Dec
30
2019
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VMware completes $2.7 billion Pivotal acquisition

VMware is closing the year with a significant new component in its arsenal. Today it announced it has closed the $2.7 billion Pivotal acquisition it originally announced in August.

The acquisition gives VMware another component in its march to transform from a pure virtual machine company into a cloud native vendor that can manage infrastructure wherever it lives. It fits alongside other recent deals like buying Heptio and Bitnami, two other deals that closed this year.

They hope this all fits neatly into VMware Tanzu, which is designed to bring Kubernetes containers and VMware virtual machines together in a single management platform.

“VMware Tanzu is built upon our recognized infrastructure products and further expanded with the technologies that Pivotal, Heptio, Bitnami and many other VMware teams bring to this new portfolio of products and services,” Ray O’Farrell, executive vice president and general manager of the Modern Application Platforms Business Unit at VMware, wrote in a blog post announcing the deal had closed.

Craig McLuckie, who came over in the Heptio deal and is now VP of R&D at VMware, told TechCrunch in November at KubeCon that while the deal hadn’t closed at that point, he saw a future where Pivotal could help at a professional services level, as well.

“In the future when Pivotal is a part of this story, they won’t be just delivering technology, but also deep expertise to support application transformation initiatives,” he said.

Up until the closing, the company had been publicly traded on the New York Stock Exchange, but as of today, Pivotal becomes a wholly owned subsidiary of VMware. It’s important to note that this transaction didn’t happen in a vacuum, where two random companies came together.

In fact, VMware and Pivotal were part of the consortium of companies that Dell purchased when it acquired EMC in 2015 for $67 billion. While both were part of EMC and then Dell, each one operated separately and independently. At the time of the sale to Dell, Pivotal was considered a key piece, one that could stand strongly on its own.

Pivotal and VMware had another strong connection. Pivotal was originally created by a combination of EMC, VMware and GE (which owned a 10% stake for a time) to give these large organizations a separate company to undertake transformation initiatives.

It raised a hefty $1.7 billion before going public in 2018. A big chunk of that came in one heady day in 2016 when it announced $650 million in funding led by Ford’s $180 million investment.

The future looked bright at that point, but life as a public company was rough, and after a catastrophic June earnings report, things began to fall apart. The stock dropped 42% in one day. As I wrote in an analysis of the deal:

The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.

VMware came to the rescue and offered $15.00 a share, a substantial premium above that August low point. As of today, it’s part of VMware.

Aug
26
2019
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VMware is bringing VMs and containers together, taking advantage of Heptio acquisition

At VMworld today in San Francisco, VMware introduced a new set of services for managing virtual machines and containers in a single view. Called Tanzu, the product takes advantage of the knowledge the company gained when it acquired Heptio last year.

As companies face an increasingly fragmented landscape of maintaining traditional virtual machines, alongside a more modern containerized Kubernetes environment, managing the two together has created its own set of management challenges for IT. This is further complicated by trying to manage resources across multiple clouds, as well as the in-house data centers. Finally, companies need to manage legacy applications, while looking to build newer containerized applications.

VMware’s Craig McLuckie and fellow Heptio co-founder Joe Beda were part of the original Kubernetes development team. They came to VMware via last year’s acquisition. McLuckie believes that Tanzu can help with all of this by applying the power of Kubernetes across this complex management landscape.

“The intent is to construct a portfolio that has a set of assets that cover every one of these areas, a robust set of capabilities that bring the Kubernetes substrate everywhere — a control plane that enables organizations to start to think about [and view] these highly fragmented deployments with Kubernetes [as the] common lens, and then the technologies you need to be able to bring existing applications forward and to build new application and to support third-party vendors bringing their applications into [this],” McLuckie explained.

It’s an ambitious vision that involves bringing together not only VMware’s traditional VM management tooling and Kubernetes, but also open-source pieces and other recent acquisitions, including Bitnami and Cloud Health along with Wavefront, which it acquired in 2017. Although the vision was defined long before the acquisition of Pivotal last week, it will also play a role in this. Originally that was as a partner, but now it will be as part of VMware.

