Get Your vTax Refund Early!  Avoid the vTax! Part 2.

Author: Amitabh Sinha

Publish on: Apr 7, 2016 6:00:00 AM

How to avoid the vTax

In the first article of this series, 'VMware Wants to Increase Your vTax!', we explained VMware's response to the weakness in its server virtualization business. Basically, it's instituting one of the largest vTax increases ever to its end-user computing and data center portfolios. From a customer standpoint, this isn't great news for a variety of reasons. Number one, paying more is always a bummer. Then, there's the intangible cost. Getting locked in to a vendor that doesn't offer a potentially best-of-breed product outside of its vSphere line isn't necessarily the best move.

How to Avoid the vTax

Nowadays there are some great alternatives to VMware. Right now's the perfect time to take a step back and reconsider whether you should pay the vTax or choose another option.

Two threats to VMware: The cloud and converged infrastructure

For VMware, the end-user computing business is growing at a rapid pace, while the traditional business has slowed down significantly. Currently, the vTax’s largest component – server virtualization – is under threat from two different sources: (1) the cloud, and (2) converged infrastructure.

  1. Cloud services from Amazon Web Services (AWS) and Microsoft Azure – Instead of buying and running complex on-premises data center infrastructure, companies are increasingly choosing to run their applications on Amazon AWS and Microsoft Azure. As a result, cloud services have made a significant dent in the traditional server virtualization business.
  • Converged infrastructure – This new architecture converges three layers of the data center – servers, storage, and networks – into converged appliances. The resulting architecture dramatically simplifies data center infrastructure. Over time it reduces the need for expensive server virtualization infrastructure like VMware. Hyper-converged infrastructure vendors such as Nutanix, Simplivity, Atlantis Computing, and others threaten the vTax associated with server virtualization.

The table below summarizes what the data center spend will look like in 2019. A large chunk of the revenue will move from traditional servers and storage to converged and hyper-converged infrastructure. This shift affects the IT spend on server virtualization because companies buying converged infrastructure have new choices in their server virtualization solution (Hyper-V, KVM, OpenStack, AzureStack, and others).

Market size by tech vTaxvtax4.png

Figure 3. With the core vSphere business slowing, the new vTax looks to tap into IT’s growing interest in converged and hyper-converged solutions.

Weighing the options

Should you go along with the VMware strategy or consider an alternative? My short answer is “it depends.” Every business has different needs, so consider how the VMware strategy works for your business.

To get the most of the increased vTax, IT needs to install the whole VMware data center stack from hardware to the management layer. The advantage of a single vendor stack is that there is only a single vendor to manage. However, IT does relinquish some benefits such as flexibility to fine-tune IT operations to match business needs. Axiomatically, there is no one size fits all technology for every company’s business needs.

So what’s the alternative?


Figure 4. Consider how technologies enable IT to solve the business needs.

The alternative is to choose the best of breed technology that matches business requirements. If a business is subject to rapidly changing market conditions, IT has to prioritize agility and flexibility. As new technology is introduced at an ever-increasing rate, IT can fine tune operations to deliver the best service to end-users and simplify operations, reduce cost, and increase performance. So by finding the right mix of technology, including VMware components like vSphere, IT maintains its flexibility to drive business growth and reduce cost of operations.

You don’t have to pay - avoid the vTax

The vTax increase is part of VMware’s strategy to keep itself relevant. The market is facing a seismic shift towards cloud and converged/hyper-converged infrastructure, which is being led by numerous companies such as Microsoft, Amazon, Nutanix, HP Enterprise, and Atlantis Computing. By owning the whole data center stack, VMware can deliver a consistent single vendor experience. However, that comes at the expense of locking IT into a solution for 3-5 years. During that period IT is limited in its ability to reduce costs and fine-tune its operations with new best of breed technologies that deliver the best service to end-users. When choosing whether to pay the increased vTax, consider which technologies enable your IT department to best solve your business needs. 

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