VMware was a busy company in 2011, and many industry-watchers think it made a number of mistakes. However, the virtualization market leader did make a number of moves that advanced its strategy and product lines.
For those convinced that VMware made all the wrong moves in 2011, a look at third-quarter revenue offers evidence that it's still doing a lot right. VMware increased revenues 22% in the U.S. in the third quarter and 42% internationally, with an overall growth rate of 32%, reported Oct. 17. The international growth is important because the U.S. has led the world in moving to virtualized servers, and now VMware is benefiting as the rest of the world hurries to catch up. Here's what VMware did right and wrong along the way.
VMware's Best Moves
No. 1: A decisive move into managing the virtualized part of the data center, which in the not too distant future may be most of the data center.
Operations monitoring, configuration management, and capacity management are not VMware comfort zones. It could have left these tasks to third parties, or to the conventional systems management providers, which have been busy extending their physical systems management into virtual systems. But it's not enough for a data center manager to spin up virtual machines; most want to move them around as well. And they need a lot of infrastructure knowledge to move VMs and make sure networking, storage, and existing security settings move as well. Live migration, or "vMotioning," is a big selling point for VMware because it leads to reduced server use and energy savings. But the manager of the VMware environment needs to know where to move VMs.
Citrix Systems and Microsoft are contending with VMware in the virtualization management market, along with traditional systems management vendors HP, IBM, CA Technologies, and BMC. But VMware's initial offering in March, vCenter Operations Management Suite, covered three key bases well: configuration, monitoring, and capacity management. VMware's product suite is already generating the data needed to provide systems management in this brave new virtualized world. However, the game isn't over. Not every customer wants their future systems management to come from a virtualization software supplier. Some think that VMware, already the high-price option, will end up with too much of a stranglehold over the virtualized environment.
No. 2: The release of vSphere 5, VMware's overall virtualization environment.
vSphere 5 includes version 5 of the ESX Server hypervisor, and it contained 200 new features and improvements over its predecessor, giving VMware an edge on the competition. The size of the virtual machine moved up from eight to 32 virtual CPUs, capable of using one terabyte of memory, while its ability to generate I/Os moved up to one million per second. Under vSphere 5, IT can set up a high-availability architecture quickly. With Auto-Deploy, 40 virtual servers can be deployed in 10 minutes, as opposed to a manual deployment over 20 hours. In short, virtualization allows a more automated approach to managing the data center, and vSphere 5.0 takes a giant step toward automating some of those key functions.
No. 3: VMware's the creation in April of Cloud Foundry, a platform as a service for hosting developers.
This was VMware's most strategic and least understood move this year. Uncharacteristically, VMware made the software behind Cloud Foundry open source code, an adroit move that soothed some fears that developers have over getting locked into VMware's platform or proprietary product set. VMware already owned the Spring Framework; providing a cloud environment for development as well a popular Java framework made Cloud Foundry a magnet for developers, and developers soon added multiple languages and approaches as well.
All of this might seem like a secondary exercise or even a distraction from VMware's main task of virtualizing the data center. But what better way to ensure that the next generation of applications--ones built to take advantage of a virtualized data center--will run under VMware than to provide a hospitable development environment that transitions new software smoothly into VMware infrastructure? Virtual machines exist to run applications. With Cloud Foundry, VMware positioned itself as supplier to a large group of independent app developers. In November those developers, voting in an Evans Data survey, named Cloud Foundry their favorite development platform over Amazon, Microsoft's Azure, and Google App Engine. In the long run, the benefit from connecting the means of producing applications to the virtualized environment in which they will run will seem obvious.
[ To learn more about one VMware cloud partner, see VMware, Bluelock To Offer Beta Hybrid Cloud Operation. ]
No. 4: VMware's designation of a set of public cloud partners.
