EMC Takes Over VCE Converged Systems Biz
EMC and Cisco Systems have decided that their VCE joint venture for converged infrastructure would become a business unit of the storage company by the end of the year.
The partners said the EMC's "controlling interest" in VCE is expected to be completed by the end if this quarter. Cisco and EMC subsidiary VMware, the other VCE founder, will remain "strategic partners" and Cisco will retain an approximately 10 percent equity stake in VCE. Intel also was an early investor in VCE.
The deal makes EMC a server seller in its own right as more cloud providers embrace a converged infrastructure model for speeding the deployment of hybrid clouds. (Although EMC is not making its own gear, and probably will not.) The move also provides the storage specialist with a separate revenue stream from server sales as it comes under pressure from shareholders to spin off VMware.
EMC said VCE's mission would expand to simplify cloud deployments by offering converged infrastructure centered on its Vblock family that incorporates compute, storage and networking technologies from the three partners.
"VCE's size, scale and market reach now requires a more traditional business structure," EMC chairman Joe Tucci said in a statement announcing the deal. "Our commitment to increased investment will enable VCE to significantly expand the scale and scope of its solutions, helping customers take better advantage of hybrid cloud and next-generation IT opportunities."
EMC also said Praveen Akkiraju would retain his position as CEO of VCE. As an EMC business unit, the new parent company said in a statement, "VCE will be an integration point for technologies from across the company."
Added Akkiraju added in a blog post: "Now that VCE is a $2 billion company looking to expand beyond platforms to deliver hybrid cloud solutions, it’s critical to evolve to a structure that supports our broader mission from the technology and financial perspectives."
VCE rivals moved quickly to downplay its new status. "While VCE has produced strong revenue for Cisco and EMC over the past couple of years, the market is rapidly moving toward hyperconverged products," asserted Howard Ting, senior vice president of marketing and products at Nutanix, one of the hyperconverged upstarts that is challenging both VCE, EMC, and VMware at the same time. "Customers are increasingly seeking more deeply integrated converged infrastructure solutions that are vastly simpler to deploy and manage."
Nutanix claims to hold the upper hand in head-to-head competition with VCE, Ting claimed. VMware launched its VSAN virtual storage area networks late last year specifically to challenge the hyperconverged upstarts like Nutanix, and has fought back with new EVO:RAIL hyperconverged systems based on VSAN with a number of hardware partners.
According to market watcher IDC, the booming converged cloud infrastructure appears is ripe for greater competition as spending grows at an annual rate of 32.8 percent. IDC forecasts that the converged cloud infrastructure market could reach $14.37 billion by 2017.
The bullish forecasts have prompted other partners like Microsoft and Dell to embrace the converged infrastructure model as a way to expand their cloud business.
As we have previously reported, the VCE unit surpassed $1.8 billion in annualized sales for Vblock products and services as of the end of its third fiscal quarter, and is still growing at a stunning 50 percent rate. VCE has around 700 customers and has shipped north of 2,000 systems to date (that is systems, not nodes), and with the average selling price of a system being $1.2 million. The partnership still plans on peddling Cisco's Unified Computing System rack and blade servers, but now there is the possibility that EMC will open VCE up to other hardware now that it has the controlling stake.