After a week of rumors, VMware has finally unleashed the Reaper. Yesterday morning as of 9 am GMT, VMware has announced layoffs in multiple business units across the globe. I have heard that Burlington Canada Call Center has been closed in its entirety (98), although about 50% have been given the opportunity to work remotely. I am sure that this will not include any of the call center staff. Additional layoffs are reported to include approximately 40% of VMware Israel (80), as well as losses in vCloud Air and vCloud Gateway Services in Canada, and in EMEA (numbers unknown). The most surprising of all are the layoffs of all VMware Workstation and Fusion development staff (numbers unknown)—as that department is being outsourced to China—and the rumors of the VMware View group’s being closed down.
The number of employees being laid off—which varies between 400 and 900, depending on where you read it—equates to 3 to 5% of the current 18K workforce. This is not as high as the January 2013 layoff round, in which VMware fired just over 6% of the then-13.5K workforce. Still, this is not an insignificant number.
Although the human factor in this is heartbreaking, I will focus on what I believe to be the business reasons for the layoffs.
It is both interesting and, at first glance, worrying to see what areas have been targeted. With the closure of the Burlington Canada Call Center, VMware no longer has an official presence in Canada.
It has carved away over 40% of the Israeli workforce located at Herzliya. This is an R&D hub for products such as Mirage and the IT Business Management Suite (ITBM).
The company has laid off the entire Palo Alto-based Workstation and Fusion development team and outsourced “maintenance” to China. It seems that the product that launched the company may be quietly being put out to pasture.
What Are the Reasons for These Layoffs?
The majority of layoffs have been in engineering, a high cost center. This most likely means that once again VMware has missed its already low numbers for the quarter and year end, and in an attempt to meet them and soothe the financial analysts of Wall Street, it has, as in 2013, cast a scythe though its ranks. It is also noticeable that again the casualties are rank-and-file, not officer-class.
That said, let’s look at the layoffs in greater depth. The Burlington Canada Call Center was the mail tech support site for vCloud Air and vCGS. It is no secret that these products have not exactly been setting the world on fire. The layoff of this department could just be a tacit admission that VMware has lost the public cloud battle to the likes of Azure, AWS, and GCS, whose pockets in this space are much deeper.
The layoffs in the Herzliya facility start to come into perspective when you look at the products that it deals with: mainly ITBM, another product that has not set the world on fire, and Mirage, also suffering from subdued sales.
Finally, on to the Workstation layoffs. This is the most interesting of the current crop of departures. Workstation as a product has had no innovative new features for several releases. The vast majority of “new” features concern communication with ESXi, vCenter, or vCloud Air. The common code sets have been merged, as evidenced by the fact that whenever a vulnerability is discovered in Workstation, the CSV announcement also includes ESXi. Thus, there is really no need for a dedicated Workstation development team from VMware’s perspective anymore. Gone are the days when Workstation incubated new features before they were promoted into ESXi; now it is the other way round.
However, this does lead to other issues surrounding stability in products. There has recently been a perceived flakiness in VMware’s flagship products. Its latest-version vSphere 6 and VSAN products have not been meeting installation numbers. True, the licenses are flying out the door, but that is only because you can no longer buy vSphere 5 licenses. Issues with quality control, like the CBT bug in vSphere 6 (which was only fixed with the release of update one, almost six months after GTM), have delayed significant upgrades. New features like Cross vCenter vMotion cause more issues with licensing (read Oracle) than they fix from an operational standpoint. And the one-upmanship game of “I can build a virtual machine with 128 vCPUs and 4 TB of RAM” is just plain fatuous and ceased to be reality driven with vSphere 4. More to the point, on what hosts can you run a virtual machine of that size for less that the cost of a small country? VMware has taken its eyes off the ball, and the game has run away from it. The company is now playing catch-up in an age when infrastructure, although key, is diminishing in importance compared to applications in this platform 3 world.
It is this lack of innovation and lower standard of quality control that has started the rot. Cutting the very people who can fix this obviously will not help; getting rid of the very people who innovate and design is not sensible. The engineers are the heart in your body, the engine in your cruise liner. The layoffs also send a message to the markets that VMware is no longer an innovation company.
VMware should look to management for the failure of vision and not to its soldiers for lacking the ability to execute a flawed plan. Until VMware sorts out what it wants to be, its share price will continue to plummet. The Dell/EMC merger is a distraction but not an excuse. Blaming the issuance of tracker stock on the drop of shares is obtuse in the extreme. VMware’s problems are much deeper, and this points to a lack of leadership and honesty when looking inward. Although I hope this is the last round of redundancies, I firmly believe it is not.
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