Telstra and VMware: a missed opportunity?

Telstra’s announcement that is will expand its Australian cloud infrastructure services to data centres in Hong Kong, Singapore and the United Kingdom came hot on the heels of a decision by its most important software partner, VMware, to enter the Infrastructure-as-a-Service (IaaS) market directly.

Both of these announcements should be seen as a direct reaction to the rapid dominance of  hyperscale IaaS vendors such as Amazon Web Services and Microsoft Azure.

Traditionally VMware used local partners like Telstra to deliver IaaS, assuming their dominance in the on-premise virtualisation market would convert into leadership in the IaaS market.

VMware enjoyed early success, and for the past few years the narrative in enterprise IT has focused on its running battles with Microsoft in the hypervisor market.

But the real challenge to VMware today are the hyperscale cloud providers, companies that derive significant benefits from their massive scale.

VMware’s only choice has been to announce it will cannibalise their vCloud partners and enter the market directly, hoping not to be too late to the party.

I predict that unless VMware can establish itself as the #2 provider in IaaS, it will quickly become a legacy technology company, limited to a shrinking on-premise market.  

Should VMware fail to establish itself as the #2 in IaaS it will quickly become a legacy technology company, limited to a shrinking on-premised market.  

In this new IaaS marketplace, Telstra will be unable to compete.

Despite its size and balance sheet, it is a minnow compared to AWS and Azure.

Telstra’s IaaS adventure in foreign countries is likely to be an expensive and futile exercise, unless it establishes a partnership with VMware as their IaaS infrastructure provider in these markets.

Dr Kevin McIsaac is an IT infrastructure analyst at IBRS.