The idea is to eventually cover the entire gamut of building, running and managing applications in the enterprise. Among the key pieces introduced today as technology previews are the Tanzu Mission Control, a tool for managing Kubernetes clusters wherever they live, and Project Pacific, which embeds Kubernetes natively into vSphere, the company’s virtualization platform, bringing together virtual machines and containers.

Screenshot 2019 08 26 08.07.38 1

VMware Tanzu (Slide: VMware)

McLuckie sees bringing virtual machine and Kubernetes together in this fashion provides a couple of key advantages. “One is being able to bring a robust, modern API-driven way of thinking about accessing resources. And it turns out that there is this really good technology for that. It’s called Kubernetes. So being able to bring a Kubernetes control plane to vSphere is creating a new set of experiences for traditional VMware customers that is moving much closer to a kind of cloud-like agile infrastructure type of experience. At the same time, vSphere is bringing a whole bunch of capabilities to Kubernetes that’s creating more efficient isolation capabilities,” he said.

When you think about the cloud-native vision, it has always been about enabling companies to manage resources wherever they live through a single lens, and this is what this set of capabilities that VMware has brought together under Tanzu is intended to do. “Kubernetes is a way of bringing a control metaphor to modern IT processes. You provide an expression of what you want to have happen, and then Kubernetes takes that and interprets it and drives the world into that desired state,” McLuckie explained.

If VMware can take all of the pieces in the Tanzu vision and make this happen, it will be as powerful as McLuckie believes it to be. It’s certainly an interesting attempt to bring all of a company’s application and infrastructure creation and management under one roof using Kubernetes as the glue — and with Heptio co-founders McLuckie and Beda involved, it certainly has the expertise in place to drive the vision.

Aug
23
2019
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How Pivotal got bailed out by fellow Dell family member, VMware

When Dell acquired EMC in 2016 for $67 billion, it created a complicated consortium of interconnected organizations. Some, like VMware and Pivotal, operate as completely separate companies. They have their own boards of directors, can acquire companies and are publicly traded on the stock market. Yet they work closely within Dell, partnering where it makes sense. When Pivotal’s stock price plunged recently, VMware saved the day when it bought the faltering company for $2.7 billion yesterday.

Pivotal went public last year, and sometimes struggled, but in June the wheels started to come off after a poor quarterly earnings report. The company had what MarketWatch aptly called “a train wreck of a quarter.”

How bad was it? So bad that its stock price was down 42% the day after it reported its earnings. While the quarter itself wasn’t so bad, with revenue up year over year, the guidance was another story. The company cut its 2020 revenue guidance by $40-$50 million and the guidance it gave for the upcoming 2Q 19 was also considerably lower than consensus Wall Street estimates.

The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.

Aug
14
2019
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VMware says it’s looking to acquire Pivotal

VMware today confirmed that it is in talks to acquire software development platform Pivotal Software, the service best known for commercializing the open-source Cloud Foundry platform. The proposed transaction would see VMware acquire all outstanding Pivotal Class A stock for $15 per share, a significant markup over Pivotal’s current share price (which unsurprisingly shot up right after the announcement).

Pivotal’s shares have struggled since the company’s IPO in April 2018. The company was originally spun out of EMC Corporation (now DellEMC) and VMware in 2012 to focus on Cloud Foundry, an open-source software development platform that is currently in use by the majority of Fortune 500 companies. A lot of these enterprises are working with Pivotal to support their Cloud Foundry efforts. Dell itself continues to own the majority of VMware and Pivotal, and VMware also owns an interest in Pivotal already and sells Pivotal’s services to its customers, as well. It’s a bit of an ouroboros of a transaction.

Pivotal Cloud Foundry was always the company’s main product, but it also offered additional consulting services on top of that. Despite improving its execution since going public, Pivotal still lost $31.7 million in its last financial quarter as its stock price traded at just over half of the IPO price. Indeed, the $15 per share VMware is offering is identical to Pivotal’s IPO price.

An acquisition by VMware would bring Pivotal’s journey full circle, though this is surely not the journey the Pivotal team expected. VMware is a Cloud Foundry Foundation platinum member, together with Pivotal, DellEMC, IBM, SAP and Suse, so I wouldn’t expect any major changes in VMware’s support of the overall open-source ecosystem behind Pivotal’s core platform.

