Founder and CEO Greene gets her walking papers

VMware has successfully sold software to some of the largest companies in the world. But now, with competition mounting and still a huge virtualization market to be gained or lost, it faces a crisis of confidence in its ability to reach deep down into the ranks of business.

Will VMware continue to dominate a market it invented--virtualization of commodity, x86-based servers--or will its brainchild become a feature of the operating system, as Microsoft maintains with the launch of Hyper-V as an addition to Windows Server 2008?

Whether customers view it as a separate, general-purpose technology, as VMware says they should, or as a feature of Windows may be less important than which company has the best mechanism for reaching new customers, especially those legions of small and medium-sized businesses eager to realize the benefits of virtualization for themselves.

Microsoft, with its ability to add virtualization as a $28 feature to each copy of Windows Server 2008 that it ships, has one of the best distribution mechanisms available. As the market for EMC's independent subsidiary shifted, CEO and chairman Joe Tucci must have questioned what VMware's answer was and, as subsequent events seem to indicate, decided it wasn't good enough.

The first victim of the crisis is Diane Greene, one of five founders of VMware in 1998 and for 10 years its CEO, leading it on a blazing growth path to hit $1.3 billion in sales last year. Replacing her is Paul Maritz, a veteran of Windows development and marketing during his 14 years at Microsoft, which he left in 2000. He joined EMC when it acquired his cloud-computing firm, Pi Corp., in February and became president of EMC's new Cloud Infrastructure and Services division. Maritz's experience at Microsoft--he was a member of the executive committee that ran the company--will be useful since Microsoft is now the main threat to VMware's rapid growth. Since joining EMC, he has reported directly to Tucci.