If VMware wants service providers to dump Xen and KVM hypervisors, it has to make the job of using the VMware stack easier than the hodgepodge of usually hand-crafted tools that service providers employ and that, to a certain extent, give them their competitive advantage. Or, perhaps in some cases, a competitive disadvantage. So …
When you factor in the costs of vmware, and the nature of cloud hosting ie having a very large number of servers, the two just don't add up...
The cost of running vmware would greatly eat into and later entirely eliminate your profit margin making you completely uncompetitive.
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