Last week while my colleagues were debating the impact of Paul Maritz replacing Diane Greene as VMware's CEO, I was relaxing on a beach in North Carolina's outer banks. I prefer to be "unplugged" while on vacation, so I didn't hear of the news until I returned home last Saturday. My colleagues Drue Reeves (see VMware: Welcome to the Game) and Richard Jones (see VMware CEO Ousted) did an excellent job covering the leadership change, and after having spoken to Paul on Tuesday, I think it's a good time to weigh-in with my thoughts regarding VMware's executive leadership change.
Diane Greene, in my opinion, did a tremendous job in bringing VMware to where it is today. VMware ships the industry's gold standard for x86 server virtualization, has strong sales, and is continuing to push the innovation envelope. This all happened on Greene's watch. In addition, Greene had VMware strategically positioned to continue broadening the company's growth and market presence. With that being said, it shouldn't be surprising that folks inside and outside of VMware felt that a leadership change at this point was a bad move. Alessandro Perilli uncovered much of this turmoil with the following posts on Virtualization.info:
- Was Diane Greene really approved by VMware employees?
- EXCLUSIVE: VMware employee reveals details on CEO firing, exposes Tucci and Maritz confidential emails
- VMware loses its CEO – Updated
Complacency has never been an effective strategy against Microsoft, so I must say that I understand the timing of the move. VMware has to move forward with a sense of urgency, and dare I say desperation. A complacent VMware would likely get steamrolled by Microsoft. History has proven that time and time again. NetWare and Word Perfect are two good examples of best-of-breed products that eventually succumbed to the Microsoft juggernaut. As Microsoft's previous successes have shown, they don't have to have the best technology to win. "Good enough," combined with low total cost of ownership and simple, effective management has historically worked very well.
Now let's get back to the leadership change. I see it as a good move. Many don't like Maritz's lengthy history with Microsoft, but that's exactly why I see him as the right leader at the right time. Maritz was part of Microsoft's core executive team that took Microsoft from dismissed start-up to dominant force in office applications, desktop operating systems, and server operating systems. Maritz knows how to take on and defeat large companies with well established product lines. Yes - VMware has the dominant hypervisor today, but VMware's future depends on much more than hypervisor dominance. VMware's future will ultimately be tied to the value it brings to applications.
At the end of the day, what matters most is whether or not our applications are available to users. Microsoft realized this long ago, and when you look past virtualization, Microsoft has a better application management story than VMware today. VMware has the best virtualization management solution going, but in the end I don't see that as being enough to hold out against Microsoft. I mentioned in my Apple - Opportunity is Knocking post that the desktop as we know it is in a state of transition and opportunity exists for a more innovative solution to eventually supplant Windows desktop operating systems. Five years out, the desktop operating system will be fundamentally different. The same can be said for the server, as the OS is trending toward being a thinner, modularized foundation for running applications. Just look at Windows Server 2008 core and the success of Linux-based virtual machine appliances to see that. In addition, we'll be seeing some core IT services transition to cloud-based computing. The cloud may be external to the organization, and I believe many organizations will have their own centrally managed clouds as well (essential to meeting the organization's security and compliance requirements).
Nearly all elements of the traditional data center are in flux, and while this is exciting, it has to worry Microsoft. Microsoft sees the transition and is developing their own next generation application, client, and server solution set. For VMware to win, they will have to deliver a fundamentally superior solution to Microsoft, and do it sooner. Of course, this will initially be a complement to existing Microsoft products. But if VMware has its way, many core IT services will transition to cloud-based offerings and virtual appliances. In the mean time, it's clear that Microsoft isn't sitting on it's hands. If you want proof, take a look at the Live Mesh Technical Preview. Live Mesh is a very intriguing cloud-based desktop delivery solution and should have VMware's attention.
As an analyst, I can afford to be wrong once in awhile and still keep my job. Maritz, on the other hand, likely doesn't have this luxury. That being said, if I was in Maritz's shoes, I would immediately do the following:
- Lower the prices of the entire VMware product line
- Accelerate development on a soup-to-nuts solution for the SMB space
- Accelerate development on VMware's virtual desktop solution
- Focus the company's messaging around the application and the total solution
Microsoft and Citrix are both competing against VMware on price. If VMware refuses to lower prices, vendors such as Microsoft, Citrix, Virtual Iron, Novell, and Sun will gladly take the market share that VMware concedes. If VMware wants to take away those market opportunities, then it must drastically lower prices immediately. Short term, a substantial price reduction would hurt. However, over time, denied opportunities for VMware's competitors would equate to more sustained revenue for VMware.
Microsoft has long dominated the SMB market and feels strongly that Hyper-V will do well there. When you factor in the System Center management suite and Data Protection Manager, by the end of the year Microsoft will have a very good management and backup solution to complement Hyper-V (System Center Virtual Machine Manager 2008 has yet to ship). Microsoft is saying that Hyper-V runs on "the Windows you know and love," but if you configure Hyper-V in the recommended deployment on Windows Server 2008 core, I'm not sure how much love you'll be feeling immediately. I've found a Hyper-V on Windows Server 2008 core installation to be more complex than either VMware ESX Server or Citrix XenServer. VMware should capitalize on this, and Microsoft should counter by simplifying the Hyper-V/Windows 2008 Core installation process (yes - it's easy to enable the Hyper-V role, but setting up the network, storage, domain membership, etc. on Windows Server 2008 Core will take additional time). To win the SMB, VMware needs to be cost competitive and offer equivalent SMB management features. I think adding a solution that rivals Data Protection Manager would help.
Some see the virtual desktop as an irrelevant tangent, but not me. Microsoft eventually won the server war due to its integration with the desktop, and I see virtualization as playing out similarly. Citrix is gaining a lot of momentum in the virtual desktop space and Microsoft is telling anyone who will listen to go with the Citrix solution. So VMware has an uphill battle here. VMware has some great ideas for virtual desktop delivery and I feel that they will need them on the street sooner rather than later in order to keep Citrix at bay. Losing the virtual desktop battle may not cost VMware the virtualization war, but it will definitely make their road to success all that more difficult.
Microsoft's core messaging has focused on the solution, while I feel that sometimes VMware places too much emphasis on its individual technologies. When you have a best-of-breed product, you tend to want to brag about the little things that you can do that no one else can. So I understand why VMware is proud of it's individual products. Still, what I want to see from VMware is more about how they are adding value to the entire application stack (management, availability, performance, etc.). Sure, VMware doesn't do it all, but combined with its major partners in the management space, VMware plays a major role in the complete solution. Give us a solution web page that shows how you do it. Better yet, give us a web 2.0-based site that allows anyone to design a fully virtualized data center using products from VMware's core management partners (e.g., BMC, CA, Dell, IBM, HP). The best technology doesn't always win out in the end, but the best story often does.
VMware - tell us your story.
Posted by: Chris Wolf