It feels to me that VMware is doing a little thrashing, trying to find their stride and a large seam that they can grow into. Think about the history here for a while. VMware was started in the late 1990's and was fairly slow growing until virtualization really exploded in the mid-2000s. After that, it was like being on a rocket ship, straight to orbit.

The trouble is, while the numbers got big, competitors started to enter the fray and hypervisor technology is not very "sticky." Fundamentally, if a hypervisor is good, it perfectly emulates an x86 processor. That's it. Yes, there might be differences in performance, etc., but as the market heats up, that is perishable differentiation. Management tools and the infrastructure around the hypervisor provides some level of long-term differentiation, but even that is thin.

So, as a result, VMware is looking for anything and everything else that can provide them with incremental, fast-growing revenue. Fundamentally, that means getting into other businesses. Going after the PaaS market with Cloud Foundry seems like a reasonable way to build on their core strengths. Unlike hypervisors and virtualization management tools, this is a core technology with a *sticky* user base. Once you write your application for Cloud Foundry, you'll likely continue to use it.

Zimbra and SlideRocket seem to be attempts to get into the SaaS market. It's almost like somebody at VMware decided that they need to use their growing cash position to try to enter the cloud market at all levels: IaaS (where they already played with vSphere and vCloud Director), PaaS (Cloud Foundry), and then SaaS (Zimbra and SlideRocket).

My hunch is that the Zimbra and SlideRocket businesses will not do well under VMware's management and will eventually be spun off or die. Zimbra has a large customer base, but I don't think SlideRocket does. My hunch is that they will gain very little synergy (sales and business development activity) at VMware. It's not like a sales-person who knows how to sell vSphere would be good at getting enterprises to adopt SlideRocket.

Robert Keahey Replied on July 18, 2011

Dave - very much in agreement on the Zimbra and SlideRocket points. Could never quite understand those acquisitions...

Ben Kepes

Director, Diversity Analysis

Posted on July 18, 2011

I've been watching VMWare for awhile now and have been interested to see them move from primarily (almost exclusively) an infrastructure/virtualization company to one that seeks to offer services at all levels of the stack - from federable PaaS with CloudFoundry (something that, if it lives up to its promise, is going to set the world on fire), to SaaS and "connective" apps like ZImbra, Horizon, SlideRocket etc. It's a compelling story but I'm not 100% convinced that VMWare can really pull through on this - they don't strike me as a company with the experience, credibility or understanding of business line issues to really move up from the server huggers (OK, virtual server huggers) that have been their bread and butter.

A lot will become clearer after VM World, where we will see how consistent that infrastructure/platform/apps story really is...

Andrew Baker Replied on July 18, 2011

I agree with you, Ben. I don't really think they can pull it off, and certainly not in a cost-effective way for small or midrange organizations

reza malekzadeh Replied on July 20, 2011

They need to diversify sources of revenue. Too much is still coming from the hypervisor and that is not a long term sustainable play. Acquisitions play to expanding their product offerings and allowing them to hopefully diversify. Now it is about execution. :)

Brian McCallion

President, Bronze Drum Consulting, Inc.

Posted on July 17, 2011

VMware has storage (EMC). I don't think VMware can safely get into the Network business at this point without alienating necessary partners like IBM, HP, CSCO. Having made acquisitions like SpringSource and Heroku, it seems to me that VMWare has a ful software stack extending to the PaaS level. The next phase where VMware needs to win is in providing the consulting and professional services necessary to move the Global 2000 from where they are now to VMWare's PaaS offering. Given the competition from Salesforce.com, Amazon AWS, Azure, and others, I think VMware will acquire professional services firms so as to accelerate this movement from where customers are now to a place where VMware needs them to be and which has been central to Paul Maritz's vision since he delivered his keynote at VMWorld 2008 announcing that he believes Platform as a Service is where VMWare needs to be playing. And he's right. Once you have customers building on your application platform, your virtualization technology is part of the stack and no longer a decision that can be easily changed. VMware needs to execute very strongly at the Platform as a Service layer in order to expand and defend its market opportunity. A Professional Services acquisition might be necessary and may help VMware to get customers there more quickly.

Denis Guyadeen Replied on July 18, 2011

Comments.

VMware does not have storage, EMC does and storage IMHO is moving into commodity.
VMware did not acquire Heroku. Salesforce.com did.

I highly doubt VMware will enter the Consulting space as their are some credible businesses already providing services in this space, including EMC.

If you seen the Cloud Foundry announcement back in 4/12, it is safe to assume VMware is building the new OS for the Cloud Era and leveraging web development communities (languages, frameworks, NoSQL, 3rd party clouds).

So my take is VMware is developing/building a platform (cloud foundry, redis, gemfire, sqlfire, etc) and user experience (sliderocket, socialcast) for the next generation of IT that lives in the Cloud.

Brian McCallion Replied on July 18, 2011

Thanks for correcting the Heroku reference--my bad.
VMware is 90% owned by EMC. According to this article, EMC sold only a very small percentage of its ownership in VMware in the VMware IPO--just ten percent. So when I write that VMware "has storage"--I really mean that VMware HAS storage :)

VMware has entered the PaaS space with Spring. The difference seems that VMware is offering PaaS as a private, in house platform, rather than as a public platform. I think it's very likely VMware will offer professional services to enable enterprise companies to adopt it's PaaS platform (Spring?). Right now VMware is aggressively recruiting Pre-Sales Engineers to sell this platform into the enterprise.

Here's the article on the EMC IPO of VMware

http://searchcio.techtarget.com/news/1242839/EMC-appeases-shareholders-with-V...

Andrew Baker

Director, Service Operations, SWN Communications Inc.

Posted on July 18, 2011

VMWare appears to be trying to build a one-stop shop for cloud computing (which is different from the approach that Citrix is taking, btw)

Brian has rightly pointed out that moving further up the stack will likely run them afoul of key business partners. VMWare should also be concerned that vendor lock-in is not something that many businesses want when it comes to cloud providers, given their concerns about data management and access under duress.

As a result, their could be a backlash against them as they trying to develop what is starting to look like a very closed ecosystem. I'm personally more in favor of an open cloud computing environment where I have more choices in what services I use, and from whom I obtain them. VMWare seems to be going back to a centralized computing model -- but one based on cloud services.

I greatly prefer Citrix's approach to the cloud