It remains to be seen whether the acquisition will indeed happen, though. In a press release, VMware acknowledged the discussion between the two companies but noted that “there can be no assurance that any such agreement regarding the potential transaction will occur, and VMware does not intend to communicate further on this matter unless and until a definitive agreement is reached.” That’s the kind of sentence lawyers like to write. I would be quite surprised if this deal didn’t happen, though.

Buying Pivotal would also make sense in the grand scheme of VMware’s recent acquisitions. Earlier this year, the company acquired Bitnami, and last year it acquired Heptio, the startup founded by two of the three co-founders of the Kubernetes project, which now forms the basis of many new enterprise cloud deployments and, most recently, Pivotal Cloud Foundry.

Jul
01
2019
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We’ll talk even more Kubernetes at TC Sessions: Enterprise with Microsoft’s Brendan Burns and Google’s Tim Hockin

You can’t go to an enterprise conference these days without talking containers — and specifically the Kubernetes container management system. It’s no surprise then, that we’ll do the same at our inaugural TC Sessions: Enterprise event on September 5 in San Francisco. As we already announced last week, Kubernetes co-founder Craig McLuckie and Aparna Sinha, Google’s director of product management for Kubernetes, will join us to talk about the past, present and future of containers in the enterprise.

In addition, we can now announce that two other Kubernetes co-founders will join us: Google principal software engineer Tim Hockin, who currently works on Kubernetes and the Google Container Engine, and Microsoft distinguished engineer Brendan Burns, who was the lead engineer for Kubernetes during his time at Google.

With this, we’ll have three of the four Kubernetes co-founders onstage to talk about the five-year-old project.

Before joining the Kuberntes efforts, Hockin worked on internal Google projects like Borg and Omega, as well as the Linux kernel. On the Kubernetes project, he worked on core features and early design decisions involving networking, storage, node, multi-cluster, resource isolation and cluster sharing.

While his colleagues Craig McLuckie and Joe Beda decided to parlay their work on Kubernetes into a startup, Heptio, which they then successfully sold to VMware for about $550 million, Burns took a different route and joined the Microsoft Azure team three years ago.

I can’t think of a better group of experts to talk about the role that Kubernetes is playing in reshaping how enterprise build software.

If you want a bit of a preview, here is my conversation with McLuckie, Hockin and Microsoft’s Gabe Monroy about the history of the Kubernetes project.

Early-Bird tickets are now on sale for $249; students can grab a ticket for just $75. Book your tickets here before prices go up.

Jun
27
2019
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We’re talking Kubernetes at TC Sessions: Enterprise with Google’s Aparna Sinha and VMware’s Craig McLuckie

Over the past five years, Kubernetes has grown from a project inside of Google to an open source powerhouse with an ecosystem of products and services, attracting billions of dollars in venture investment. In fact, we’ve already seen some successful exits, including one from one of our panelists.

On September 5th at TC Sessions: Enterprise, we’re going to be discussing the rise of Kubernetes with two industry veterans. For starters we have Aparna Sinha, director of product management for Kubernetes and the newly announced Anthos product. Sinha was in charge of several early Kubernetes releases and has worked on the Kubernetes team at Google since 2016. Prior to joining Google, she had 15 years experience in enterprise software settings.

Craig McLuckie will also be joining the conversation. He’s one of the original developers of Kubernetes at Google. He went on to found his own Kubernetes startup, Heptio, with Joe Beda, another Google Kubernetes alum. They sold the company to VMware last year for $505 million after raising $33.5 million, according to Crunchbase data.

The two bring a vast reservoir of knowledge and will be discussing the history of Kubernetes, why Google decided to open source it and how it came to grow so quickly. Two other Kubernetes luminaries will be joining them. We’ll have more about them in another post soon.

Kubernetes is a container orchestration engine. Instead of developing large monolithic applications that sit on virtual machines, containers run a small part of the application. As the components get smaller, it requires an orchestration layer to deliver the containers when needed and make them go away when they are not longer required. Kubernetes acts as the orchestra leader.

