Once viewed as the disruptive darling of the data center, VMware Inc. is sitting at a major crossroads as it finds itself under attack on multiple fronts. The company built its empire by cornering the market for hypervisor x86 virtualization, and many an enterprise was happy to pay handsomely to reap the benefits of premium performance and consolidation.

But times are changing, and VMware’s virtualization business is being squeezed by a raft of cloud computing, containerization and “as-a-service” offerings that threaten to diminish its importance in the data center. The company has known for some time that it needs to transform itself and go on the attack to meet these new challenges, but so far its approach has been to play defense.

Will VMworld 2015 provide a platform for VMware go on the offensive at last? Or will it be more of the same?

VMware’s massive transition

One thing that’s clear is how VMware has changed its game plan as it attempts to navigate its way through a massive transition, said Dave Vellante, Co-founder & co-CEO of SiliconANGLE Media, in theCUBE’s VMworld 2015 Preview. Vellante explained that VMware’s strategy has evolved since the days when it was all about the ecosystem and the leverage gained for every dollar spent on VMware licenses.

“We’re seeing VMware in the midst of a massive transition,” Vellante said. “You don’t hear VMware talking about (the ecosystem) any more. Instead we’ve seen a navigation through that ecosystem play, and now we see VMware grabbing networking and storage. With all this [EMC] Federation talk coming back together, maybe EMC is thinking of taking a more Oracle-like approach – so there’s going to be an interesting undercurrent to VMworld this year.”

Brian Gracely, Wikibon’s new cloud analyst, said the transition is causing a lot of confusion for VMware’s customers because it’s not clear who the company speaks to anymore. VMware’s problem, Gracely explained, is that it’s trying to speak to many different groups at once, including server and storage administrators, open-source devotees and developers.

“They’re talking about public cloud, they’re doing stuff around applications, they’re doing security and networking,” Gracely said. “It’s really hard to communicate with someone now about to focus on if when work with VMware. [CEO Pat] Gelsinger has got to figure that out; how does he communicate to people?”

One reason VMware’s position is confused is because it’s being attacked from many different angles at once, said Wikibon Analyst Stu Miniman. VMware is now fighting a “multi-front war” against platforms like Amazon Web Services, OpenStack and Docker, all of which are making steady gains on VMware’s choke hold on the data center.

In the case of OpenStack, Miniman explained that the ecosystem has built a value proposition based on getting people off of their VMware licenses in favor or open-source alternatives, and that’s put the company back on its heels. For example, he said, companies like IBM and Hewlett-Packard Co. both offer their own versions of OpenStack that are not fully compatible with VMware.

VMware is “not even close to being a leader in [the OpenStack] community, and it’s still struggling to find where it fits in,” Miniman said.

Lost in the clouds

Wikibon cloud analyst Brian Gracely

VMware is also struggling to compete in the public cloud, where its vCloud Air offering has come under fire for failing to establish a leadership position. VCloud Air accounted for just over six percent of revenues in the most recent quarter, and Wikibon’s Gracely was far from positive about its progress.

“The numbers for vCloud Air don’t even come close to what Amazon is doing in terms of growth or penetration,” Gracely said. “You don’t hear developers talk about working on vCloud Air, and that’s where Amazon’s winning.”

SiliconANGLE Founder John Furrier asked Gracely if VMware had any credibility at all in the developer community, and the analyst’s response was far from encouraging. He said VMware still looks unsure about whether to try to part of ecosystems like CloudFoundry, Docker and Kubernetes, or attempt to neutralize those technologies as competitors instead. VMware hasn’t really put its money where its mouth is when it comes to the cloud, Gracely said, flatly.

“The economics of being cloud-native are really expensive,” Gracely explained. “Guys like AWS are putting in one billion dollars per quarter to build out these huge clouds, but VMware isn’t doing anything near that.”

Time to innovate?

Looking ahead to VMworld, Gracely said VMware faces a stark choice between sticking with its defensive tactics or getting aggressive and trying to out-innovate its rivals.

Vellante was less pessimistic, saying that VMware was merely following a standard playbook: announce a year ahead of time, get the technology ready, buy whatever pieces are missing and then eventually get things right within the next couple of versions.

“In that regard, I expect to hear a lot about VSAN and a lot about NSX, which are the next two revenue drivers for VMware,” Vellante said. “It’s got to start delivering.”

For those who won’t be attending VMworld 2015, you can watch all of the action on theCUBE, SiliconANGLE’s live interview show. TheCUBE’s coverage begins August 31 and runs through Sepetember 2, broadcasting live on SiliconANGLE.tv. Alternatively, all interviews can be watched on-demand on SiliconANGLE’s YouTube Channel.

Image credit: WikiImages via Pixabay.com