Who are the customers for cloud?
The problem here is VMware's customers are IT operations. Cloud computing providers' customers are developers.
IT operations and Cloud computing providers are direct competitors for the compute needs of end users (application owners and developers).
Put VMware on the cloud, and it forces the application owners and developers to have to deal with the same people (IT operations) who caused them to bypass IT and go to the cloud.
No developer wants to put in an ITSM ticket to get a VM. They don't want to have to put in another ticket to get additional storage. They don't want to put in a third ticket to get a VLAN. They want to go to a self-service portal and click on a VM, click again to get an EBS Volume, and click again to provision networking to their application.