As Kubernetes, containerization and the cloud-native ethos it encompasses has grown, it has helped drive the enterprise shift to the cloud in general. If you can write your code once, and use it in the cloud or on prem, it means you don’t have to manage applications using different tool sets and that has had broad appeal for enterprises making the shift to the cloud.

TC Sessions: Enterprise (September 5 at San Francisco’s Yerba Buena Center) will take on the big challenges and promise facing enterprise companies today. TechCrunch’s editors will bring to the stage founders and leaders from established and emerging companies to address rising questions, like the promised revolution from machine learning and AI, intelligent marketing automation and the inevitability of the cloud, as well as the outer reaches of technology, like quantum computing and blockchain.

Tickets are now available for purchase on our website at the early-bird rate of $395; student tickets are just $75.

Student tickets are just $75 – grab them here.

We have a limited number of Startup Demo Packages available for $2,000, which includes four tickets to attend the event.

For each ticket purchased for TC Sessions: Enterprise, you will also be registered for a complimentary Expo Only pass to TechCrunch Disrupt SF on October 2-4.

Jun
04
2019
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How Kubernetes came to rule the world

Open source has become the de facto standard for building the software that underpins the complex infrastructure that runs everything from your favorite mobile apps to your company’s barely usable expense tool. Over the course of the last few years, a lot of new software is being deployed on top of Kubernetes, the tool for managing large server clusters running containers that Google open sourced five years ago.

Today, Kubernetes is the fastest growing open-source project and earlier this month, the bi-annual KubeCon+CloudNativeCon conference attracted almost 8,000 developers to sunny Barcelona, Spain, making the event the largest open-source conference in Europe yet.

To talk about how Kubernetes came to be, I sat down with Craig McLuckie, one of the co-founders of Kubernetes at Google (who then went on to his own startup, Heptio, which he sold to VMware); Tim Hockin, another Googler who was an early member on the project and was also on Google’s Borg team; and Gabe Monroy, who co-founded Deis, one of the first successful Kubernetes startups, and then sold it to Microsoft, where he is now the lead PM for Azure Container Compute (and often the public face of Microsoft’s efforts in this area).

Google’s cloud and the rise of containers

To set the stage a bit, it’s worth remembering where Google Cloud and container management were five years ago.

Feb
26
2019
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New VMware Kubernetes product comes courtesy of Heptio acquisition

VMware announced a new Kubernetes product today called VMware Essential PKS, which has been created from its acquisition of Heptio for $550 million at the end of last year.

VMware already had two flavors of Kubernetes, a fully managed cloud product and an enterprise version with all of the components, such as registry and network, pre-selected by VMware. What this new version does is provide a completely open version of Kubernetes where the customer can choose all the components, giving a flexible option for those who want it, according to Scott Buchanan, senior director of product marketing for cloud-native apps at VMware.

Buchanan said the new product comes directly from the approach that Heptio had taken to selling Kubernetes prior to the acquisition. “We’re introducing a new offering called VMware Essential PKS, and that offering is a packaging of the approach that Heptio took to market and that gained a lot of traction, and that approach is a natural complement to the other Kubernetes products in the VMware portfolio,” he explained.

Buchanan acknowledged that a large part of the market is going to go for the fully managed or fully configured approaches, but there is a subset of buyers that will want more choice in their Kubernetes implementation.

“Larger enterprises with more complex infrastructure want to have a very customized approach to how they build out their architecture. They don’t want to be integrated. They just want a foundation on which to build because the organizations are larger and more complex and they’re also more likely to have an internal DevOps or SREOps team to operate the platform on a day-to-day basis,” he explained.

While these organizations want flexibility, they also require more of a consultative approach to the sale. Heptio had a 40-person field service engineering team that came over in the acquisition, and VMware is in the process of scaling that team. These folks consult with the customer and help them select the different components that make up a Kubernetes installation to fit the needs of each organization.

Buchanan, who also came over in the acquisition, says that being part of VMware (which is part of the Dell family of companies) means they have several layers of sales with VMware, Pivotal and Dell all selling the product.

