Brian Madden's Blog

VMware deserves a lot of credit. Even though hardware virtualization has been around for decades in one form or another, we wouldn't have it in the x86 space without VMware. The hardware and OS vendors would have been happy to keep selling hardware that was only 20% utilized. VMware turned this industry on its head. But it has awoken the slumbering giant that is Microsoft...

[Note from the author: This wasn't an article I intended to write right now. But after Alex Barrett blogged about a conversation I had with her last week on this very topic, my inbox has been flooded with emails asking "Did Alex really quote you properly?" and "Are you crazy?" The answers to those two questions are "yes" and "quite possibly."]

VMware deserves a lot of credit. Even though hardware virtualization has been around for decades in one form or another, we wouldn't have it in the x86 space without VMware. The hardware and OS vendors would have been happy to keep selling hardware that was only 20% utilized. VMware turned this industry on its head. They deserve credit not only for the move towards virtual hardware, but also for the whole VDI concept. (Even though VMware did not initially embrace VDI, the early adopters / creators of the concept couldn't have done it without VMware.)

So kudos to VMware for doing some awesome stuff.

But VMware will face some tough times ahead:

• Hardware virtualization is becoming a commodity, and when this happens, you end up with a lot of competitors, feature parity across vendors, and a price race to the bottom.
• The "easy" virtualization sales have been made already. What's left is the more complex stuff, with longer sales cycles and more complex deals.
• Now that VMware has "proven" the concept of hardware virtualization, and now that analysts have predicted this market will be <insert some random 11-digit dollar amount> by <insert some year>, many companies are entering the space.

VMware has awoken the slumbering giant that is Microsoft. Sure, there have been isolated cases of smaller companies successfully competing against Microsoft, or smaller companies partnering with them (e.g. Citrix), but in general, if you're a software vendor and Microsoft puts you in their crosshairs, you days are numbered. Microsoft will add many of VMware's core features into the base OS over the next several years without really increasing the price. And in addition to Microsoft, many other companies are entering the hypervisor space, including Citrix, Novell, Sun, Oracle, and even Phoenix Technologies (the BIOS makers).

Of course VMware has the first-mover advantage in the virtualization market, and conventional business wisdom suggests this can help a company win long-term. But history is full of wildly successful businesses who only entered a market after another "first mover" blazed the trail. Look at Amazon, Walmart, eBay, Starbucks, Microsoft--none of these was the first company in their sapce, and each of them dominates today.

I don't want to minimize the impact that VMware has had on the industry. But I think in five or ten years, VMware will be more significant for what they did in the 2000s, not what they're doing at that time.

I'll write another article tomorrow about what VMware could do to maintain their dominant position. Feel free to share your thoughts in the comments today. Here are some points to kick-start the conversation:

VMware is doomed

• They only make one type of product, and it's a market that everyone is entering.
• They're competing against Microsoft.
• People will want to buy a more complete integrated solution from one vendor, and that includes things that VMware doesn't own
• VMware is too dependent on other vendors that they're also competing against. For Citrix servers, why not use Citrix's virtualization? For VDI, why not use Microsoft's RDP or Calista? For packaging offline Windows VMs, why not use Microsoft's Kidaro to package Microsoft Windows? For software distribution, why not use the packager of your distribution vendor (Citrix or MS) instead of Vmware's Thinstall?

VMware will continue, no problem

• First mover advantage. ("No one ever got fired for buying IBM." We have that now in the virtualization space with VMware. VMware = Virtualization. Period.)
• Even though their stock has lost more than 60% of its value, VMware's market cap is still $18B (3x Citrix)
• VMware is owned by EMC. (Remember only 10% of VMware's shares are public.) EMC's market cap is $31B
• The virtualization market will be HUGE in five years. VMware only needs to grab a small slice.
• Only the actual hypervisor will become a commodity. VMware and others will compete on the value-adds, which VMware leads

What does VMware need to do to survive?

• ?? Let's discuss ??

