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How IT silos are affecting VMware NSX licensing and adoption

NSX adoption has expanded rapidly over the last year, but the product still faces challenges and pricing complaints.

VMware introduced NSX at VMworld 2014 after acquiring the technology from Nicira. The tide has since changed for VMware's core server virtualization business, with an expected decline in vSphere revenue in coming years. Now, VMware will need to rely on growing NSX licensing revenues to pick up the slack. And, grow it has. NSX bookings tripled from 2014 to 2015, and the product now has 1,200 paying customers. Organizations using the software in production increased fivefold over the same period.

Even so, the product faces plenty of challenges -- not the least of which is the traditional siloed IT structure found in many organizations. VMware is a well-known and respected name among server administrators, but it must win over a new audience of network and security professionals.

In the first section of this two-part Q&A, spoke with Guido Appenzeller, chief technology strategy officer for the Networking & Security Business Unit at VMware, about NSX licensing and adoption.

Within a business, who is pushing for NSX and who is driving it once it's installed?

Guido Appenzeller: I think we naturally start with the virtual admin or server organization, because we have the best contacts there. That being said, for any substantial NSX deployments, you have to get everyone on board. That's what makes this, from our perspective, quite complicated. You have to go to the network folks, the compute folks and the security folks. You need to get them all in a room, and they all need to agree this is a reasonably good idea.

As far as the people who drive NSX once it's in the business, sometimes it's the server folks and sometimes it's the networking folks.

What really is happening is that the way enterprises are organizing their IT teams is starting to change. Enterprises used to have clear silos, but that's now moving more towards a cloud type organization.

To give an example, one of the big New York banks is building their next-generation cloud, and they just have cloud teams. They now have different VPs for different clouds, but they no longer have a network team that goes across clouds.

The way the purchase order works today is you now write the purchase order for servers, storage and networking together. You may be building an entire Hadoop cloud, which is different from your production cloud, which is different from your test/dev cloud.

More on the future of NSX

Read part two of this Q&A to learn about an NSX technology preview and how VMware plans to grow its network virtualization software to span the hybrid cloud. 

So, if buy-in and control is split among different groups, whose budget is paying for NSX licensing?

Appenzeller: We did a study that looked at, where is this coming from? The virtualization budget, the networking budget, the cloud budget or is it the security budget? The answer is yes. All of these account for substantial sources.

What this means to me is that we are in a transition. Long term, it doesn't make sense for one product to come out of four different budgets. The way our budgeting is done in enterprises is changing as well.

One of the criticisms of NSX is that it's too expensive. Has there been thought to offering tiered NSX licensing versions -- such as standard, enterprise and enterprise plus -- like VMware does with vSphere?

Appenzeller: I've heard that before. But we're looking at our sales numbers, and they seem to purport that our established NSX licensing isn't that far off. If your product grows by 100% year-over-year, it can't be that expensive. In the future, I could certainly see us doing something like that. Right now we still have only one SKU.

So far, use cases and pricing for NSX have been aimed at large enterprises. Do you have a sales pitch to offer small and midsize businesses?

Appenzeller: Certainly, I think we could do better. This is something we're actively thinking about. There are two questions here: How far down the market is NSX an attractive product? I think it can go a lot farther down than it does now. The second question is: How far down the line do you need to go before a business runs almost entirely on the public cloud? For the true "S" in the SMB [small and medium-sized business], I'm not sure they'll have a data center or run a hypervisor in the future. If they do, they would probably consume it more or less as a service. If you're a 20 or 50 person organization, I don't think you'll have an on-premises data center in the future.

VMware recently announced some job cuts, but executives also said they were reinvesting in NSX. Are you adding more employees to develop, support and sell NSX?

Appenzeller: The short answer, I think, is yes. The Networking & Security Business Unit, we are growing, and you can see that if you look at our job openings.

I've spent all my life at startups, and this is the fastest growing organization that I've ever seen, in terms of any metric -- amount of revenue, number of people and what we have to do.

Currently, there are two versions of NSX: NSX-V for vSphere and NSX-MH, which is compatible with multiple hypervisors. Are you still actively developing NSX-MH?

Appenzeller: This distinction between the two versions is something we're looking at as temporary. Long term, it doesn't make sense whatsoever to have two versions of NSX. In the future I don't think it'll be an issue. Expect, at some point, we will have one version.

In the second part of this Q&A, we address the future of NSX, including integration of public clouds, such as Amazon Web Services.

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