Wait, isn't VMware a proprietary vendor focused on the enterprise data center, not the public cloud? It is, but VMware's sees that the data center of the future will involve hybrid operations--an internal data center meshing with a public cloud. Thus, it's designated BlueLock, SingTel in Singapore, Softbank in Japan, and Colt data centers in Europe as primary public cloud partners that are implementing VMware's vCloud-based infrastructure. In mid-October, Dell announced it was a VMware cloud partner as well. VMware customers may implement their own private cloud with VMware products, then move virtual machines back and forth between the data center and public cloud, or fire up auxiliary engines in the cloud to meet peak demand. vCloud is an attempt by VMware to wean its customers from cloud services from Amazon Web Services, Google, Microsoft, and IBM, and encourage them to use a VMware-compatible alternative. And it put together a globe girdling coalition of public clouds to give VMware customers a choice of where their different units may deploy.
VMware's Worst Moves
No. 1: Adding a virtual memory limit per vSphere 5 license.
This move in July produced a stiffer protest than the company anticipated. VMware announced 32-GB and 48-GB limits for vSphere 5 Enterprise and Enterprise Plus, then--reacting to the outcry--doubled them within three weeks to 64 GB and 96 GBs. Not all customers reacted, but those affected were quick to express themselves on the implications of such a limit. That was a miscalculation of what the customer base would accept. The move to pricing based on the use of a virtual asset is a new concept, one that is sure to become a pattern in the future. But for now, VMware is leading the transition on its own. Furthermore, the price change most affected its largest customers. The revised memory limits were generous enough that most small and midsized businesses and some large businesses weren't. The ones who were hit included VMware's customers adopting virtualization at the most aggressive pace, including those who have virtualized their databases, a move that requires a lot of memory. Not surprisingly, these aggressive customers gave VMware some push back.
Competitors such as Microsoft and Oracle made much of the fact that they were sticking with the established per CPU pricing, an approach that favors customers as the number of cores and amount of memory per CPU climbs upward. But if VMware makes a virtual asset "use" metric stick, look for competitors to adopt similar pricing--after VMware has taken the heat. Otherwise, they're leaving a lot of money on the table, based on the growing usefulness of the product sitting on more and more powerful hardware. Asked about the fall-out of its pricing move, VMware CEO Paul Maritz said at VMworld in Las Vegas Aug. 30, "Every time you try something new, you have to expect some feedback. We got that feedback and we had to adjust. I don't think that's the end of this journey."
At the same time VMware will be closely watching its revenue stream. Any flattening of that growth curve could mean that customers have decided the time has come to shift to one of the commodity hypervisors in the market, including Microsoft's Hyper-V or Citrix XenServer, which also are lower priced than VMware. Some shift seems likely. But the most aggressive implementers will also have to calculate what a shift would actually mean in terms of, say, managing databases under one hypervisor and running some applications under another. Nevertheless, some customers will at least give those competitors' hypervisors another look. VMware found that 38% of its customers were considering such a move, according to a survey compiled by a third-party supplier to the VMware environment, Veeam. (See VMware Users Hear Siren Song Of Lower Costs.)
No 2: Falling behind in the desktop virtualization race.
Although there's no precise count to show it, I think VMware fell behind in desktop virtualization in 2011, thanks to Citrix' multi-pronged approach to delivering a quality desktop experience and that company's growing credentials for delivering secure virtual desktops. Citrix has been cooperating with the U.S. Air Force and Defense Intelligence Agency to build secure desktops that they can use in hazardous settings such as behind enemy lines. That gives Citrix the right mojo as enterprise IT tries to protect sensitive data. However, there's still a long ways to go before desktops will be widely virtualized--only a fraction have been so far. So there's no need to count VMware out of the race.
No. 3: Losing focus with end user app acquisitions.
I hesitate to call this an outright mistake, but I can't help thinking its moves in that market reflect a growing fear about losing ground in virtualized desktops. The thinking might be: Put together a killer set of applications for the virtualized desktop, and it can make up the lost ground and ensure domination of this side of the virtualized enterprise as well. VMware has acquired Zimbra, SlideRocket, and WaveMaker, which are questionable in terms of contributing to VMware's immediate strengths and goals.
VMware officials explain it's a post-PC era, and they're preparing to supply the post-PC virtualized environment with applications end users need. The functionality found in these applications could be made available as services to Cloud Foundry developers, aiding thousands of independent developers in building next generation apps that keep VMware virtual machines at the forefront. And maybe that's where the payoff comes. But as far as I'm concerned, the jury is still out on these acquisitions.
Charles Babcock is an editor-at-large for InformationWeek.
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