Virtualization Technology Providers and Contributors in 2008-2009
The following companies are among the providers and contributors of Virtualization technology: 3PAR, Accellion, Acronis, Actional, Active Endpoints, ActiveGrid, activePDF, ActiveServers, ActiveState, Actuate, Adaptec, Agile Software, AGiLiENCE, Agilysys, Akorri, AlachiSoft, Alter Logic, Altor Networks, Altova, AMD, AMDAHL, Amentra, Amyuni, anacubis, Apani, APC, Appcelerator, AppSense, AppStream, Array Networks, Ascential, Astaro, Attune Systems, Autodesk, AutoVirt, Availl, Avanade, Azul Systems, Barracuda Networks, BEA Systems, B-hive, Black Duck Software, Blackbaud, Blade Network Technologies, Blue Coat, Blue Lane, BlueArc, BlueNote Networks, BluePheonix Solutions, BMC Software, Borland, Bristol Technology, Brix Networks, BroadVision, Brocade, Burton Group, Business Objects, CA, CalAmp, Cassatt, Cast Iron Systems, Catbird, Cayenne Technologies, Ceedo Technologies, Cenzic, Certeon, CiRBA, Cisco Systems, Cision, Citrix Systems, ClearApp, ClearCube Technology, CollabNet, Compass America, Composite Software, Compugen, Compuware, Configuresoft, Continuity Software, Coraid, Courion, Coyote Point Systems, Crescendo Networks, CSC, DataCore, DataSynapse, Dell, Desktone, Digipede Technologies, Double-Take Software, Ecora Software, EDS, eG Innovations, Egenera, Elastra Corporation, Electric Cloud, Embotics, EMC Corporation, Emulex, Endeavors Technology, Enigmatic Corporation, Enterprise Management Associates, Entuity, EqualLogic, Ericom Software, ESRI, EVault, eXludus Technologies, F5 Networks, FalconStor, FastScale Technology, Foedus, Force10 Networks, Fortisphere, Forum Systems, Fujitsu, GemStone Systems, Getronics, GlassHouse, Green Hills Software, Grid Dynamics, GridGain Systems, GT Software, Hitachi, HP, Hyper9, Hyperic, IBM, ICEsoft, IGEL Technology, Illumita, ILOG, IMEX Research, Information Builders, Ingres, InstallFree, Integrien, Intel, Intellium, International Computerware, iTKO LISA, JBoss, Juniper, KACE, Kidaro, LeftHand Networks, Leostream, Lifeboat Distribution, Liquid Computing Corporation, Liquid Technology, Lynux Works, Mainline, ManageIQ, Managed Methods, ManageSoft, Marathon Technologies, McAfee, Mellanox Technologies, Microsoft, Mid-Atlantic Computers, Mindbridge Software, Mindreef, MKS, MonoSphere, Motorola, MQSoftware, mySoftIT, NASTEL, Ncomputing, NEC, Neocleus, NeoPath Networks, Neoware, NetApp, Netegrity, Neterion, Netuitive, Neverfail, Nexaweb, NextAxiom, Nimbus, Nimsoft, Niyuta, NoMachine, Novell, ONStor, Opalis Software, Open Kernel Labs, OpenSpan, OPNET Technologies, Optaros, OpTier, Oracle, Pano Logic, Parallels, Parasoft, Perforce Software, PHD Technologies, Phoenix Technologies, Phurnace Software, Pillar Data Systems, PlateSpin/Novell, Progress Software, Prolifics, ProSync Technology, Provision Networks, QLogic, Quest Software, Racemi, Raritan, Raxco Software, Red Hat, Reflex Security, Resolution Enterprises, RingCube Technologies, Riverbed Technology, Rogue Wave Software, RSA Security, Sagnet Solutions, SanDisk Corporation, SAP, SAVVIS, ScaleMP, Scalent Systems, Seanodes, Secure Command, Secure Computing, Sentillion, Shavlik Technologies, ServInt Internet Services, Silpion IT Solutions, SIMtone, Skytap, Skyway Software, Software AG, Sonasoft, SourceGear, Splunk, StackSafe, SteelEye Technology, StillSecure, StoneFly, Stonesoft, Stoneware, StoreVault, StrikeIron, STT WebOS, Sun Microsystems, SunGard, Supermicro Computer, Surgient, SWsoft, Sybase, Symantec, Systar, TBD Networks, Tenfold, TheInfoPro, Thinstall, Third Brigade, TIBCO Software, Tidal Software, Tideway Systems, TOA Solutions, TRANGO Virtual Processors, Trend Micro, Tresys Technology, Trigence, Tripwire, Ulteo, Unisys, United Devices, VaST Systems, VDIworks, VeeAm Software, Verari Systems, Verio, VeriSign, Vicom Computer Services, VirtenSys, Virtera, Virtual Iron, VirtualLogix, Virtugo Software, Virtutech, VisionCore, Vizioncore, VKernel, VMLogix, vmSight, VMware, Vordel, vThere-Sentillion, Vyatta, WaveMaker, Web Age Solutions, WSO2, Wyse Technology, XDS, XenoCode, Xiotech, xkoto, Xsigo Systems, Zenith Optemedia, Zeus Technology.

Cloud Computing Technology Providers and Contributors in 2008-2009
The following companies are among the providers and contributors of Cloud Computing technology: 10Gen, 3Leaf, 3Tera, Absolute Performance, Accenture, Akamai, Amazon.com, Appirio, Appistry, Areti Internet, Boomi, Box.net, Canaan Partners, Cloud9 Analytics, CloudWorks, CNI Systems, CohesiveFT, CSRware, DataDirect, Dell, DNAmail, eBay, Elastra, EMC, EngineYard, Enki Consulting, Enomaly, Excelian, Flexiscale, Fortress ITX, Forum, GigaSpaces, GoGrid, Google, HP, IBM, IBRIX, Joyent, JumpBox, Layered Technologies, Level 3 Communications, Linxter, LongJump, MDV, Microsoft, Moka5 (MokaFive), Mosso, NewServers, Nirvanix, Ocarina Networks, OpSource, Panorama Software, Peer1 Networks, Pervasive Software, Platform Computing, PLX Technology, Qlayer, Rackspace, RampRate, Red Hat, RightScale, rPath, Salesforce.com, Saugatuck Technology, ServePath, Skills Matter, Skytap, SnapLogic, SOASTA, Sun Microsystems, Symphoniq, Symphony Services, Tap In Systems, Teneros, Terremark, Transitive Corporation, Univa UD, Verizon Business, Vertica, VMware, XCalibre, Zabovo.com, ZOHO and Zuora.

This post appeared originally here and is republished in full with the kind permission of the author, who retains full copyright.