Companies settle VMware bid protests

Citrix Systems and Nutanix have both withdrawn their protests as they have apparently reached a settlement involving their objections to a sole-source contract awarded to VMware.

The Army contract originally was just for maintenance and services, but a later modification added the ability of the Army and the rest of the Defense Department to buy a software licenses for a wide-range for virtualization software.

It was after that modification that Citrix and Nutanix turned to the Government Accountability Office, complaining that the modification went too far and gave VMware an unfair advantage in the market.

Before GAO could rule on those charges, the companies and the Army began negotiating a settlement. GAO apparently acted as a facilitator without taking sides in the dispute.

The settlement, according to what sources have told me, is that the Army is going to issue another modification that will undo the first modification and return the contract to one where the Army is only buying maintenance and services.

If the Army needs to acquire new software licenses, then it will conduct an open competition.

This dispute is very similar to another dispute from early in 2015, when the Defense Information Systems Agency issued a sole-source contract to VMware for a wide variety of software licenses. DISA backed off of that contract when Citrix, Nutanix and others filed protests.

The battle among these companies says a lot about the state of the market and hyper competitiveness among software companies.

In this case, VMware is the well-established leader and dominant player in the realm of server virtualization. It is the de facto standard.

But as the company has expanded its product base into other areas of virtualization, it has run into competitors such as Citrix, which is known for its virtualized desktop products, and Nutanix, which has products around virtualized storage.

There is not an established installed base in those areas because they are a newer when compared to virtualized storage.

The DISA and Army deals would limit competition for these newer virtualization products and give VMware an advantage because of the exclusive contract it would have held, sources told me.

That was the main fear for Citrix and Nutanix, it appears – getting shut out of the market. But this agreement apparently addresses those fears. It allows the Army to get the support services it needs, and it brings competition back to the market place.

While the Citrix and Nutanix protests have been withdrawn, the Army hasn’t yet issued the medication, at least according to the Chess website for the VMware contract. I’ll post an update as soon as the modification is released.