Heptio is the Kubernetes startup founded by Craig McLuckie and Joe Beda, the two men who helped develop the technology while they were at Google. Heptio was founded in 2016 and raised $33.5 million prior to the acquisition, according to Crunchbase data.

Nov
06
2018
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VMware acquires Heptio, the startup founded by 2 co-founders of Kubernetes

During its big customer event in Europe, VMware announced another acquisition to step up its game in helping enterprises build and run containerised, Kubernetes-based architectures: it has acquired Heptio, a startup out of Seattle that was co-founded by Joe Beda and Craig McLuckie, who were two of the three people who co-created Kubernetes back at Google in 2014 (it has since been open sourced).

Beda and McLuckie and their team will all be joining VMware in the transaction.

Terms of the deal are not being disclosed — VMware said in a release that they are not material to the company — but as a point of reference, when Heptio last raised money — a $25 million Series B in 2017, with investors including Lightspeed, Accel and Madrona — it was valued at $117 million post-money, according to data from PitchBook.

Given the pedigree of Heptio’s founders, this is a signal of the big bet that VMware is taking on Kubernetes, and the belief that it will become an increasing cornerstone in how enterprises run their businesses. The larger company already works with 500,000+ customers globally, and 75,000 partners. It’s not clear how many customers Heptio worked with but they included large, tech-forward businesses like Yahoo Japan.

It’s also another endorsement of the ongoing rise of open source and its role in cloud architectures, a paradigm that got its biggest boost at the end of October with IBM’s acquisition of RedHat, one of the biggest tech acquisitions of all time at $34 billion.

Heptio provides professional services for enterprises that are adopting or already use Kubernetes, providing training, support and building open-source projects for managing specific aspects of Kubernetes and related container clusters, and this deal is about VMware expanding the business funnel and margins for Kubernetes within it its wider cloud, on-premise and hybrid storage and computing services with that expertise.

“Kubernetes is emerging as an open framework for multi-cloud infrastructure that enables enterprise organizations to run modern applications,” said Paul Fazzone, senior vice president and general manager, Cloud Native Apps Business Unit, VMware, in a statement. “Heptio products and services will reinforce and extend VMware’s efforts with PKS to establish Kubernetes as the de facto standard for infrastructure across clouds upon closing. We are thrilled that the Heptio team led by Craig and Joe will be joining VMware to help us guide customers as they move to a multi-cloud world.”

VMware and its Pivotal business already offer Kubernetes-related services by way of PKS, which lets organizations run cloud-agnostic apps. Heptio will become a part of that wider portfolio.

“The team at Heptio has been focused on Kubernetes, creating products that make it easier to manage multiple clusters across multiple clouds,” said Craig McLuckie, CEO and co-founder of Heptio. “And now we will be tapping into VMware’s cloud native resources and proven ability to execute, amplifying our impact. VMware’s interest in Heptio is a recognition that there is so much innovation happening in open source. We are jointly committed to contribute even more to the community—resources, ideas and support.”

VMware has made some 33 acquisitions overall, according to Crunchbase, but this appears to have been the first specifically to boost its position in Kubernetes.

The deal is expected to close by fiscal Q4 2019, VMware said.

Jun
06
2018
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Four years after its release, Kubernetes has come a long way

On June 6th, 2014 Kubernetes was released for the first time. At the time, nobody could have predicted that 4 years later that the project would become a de facto standard for container orchestration or that the biggest tech companies in the world would be backing it. That would come later.

If you think back to June 2014, containerization was just beginning to take off thanks to Docker, which was popularizing the concept with developers, but being so early there was no standard way to manage those containers.

Google had been using containers as a way to deliver applications for years and ran a tool called Borg to handle orchestration. It’s called an orchestrator because much like a conductor of an orchestra, it decides when a container is launched and when it shuts down once it’s completed its job.

At the time, two Google engineers, Craig McLuckie and Joe Beda, who would later go on to start Heptio, were looking at developing an orchestration tool like Borg for companies that might not have the depth of engineering talent of Google to make it work. They wanted to spread this idea of how they develop distributed applications to other developers.

