Microsoft, VMware, and Dell officially launched a new partnership that shouldn't please Amazon (AMZN)


Satya Nadella, Michael Dell, Pat Gelsinger

  • What started out as a contentious situation between Microsoft and VMware has blossomed into a friendly, formal partnership.
  • The CEOs of the two long-time corporate rivals stood on stage with their mutual friend, Michael Dell, and announced a sweeping deal to bring VMware’s software to Microsoft’s cloud.
  • And it all happened after VMware cozied up with Microsoft’s rival, Amazon Web Services.
  • Visit Business Insider’s homepage for more stories.

It’s official: the new partnership that VMware and Microsoft that leaked in February has been formally announced, and there’s one competitor that shouldn’t be too happy about it: Amazon.

On Monday, Dell CEO Michael Dell, Microsoft CEO Satya Nadella, and VMware CEO Pat Gelsinger took the stage together at Dell’s customer conference in Las Vegas.

The trio told the audience that VMware was officially agreeing to bring its flagship software to the Microsoft Azure cloud. They were also agreeing to bring some of VMware’s other software to Microsoft’s cloud and make it work well with Microsoft’s competing products, also available on the cloud.

Read more: The most successful product Microsoft released since Satya Nadella became CEO just reached 100 million users

Specifically, the partnership will bring VMware’s popular virtualization software to Microsoft Azure. That’s software that lets devices securely run Windows apps from afar without installing Windows or the apps directly onto the a computer. The two also said they are looking into bringing VMware’s computer networking software, NSX — which competes with similar products form Cisco — to Azure, but didn’t make any kind of formal commitment on stage. 

Dell is throwing its configuration software into the deal, so companies can buy pre-configured Windows PCs from Dell that run virtual desktops hosted from Microsoft’s cloud, all managed by VMware software.

An ‘ouch’ for Amazon 

If there’s a loser in this deal, it would be Amazon.

AWS Andy Jassy, VMware Pat GelsingerThat’s because VMware and Amazon Web Services (AWS) are also major partners, a union announced in 2016 that has become a boon to both companies so far.

In a rare role reversal, Amazon is considered somewhat dependent on the VMware partnership to push into the biggest, growth area in the cloud market, known as  hybrid cloud.

That’s where companies keep some of their own apps, servers and private data centers for some needs, and use public cloud computing, like Microsoft Azure or AWS, for other needs. It’s big business, but it requires both parts of the puzzle to be tightly linked to each other.

Microsoft, especially, has thrived in the hybrid cloud market — it grew up in the era before there was a cloud, and now operates the popular Microsoft Azure cloud platform, making it relatively easy to help its millions of business customers make the transition. 

VMware, meanwhile, has half a billion customers using its data center software. By partnering up with VMware, Amazon gets to connect those data center customers to its own AWS, the largest public cloud. In so doing, AWS gets the hybrid tech and access to enterprise customers it needs to compete against one of Microsoft’s biggest strengths.

Read: A male Microsoft programmer who came from the military, not a university, describes how his career got tanked by the ‘brilliant jerks’ culture

From feud to buddies 

Microsoft and VMware have been bitter competitors for decades, but Microsoft wasn’t about to stand by while the AWS-VMware duo encroached on its most defensible position in the cloud wars. 

So, in late 2017, shortly after VMware’s cloud products became available on Amazon’s cloud, Microsoft started working with a VMware partner to bring VMware software to Azure — without the official consent of VMware itself. 

In a blog post at the time, VMware Senior Vice President Ajay Patel described Microsoft’s unofficial take as an “offering” that was “being developed independent of VMware,” and said that the company was talking to the partner behind it about the situation.

Satya Nadella, Michael DellPatel went on to write that VMware was already formally working with several cloud providers, namely AWS, and warned people to stay away from its software on clouds it has not approved, with emphasis ours: “You can look to VMware Cloud on AWS and cloud offerings from partners such as IBM, OVH, Rackspace, Virtustream, CenturyLink and as others come to market, that are properly validated and supported by VMware.”

A few weeks later, Microsoft’s corporate vice president of Azure Corey Sanders published his own blog post.

He implied Microsoft planned to bring VMware to its cloud, or at least its negotiating table, with emphasis again ours:  “We are facilitating discussions with VMware and the VCPP partners to ensure you have a great solution and a great support experience when we make this offering generally available next year.” Note that this was published in December 2017.

Michael Dell was in a perfect position to broker a deal. His company Dell Technologies owns the majority stake in VMware, has a vested interest in VMware. But he’s also been a close friend to Microsoft for years. Dell’s PC business has always depended on Microsoft Windows. Dell today supplies Windows servers and other hardware to many enterprise software clients.

Microsoft even loaned Dell $2 billion back when he took his company private in 2013.

And so all three CEOs joined up on stage today to announce VMware’s new services on Azure. 

Goes around comes around

If Microsoft is cutting in on Amazon’s plans, it’s unlikely that Amazon will garner much sympathy. 

Pat GelsingerAmazon never seems to hesitate to compete with anyone. It routinely launches its own services that compete with those who sell their wares on its cloud. 

Once VMware’s customers moved their apps to Amazon’s cloud, there’s nothing to stop Amazon from trying to get them to try its own home-grown technology.

In fact, in December, Amazon released an open source project called Firecracker, in what could be considered at least a partial competitor to VMware.

But the fact is that Amazon is so dominant in cloud, and Microsoft/VMware have so much history — not to mention legacy baggage with how they’ve treated their software customers — that if the partnership is a punch to Amazon, it will likely be more like a sting than a body blow.

SEE ALSO: Apple CEO Tim Cook says he made one simple change that helps him avoid becoming addicted to his iPhone

Join the conversation about this story »

NOW WATCH: The rise and fall of Donald Trump’s $365 million airline