Vendors and Solutions Mentioned: VMware, CloudHealth Technologies, Cloudyn, Microsoft Azure Cloud Cost Management, Cloud Cruiser, HPE OneSphere. Nutanix Beam, Minjar, Botmetric
Key Stakeholders: Chief Financial Officers, Chief Information Officers, Chief Accounting Officers, Chief Procurement Officers, Cloud Computing Directors and Managers, IT Procurement Directors and Managers, IT Expense Directors and Managers
Key Takeaway: As Best-of-Breed vendors continue to emerge, new technologies are invented, existing services continue to evolve, vendors pursue new and innovative pricing and delivery models, cloud computing remains easy to procure, and IaaS doubles every three years as a spend category, cloud computing management will only increase in complexity and the need for Cloud Service Management will only increase. VMware has made a wise choice in buying into a rapidly growing market and now has greater opportunity to support and augment complex peak, decentralized, and hybrid IT environments.
About the Announcement
On August 27, 2018, VMware announced a definitive agreement to acquire CloudHealth Technologies, a Boston-based startup company focused on providing a cloud operations and expense management platform that supports enterprise accounts across Amazon Web Services, Microsoft Azure, and Google Cloud Platform.
VMware did not immediately announce the purchase amount for CloudHealth Technologies. However, Pitchbook had valued CloudHealth Technologies at approximately $300 million as of its Series D round last year. Amalgam Insights expects that the purchase price was at more than a 50% premium on this valuation, which would have made the acquisition tempting for a company was focused towards filing an IPO, growing rapidly, and had spoken about being an independent provider.
Why VMware’s Acquisition of CloudHealth Technologies Matters
This acquisition demonstrates the challenges of managing multi-cloud environments. The challenges of managing cost, usage patterns, operational performance and continuity, security, and governance for cloud Infrastructure as a Service and Platform as a Service have steadily increased as these cloud technologies have grown from niche IT technologies to standard and primary IT deployment options. IT organizations seek to develop multi-cloud and hybrid cloud environments that are optimized to bring the best aspects of rapid cloud instantiation, dedicated on-premises assets, new cutting-edge storage and workload management capabilities, and apples-to-apples comparisons of hybrid and multi-cloud environments.
However, as each cloud vendor has created its own portfolio of services, capabilities, transaction definitions, usage metrics, and terminology, the challenge of multi-cloud management in a vacuum requires cloud, data center, and infrastructure managers to learn a new cloud “language” of terms, technology, and metrics to optimize their IT environments.
VMware, as a cloud-neutral vendor working with the challenges of hybrid IT and cloud management, has an opportunity to be one of the key “manager of managers” in terms of being a control plane for a variety of IT infrastructure and data platforms. A number of startups have emerged to support the cost, usage, inventory, continuity, operations, security, and governance challenges that occur across clouds. Cloudyn was purchased by Microsoft and turned into Azure Cloud Cost Management. HPE acquired Cloud Cruiser, which became the foundation for HPE OneSphere. Nutanix acquired Minjar and Botmetric to create Nutanix Beam. And both Cloudability and Cloudcheckr remain as strong standalone solutions for cloud management.
CloudHealth Technologies As A Cloud Service Management Market Leader
In this deep market of cloud management solutions, CloudHealth Technologies stood out in its breadth of spend under management, claiming over $5 billion in spend as of the acquisition, as well as its strength in resource and operational management, including its support of Google Cloud Platform and container resources over the last 12 months. This combination of spend and operational management capabilities led to CloudHealth Technologies being named as a market leader or a noted vendor across a variety of analyst firms including Forrester, 451 Research, and Amalgam Insights where we’ve noted CloudHealth Technologies’ success both in prior Market Milestones and webinars profiling CloudHealth Technologies as one of Amalgam’s most highly recommended Cloud Service Management solutions.
In acquiring the independent market leader in Multi-Cloud Management, VMware is better positioned to support clients seeking to better manage complicated hybrid cloud environments. Amalgam Insights expects that once this acquisition closes, VMware will start using both CloudHealth Technology’s functional capabilities to quickly gain visibility to client cloud environments and to build deeper partnerships with CloudHealth Technology’s significant partner base.
What to Expect
Existing CloudHealth Technologies customers should expect status quo in the short term, meaning that current roadmap and support structures should remain consistent throughout the rest of the year. Amalgam Insights would expect some integration of VMware and CloudHealth Technologies sales and support staff to be formalized in 2019 to provide clients with greater access to the full portfolio of services and to help clients to further rationalize and optimize hybrid cloud environments with virtualization, containers, and relevant infrastructure.
VMware customers should expect to be introduced to CloudHealth Technologies as a solution to reduce Amazon Web Services, Microsoft Azure, Google Cloud Platform, and container costs throughout the rest of the year. For enterprises that have not conducted a formal cloud infrastructure spend management initiative, this represents an opportunity to reduce costs by an average of 25-30% at a price that will likely be cheaper than other third-party cloud service management or cloud cost management solutions. Amalgam Insights recommends that all VMware customers with significant public cloud spend take advantage of this, as CloudHealth Technologies’ current status as a market leader in multi-cloud management makes it a robust and unbiased solution to support the service and cost management across clouds and accounts.
Enterprises with current or intended cloud computing initiatives should expect VMware and CloudHealth Technologies offerings to start to come together in 2019 as VMware takes advantage of its current market leadership in virtualization combined with visibility into five billion dollars in cloud computing resources to find more innovative ways to optimize computing environments while improving governance, business continuity, and business flexibility.
And as a general note for the Cloud Service Management (CSM) and IaaS Vendor Management markets, CSM combined with some sort of hybrid, private, or dedicated infrastructure provides an interesting combination of management capabilities. Cloud Service Management solutions provide enterprises with the ability to manage IaaS across vendors. As Amazon, Microsoft, Google, and perhaps Oracle and IBM continue to compete on price and innovation, Cloud Service Management will allow enterprises to take advantage of arbitrage, cost optimization, and governance capabilities across vendors. When combined with additional infrastructure options, this potentially allows enterprises to fully manage hybrid infrastructure through a single “manager of managers,” solutions that provide service, inventory, billing, governance, and security visibility to the large mega-vendors of the tech world.
As Best-of-Breed vendors continue to emerge, new technologies are invented, existing services continue to evolve, vendors pursue new and innovative pricing and delivery models, cloud computing remains easy to procure, and IaaS doubles every three years as a spend category, cloud computing management will only increase in complexity and the need for Cloud Service Management will only increase. VMware has made a wise choice in buying into a rapidly growing market and now has greater opportunity to support and augment complex peak, decentralized, and hybrid IT environments.