Virtualization Anemia

Both VMware and Citrix have had major layoffs over the past week. Although the VMware layoffs affected more people and garnered more press, Citrix quietly laid off some critical innovators, such as the Sydney, Australia, engineering team, as well. Will either or both organizations suffer from technical anemia as a result of the major cuts?

In parallel, the Dell acquisition of EMC and VMware is moving forward, and Citrix has appointed Kirill Tatarinov as president and CEO, with an executive compensation package that is reportedly worth $24 million. Clearly, business as usual is not the mantra within VMware or Citrix, and with new forces at the top of each organization, tumultuous times are ahead. The VMware layoffs were summarized in The Virtualization Practice articles VMware Layoffs: Don’t Fear the Reaper and The Start of 2016 Brings the Start of Layoffs.

A tremendous number of extremely talented people have lost their jobs in the past few weeks just from Citrix and VMware. The casualties from the January layoffs don’t include the additional 1,000 people that Citrix laid off in November. As a result of the layoffs from these two virtualization powerhouses and the industry trickle-down, there are thousands of people finding themselves without an employer. What will this mean for the virtualization industry?

A fair percentage of the people who were laid off at Citrix and VMware were not technical and did not have strong ties to the virtualization industry. It is likely that these individuals will be absorbed by other industries.

However, a lot of highly technical people found themselves in the wrong place at the wrong time. While some industry employers will rapidly scoop up some of them, it’s likely that a large number of these newly unemployed individuals will form start-ups in the technology industry.

Let’s face it: Citrix and VMware can’t invent the technologies of tomorrow if key masterminds aren’t on their payroll today. That means that these virtualization powerhouses will hit a point at which the layoffs’ resultant anemia depletes the technology funnel. While it may take as much as a year to reach that juncture, the search for technology will then need to come from external sources: i.e., start-ups.

Take the scenario of a group of engineers from Citrix or VMware who form a start-up that enables them to incubate a concept that their management had not allowed them to pursue. The engineers knew that it was a great idea, but too many layers of management just didn’t understand it. Without those layers of management, the engineers can form a start-up and fully develop that idea to make it reality. If those brilliant engineers can not only develop the concept successfully but also market it to their former employer for a hefty price tag, they will have come full circle. After all, the sweetest revenge is success. This is precisely the model that has great potential in the next one to two years.

Companies like Citrix and VMware will need to rapidly acquire start-ups in the next one to two years as competition becomes even more intense. Even though the acquisition of start-ups makes business sense, the integration of acquired technologies typically doesn’t happen overnight. A case in point is the Framehawk technologies that Citrix acquired: it took nearly two years to integrate Framehawk into XenApp/XenDesktop and NetScaler. Again, while the acquisition of start-ups may appear to be a quick fix to a technology hole, true integration does not happen immediately.

However, some of these start-ups may develop successful competitive offerings or alternatives to Citrix and VMware products. After all, who knows Citrix and VMware products better than the former engineers who worked within the inner sanctuary of its technology on a daily basis? Whether these types of start-ups develop products that reduce the spending for Citrix or VMware or compete with specific offerings head-on, the impact of newer or better technologies will create an unplanned disruption in the virtualization marketplace.

The layoffs of technical individuals at Citrix and VMware apparently makes dollars-and-cents sense from a short-term business perspective at the executive level. However, from a technology perspective, these decisions may have a devastating impact on obtaining or maintaining virtualization industry leadership in the longer term, because of the yet-unknown career chapters of the technical capital that has just been escorted out the door.

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