People often equate VMware with vSphere (certainly VMware’s flagship product). But VMware is not a one product or even a one product line company. VMware is in fact five different businesses, each of which make different current contributions, have different long term strategic value, and have different synergies with the others. These five businesses are like an engine, three boxcars and a caboose.
Putting the Five Businesses into the Analogy
VMware has five businesses; vSphere -the Data Center Virtualization business, vFabric – the Application Platform business, vCloud – the Cloud Platform business, vCenter – the Management Software business, and View – the Desktop Virtualization business. Let’s fit this businesses into our train analogy.
vSphere – The Engine. The engine by definition produces more than it consumes. In fact the vSphere engine produces so much revenue and customer traction at VMware that it is the engine that can and does pull the rest of the train. The engine is the only part of the train that is capable of powering the VMware business forward on its own. Everything else is dependent to a greater or lesser degree upon the engine for its ultimate success.
vFabric – Boxcar #1. Boxcars contain valuable assets, but they are not yet engines in the sense that they are the basis of viable businesses on their own. Boxcars therefore represent long term strategic investments in future businesses and market positions. vFabric is the most important boxcar in the VMware product portfolio because as a system software vendor, VMware’s long term survival depends upon it having an applications API for developers to write to. In this context, CloudFoundry is probably the most long term strategic product at VMware.
vCloud – Boxcar #2. vCloud is strategic to VMware because cloud service providers in all shapes and sizes represent a long term strategic channel to the market for the vSphere/vCloud technology, much in the same way that server and desktop/laptop computer manufacturers were (and are) the strategic channel for Microsoft Windows. The bottom line is that most people did not care that their desktop or server can pre-installed with Windows. Most people are not going to care if the underlying infrastructure for their cloud services is from VMware. So this is a way to get to the market in a very broad manner without having people even know or care that they are buying something from VMware.
vCenter – Boxcar #3. vCenter is VMware’s management software lineup. vCenter is strategic because VMware believes that virtualization and cloud computing will require new management stacks, and VMware intends to be the vendor of that management stack. Management software also plays two critical economic roles in VMware’s strategy. The first is that good management software can help enterprises adopt vSphere more aggressively. The second is that to the extent that the vSphere business might get commoditized over time, vCenter is the natural next layer up where VMware would make money if this were to happen would be the stack of management software that manages the virtualization platform.
View – The Caboose. The caboose on this train occupies a unique position. It contains some valuable assets, but it is subject to being let loose from the back of the train (abandoned) at the least sign of a slowdown in momentum on the part of the train or a steep hill ahead. VMware View is the caboose on this train. The reason for this is the of the five businesses, View has the least amount of synergy with the other four, and is also the one that is struggling the most in the market to establish a position of value and differentiation (Citrix owns the circus and View is a one-trick pony).
Why Does All of This Matter?
The single most important point of this article is how important it is for VMware for the vSphere engine to continue to fund not just its own development and marketing, but the development and marketing of the rest of the train. With the announcement of vSphere 5, VMware made it clear that its existing customer base was a bit less than 40% virtualized so that there was a runway that was 1.5 times longer in front of vSphere than what was behind it. That means that VMware could easily double in size as a company before running out of runway on the vSphere front.
But doubling the vSphere penetration in existing accounts is not just going to incrementally and organically happen. It will not happen all by itself, because what is left to virtualize is much more difficult and challenging to virtualize than was has already been virtualized. What lies in front of vSphere is business and performance critical applications, not low hanging fruit. This means that the vSphere business needs to be optimized in order to address the virtualization of these kinds of applications – and anything that stands in the way of the continued momentum of the vSphere engine needs to be changed or eliminated. It is in this context that the recent vRAM pricing constitutes a real risk to VMware – as discussed in “Could the new vSphere vRAM Pricing Slow Down Virtualizing Business Critical Applications?“.
VMware is already the most important, and with vSphere the best systems software vendor on the planet. This is true not only based upon the current success of the vSphere platform, but the quality of the long term strategies in place for vFabric, vCloud, and vCenter. With vSphere 5, VMware can ill afford distractions that detract from the momentum of the attack upon the remaining 60% that is not virtualized. The strategic investments in vFabric, vCloud, and vCenter then call into question of viability of having a desktop virtualization business (View) that is today in product and tomorrow in vision a minor subset of what Citrix is delivering and articulating. This also places a premium upon the rapid resolution of the pricing issues that VMware has created with vRAM entitlements.
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