Monday, 2 November 2015

Why Microsoft Buying Citrix is a Terrible Idea, why HP or Cisco Will Buy Them Instead, And Where the *real* battle is?

Last week I published Why it’s finally time for Microsoft to buy Citrix. It was long (3k words) and it did well (12k views), but no one really commented on it. (Most of the conversation about it on Twitter was based on a remark I made about the popularity of XenServer—a topic we’ll revisit here soon.)

Since views of these articles tend to really die off after the first day, most people missed an fantastic comment from AppDetective. It was so good that I’m republishing it here as a standalone article, because he makes a lot of good points that we should talk about.

So here’s his comment (I consolidated his original 10 points down to 8), slightly edited to make it more readable in article form:

1. The Datacenter Battle

The datacenter battle is not "Hyper-V versus VMware." That’s yesterday’s war and Microsoft is doing just fine.
The battle is AWS versus Azure in the public cloud and blocking AWS from entering the enterprise. Google a secondary threat and VMware is nowhere to be found in cloud and five years too late to the party. (See stock price…)

2. Containers

The other battle is containers. That will make development and virtualization turn on its head in the next decade. It's still a wide-open opportunity and a battle to win developer mindshare. Containers is what will hurt Amazon as they are a VM mindset still (even though it's custom Xen).

3. This is Microsoft’s Focus

The above two opportunities are where Microsoft will focus. Everything else is about Office, Windows client, and devices with apps based on Azure to reach those devices on Windows.
Then the future is about an expansion of Azure to serve other operating systems as Windows looses steam. i.e. "Azure is the new Windows.” RDSH, Intune, etc. are nothing more than workloads to drive Azure adoption, and anything Citrix (or anyone else) does to help is free money for Microsoft, just like it’s been forever…

4. Desktop Virtualization is Nothing in Comparison

The Desktop Virtualization market is a fart in the wind opportunity in comparison to these tectonic shifts that are taking place, and it’s a backwards-looking bet for a $13B plus transaction. I’m not saying the market won’t grow, (it seems to be based on Citrix’s earning yesterday), but I’ll have to read the earnings transcripts in more detail to see if XenApp/XenDesktop is growing or not.

In my world, I haven’t seen growth in these core products. I mostly see Netscaler growth and suite sales with mobile to pull things along. In other words, it’s getting harder with Citrix’s internal turmoil which is driving a lot of the,”Is Citrix a bet for the future?” and, “Should we consolidate the number of vendors we manage?”conversations.

VMware is taking advantage of that scenario, so here I agree that Citrix as part of a bigger company will help calm those fears. I just don’t believe it matters to Microsoft.

Cisco or HP will buy Citrix. If that happens, Microsoft prints free money from Citrix and VMware competing to drive revenue on top of Windows. Why spend $13B+ to get something you will get anyway for free, and when you can keep squeezing their margins with a "good enough" RemoteApp in Azure that at cloud speed will keep getting better quickly? Microsoft will care more about making sure Amazon doesn’t take people to AWS with Windows. If VMware were smart they would build for Azure to weaken AWS and play the Microsoft B I T C H game.

5. Mobile is Overblown

I hear you screaming mobile! I’ve said it for a long time. EMM is a dead market. Most people think it’s still MDM, which is dead. All the mobile vendors are desperately trying to make it bigger with identity, productivity apps, Windows management, etc., but Intune from Microsoft will squeeze this market and take the profits out.

EMM is not mobile. Mobile is so much more and it’s mostly about apps, business processes, and enabling a digital enterprise. EMM does little to enable that and is nothing more than commodity infrastructure management with way too much marketing BS, but hey I guess it keeps Jack busy! Just look at how badly MobileIron is doing, and they are supposed to be a leader in this space. VMware with AirWatch and Citrix with XenMobile are trying to bundle everything together as a suite as I’m sure they see the reality too.

There is a reason for this. What people are still buying is mostly MDM. EMM is 90% add-on crap nobody cares about and the this whole "EMM will manage Windows 10” thing is a long term "may happen" bet for a world that is going away from Windows.

I’ll say it again: EMM is not mobile. True mobility is so much more—we just have tunnel vision by reading too much vendor BS.

6. Citrix Workspace Cloud

Citrix Workspace Cloud is a mid-market cloud. Citrix is already in every enterprise account. CWC is about reaching new people and enabling service providers. I like it, but it will take time to mature to be relevant. Plus partners will get screwed so that’s something that needs more clarity.

You are right about the price. The math doesn’t work at those levels. CWC is $100-150k per year to support 1000 users just for the infrastructure pieces. In the enterprise, as you scale up the costs to support Citrix don’t go up as fast, even if the enterprise is hosting the infrastructure. This is a big problem for Citrix since they don’t have their own cloud. Citrix will always have to be expensive to pay the cloud providers. Hey, perhaps Amazon should buy Citrix instead…

The only way to charge that sort of money is to drive more cost out of OpEx and higher up the stack to replace more things done today.

7. The “Other” Citrix Products

IoT is too early. There is no proven business model yet. OctoBlu was nothing more than Mark T hiring his friend to help him rescue Citrix, which didn’t work out and we won’t ever know the plan since Mark is now gone.

ShareFile is a feature, but who cares in a crowed market.

DaaS (in time) will have potential, but Microsoft will already win here. AWS is getting better and VMware still sucks at it.

8. Everything is Changing

What we’re seeing here is a changing of everything in the market.

Amazon has won the cloud and Microsoft was smart/rich enough to build Azure. Everybody else is trying to win by consolidating and saying, "We are big so we must be relevant.” They're all f’ed. Desktop Virtualization and EMM are yesterday’s battlegrounds, get over it people. These are all parts of bigger stories moving forward.

The end-to-end assertion by Brian is correct, but Microsoft doesn’t need Citrix since they already own that market. However Cisco or HP—who are just as desperate as Dell/EMC—need a story, and Citrix would be the perfect fit for another giant boring company that represents the past.

Meanwhile Amazon, Microsoft, and Google become the infrastructure giants of tomorrow.

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