Hello world

Before that first version hit the streets, what would become Kubernetes developed out of a need for an orchestration layer that Beda and McLuckie had been considering for a long time. They were both involved in bringing Google Compute Engine, Google’s Infrastructure as a Service offering, to market, but they felt like there was something missing in the tooling that would fill in the gaps between infrastructure and platform service offerings.

“We had long thought about trying to find a way to bring a sort of a more progressive orchestrated way of running applications in production. Just based on our own experiences with Google Compute Engine, we got to see firsthand some of the challenges that the enterprise faced in moving workloads to the cloud,” McLuckie explained.

He said that they also understood some of the limitations associated with virtual machine-based workloads and they were thinking about tooling to help with all of that. “And so we came up the idea to start a new project, which ultimately became Kubernetes.”

Let’s open source it

When Google began developing Kubernetes in March 2014, it wanted nothing less than to bring container orchestration to the masses. It was a big goal and McLuckie, Beda and teammate Brendan Burns believed the only way to get there was to open source the technology and build a community around it. As it turns out, they were spot on with that assessment, but couldn’t have been 100 percent certain at the time. Nobody could have.

Photo: Cloud Native Computing Foudation

“If you look at the history, we made the decision to open source Kubernetes and make it a community-oriented project much sooner than conventional wisdom would dictate and focus on really building a community in an open and engaged fashion. And that really paid dividends as Kubernetes has accelerated and effectively become the standard for container orchestration,” McLuckie said.

The next thing they did was to create the Cloud Native Computing Foundation (CNCF) as an umbrella organization for the project. If you think about it, this project could have gone in several directions, as current CNCF director Dan Kohn described in a recent interview.

Going cloud native

Kohn said Kubernetes was unique in a couple of ways. First of all, it was based on existing technology developed over many years at Google. “Even though Kubernetes code was new, the concepts and engineering and know-how behind it was based on 15 years at Google building Borg (And a Borg replacement called Omega that failed),” Kohn said. The other thing was that Kubernetes was designed from the beginning to be open sourced.

Photo: Swapnil Bhartiya on Flickr. Used under CC by SA 2.0 license

He pointed out that Google could have gone in a few directions with Kubernetes. It could have created a commercial product and sold it through Google Cloud. It could have open sourced it, but had a strong central lead as they did with Go. They could have gone to the Linux Foundation and said they wanted to create a stand-alone Kubernetes Foundation. But they didn’t do any of these things.

McLuckie says they decided to something entirely different and place it under the auspices of the Linux Foundation, but not as Kubernetes project. Instead they wanted to create a new framework for cloud native computing itself and the CNCF was born. “The CNCF is a really important staging ground, not just for Kubernetes, but for the technologies that needed to come together to really complete the narrative, to make Kubernetes a much more comprehensive framework,” McLuckie explained.

Getting everyone going in the same direction

Over the last few years, we have watched as Kubernetes has grown into a container orchestration standard. Last summer in quick succession  a slew of major enterprise players joined CNCF as AWSOracleMicrosoftVMware and Pivotal all joined. They came together with Red Hat, Intel, IBM Cisco and others who were already members.

Cloud Native Computing Foundation Platinum members

Each these players no doubt wanted to control the orchestration layer, but they saw Kubernetes gaining momentum so rapidly, they had little choice but to go along. Kohn jokes that having all these big name players on board is like herding cats, but bringing in them in has been the goal all along. He said it just happened much faster than he thought it would.

In a recent interview with TechCrunch, David Aronchick, who runs the open source Kubeflow Kubernetes machine learning project at Google, was running Kubernetes in the early days. He is shocked by how quickly it has grown. “I couldn’t have predicted it would be like this. I joined in January, 2015 and took on project management for Google Kubernetes. I was stunned at the pent up demand for this kind of thing,” he told TechCrunch.

As it has grown, it has become readily apparent that McLuckie was right about building that cloud native framework instead of a stand-alone Kubernetes foundation. Today there are dozens of adjacent projects and the organization is thriving.

Nobody is more blown away by this than McLuckie himself who says seeing Kubernetes hit these various milestones since its initial release has been amazing for him and his team to watch. “It’s just been a series of these wonderful kind of moments as Kubernetes has gained a head of steam, and it’s been  so much fun to see the community really rally around it.”

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