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VMware

What VMware’s Latest Purchase Means for Its CEO

Barb Darrow
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Barb Darrow
Barb Darrow
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Barb Darrow
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Barb Darrow
Barb Darrow
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June 13, 2016, 10:37 AM ET
CA: Companies In Silicon Valley
A logo sign at the headquarters of VMware, Inc., in Palo Alto, California on December 6, 2014. Photo Credit: Kristoffer Tripplaar/ Sipa USA *** Please Use Credit from Credit Field ***Photograph by Kris Tripplaar/Sipa USA/AP
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VMware is buying Arkin Net, a partner in its push to become the leader in what it calls software-defined data centers. Terms of the deal were not disclosed.

The buy makes sense in that Arkin was co-founded three years ago by VMware veteran Shiv Agarwal as a way to give users of VMware’s NSX networking software a better look into how their network traffic is flowing both at the software level and at the underlying hardware layer. VMware plunged into this business with its $1.26 billion acquisition of Nicira four years ago.

The promise of software-defined data centers (SDDCs) is that companies can reconfigure network gear and re-route traffic on the fly, without having to manually tweak hardware settings—or buy boatloads of new routers and gear all the time. NSX’s promise is that it virtualizes networks just like some of the products already in VMware’s arsenal, allow companies to pack more applications on fewer servers and manage them via software.

For more, read: Dell Lays Out its Future Brain Trust

NSX software sits atop or “overlays” existing networking hardware—even older gear from many vendors—and promises to knit it together into one manageable system. That’s a tall order, but one that has found adherents in big companies trying to wring the most value out of their existing data center equipment. Thus, network virtualization lets data center managers re-program routers and switches as needed with software. Basically, the smarts of the system comes from the software, not the individual hardware components.

A top tech exec at a Fortune 100 healthcare provider was an early proponent of both NSX and Arkin. He likened Arkin’s technology to a GPS or Google (GOOG) Maps for his company’s complicated networking blueprints.

“Arkin visualizes what that path is between a pair of virtual machines and the networking fabric right now or five days ago,” noted this executive who requested anonymity because he is not authorized to speak about vendor relationships. “Arkin looks at the logic in the SDDC software and tells you the path of the software and also tells you a lot about the security situation. If there is a firewall between a few hosts, it will show you the policies of that firewall.”

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For large companies running a lot of different gear and supporting many different constituencies, this is a big deal.

“While we are an internal IT group, we have a lot of business unit customers with their own system administrators and they all need traffic data to do their jobs. Arkin wraps that up in a nice clean view and does a good job pointing out configuration errors,” he noted.

A source close to VMware suggested this deal is crucial for Pat Gelsinger’s legacy. Gelsinger, chief executive of VMware (VMW), has said that NSX will be the company’s next big revenue generator—as big as or bigger than ESX, a hypervisor (or a host machine) developed by VMware for deploying and managing virtual computers.

That’s key because the server virtualization market is largely saturated. There isn’t that much room to grow, and VMware is betting that many, many companies will want to modernize their data centers to make them more cloud-like so they can offer Amazon (AMZN) Web Services-like self-service applications to their internal users.

For more on EMC-Dell deal, watch:

Given that VMware and parent company EMC (EMC) are in the process of being acquired by Dell in a mammoth $67 billion deal, one might think another M&A deal would be on hold.

“This shows that Pat is still in charge. This is his baby,” the source said. That is of note because there has been considerable speculation that once the Dell deal is done, Gelsinger will leave the company.

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