise segment. Consequently the company’s customer base and activities are very, very Enterprise – think banks, national security organisations and some of the world’s largest businesses.  

The company has a well-deserved reputation for providing cloud environments for SAP implementations, and indeed acquisition by SAP was on the cards some years ago. That didn’t happen – the company was eventually snapped up by EMC and in due course became part of Dell Technologies – but SAP is still a cornerstone of Virtustream’s business, and even today around two thirds of the company’s revenues are associated with SAP and the broader SAP ecosystem. 

Nonetheless the Virtustream solution is not limited to SAP, and is technically capable of delivering a broad range of mission-critical applications. Today’s concentration on SAP appears to be partly due to Virtustream’s historic sales focus, and partly due to external commercial constraints, such as the cloud-unfriendly licencing fees that particularly impact Oracle adoption on non-Oracle clouds. 

Virtustream’s approach to cloud delivery differs in many ways from the common hyperscale models. Virtustream has rejected the most typical cloud proposition of “here is our range of cloud instances – feel free to configure, deploy and pay for whatever you think you need”. Instead Virtustream’s customers are charged according to their aggregate consumption of cloud resources used - measured out in terms of CPU, RAM, I/O and bandwidth. Conceptually this should overcome problems of over-provisioning, which still exist at cloud VM level just as they previously did at server level. Moreover the flex built into the resource accounting means that customers are protected against running out of resources, which is essential for the mission-critical applications this service is aimed at. 

The one big problem of this approach is one of market comprehension - this is very different to other clouds. Add to this a misleading name (the unit of cost is called a “MicroVM”, although it isn’t  a virtual machine, it’s an accounting increment) and it’s easy to imagine that this must be something of an albatross in Virtustream’s sales interactions. 

Virtustream is happy to diverge in many other ways from the hyperscalers, not least in the company’s choices of base infrastructure: while larger clouds today make extensive use of commodity hardware, Virtustream’s position within Dell Technologies allows it to make extensive use of enterprise-grade hardware from Dell and EMC. This high-cost high-reliability approach is very consistent with Virtustream’s focus on mission-critical solutions for Enterprise, and must help position their cloud offer as truly enterprise-grade to their target market.

Virtustream’s focus on the enterprise market for mission-critical applications has given them a lot of experience with the type and scale of work needed to move these workloads into cloud environments. Company representatives are quick to squash the idea that any application can be moved as-is into the cloud – in the words of their CTO, Deepak Patil: “Lift and shift is a myth - there always some refactoring in moving to the cloud”. The company claims that notwithstanding this need to tweak applications, their depth of experience means that they can generally complete the migration of a mission-critical production system within a month. This compares well with more typical (much longer) time scales that most enterprises experience, and underscores Virtustream’s confidence in the legacy application space. 

An area of significant growth for Virtustream is channel sales. Many organisations with a complex proposition such a Virtustream’s typically find selling with or through other organisations problematic. Often selling the right things (i.e. what can actually be delivered) is as challenging as closing the sale, since a deep understanding of what is real vs vapourware is often embedded within the tribal DNA of a sales organisation. This does not seem to be posing a problem to Virtustream, since the firm claims a 10-15x increase in channel pipeline in H1 2018.  While pipeline is admittedly not revenue, this is still a staggering uptick in the indirect sales funnel, driven largely through greater interaction within the Dell Technologies group. 

Overall the company presents a very compelling story: a complimentary capability that can co-exist happily (and profitably) alongside larger cloud providers, providing a highly credible offer for mission-critical enterprise applications, with solid sales channels through the broader Dell Technologies family. In fact the only off-note we heard from Virtustream were some indirect suggestions that they may in future engage in multicloud delivery themselves. 

In PAC’s opinion, this would be a step too far. Virtustream has created a niche that the company dominates, with a strong reputation, and little obvious direct competition. If the company steps into the multicloud management and delivery space, it will be competing with a much broader range of providers, and potentially some existing partners. PAC believes that Virtustream would do better to stick to what it excels at, and be content to be a niche component within the multicloud ecosystem, rather than a full-on multicloud provider in its own right.