Virtualization development by VMware
Talking about the IT strategy in virtualization field, the discovery of the amazing
implementation idea of young enthusiastic founders that built VMware company cannot be
overshadowed. In the late 90s nobody knew that such small company was built by five passionate
engineers who drove the world with new type of server architecture, so that 200 computers of
software operated within one box.
The entry of game changing technology
According to the consideration of T. Stephen, the main benefits of VMware that moved IT
agility to expand the business were simplification of operation and its maintenance, dramatic
reduction of costs for redirection into new opportunities and innovations and, of course, flexible
service delivery that met the business requirements.
Making some research it can be seen that vMotion is an
innovative technology of live migration of multiple VMs or
packages of software files without interruption of virtual services
as represented on Fig.1 that made a great influence on the
development of virtualization. Other parts of clustering also have
their own goal and abilities, like dynamic resource scheduling",
distributed power management and backup storage. Fig.1 vMotion
So, how they did succeed?
The main component of virtual infrastructure is definitely High
Availability (HA) that is responsible for disaster recovery, and
its cluster recovery is aimed to share resources, balance loading
and improve the performance and reliability. It was represented
as the essence of strategy in the way of performing unique
activities differently than competitors did, because the strategy is
not a just a marketing slogan.
Fig.2 VMware infrastructure
The evolution of VMware as a company
As Porter stated, company must stay flexible so as to respond quickly to any market change
and position its technical advantage in enterprise market. Due to being new fast-growing company",
VMware was able to innovate with simple organizational structure and developed government
regulations, and enter the global market. In 1999 the first product Workstation 1.0 was launched
to let customers run several OS on a single PC. Moreover, the company had a superior performance
based on its strategic differentiation and operational effectiveness, and outperform the rivals
making establishment of difference as patent of hypervisor that it can preserve. Having achieved
foremost position due to vMotion technology, the business diversity was expanded around the
world that followed by the greatest deal with EMC Corporation in 2004 that purchase VMware for
over $600 million. Nevertheless, this difference was cost efficient for customers and high
profitable for VMware, because the cost was generated by performing outstanding activities that
will be described more in depth.
Fig.3 The history in timeline
The company became publicly traded in 2007 starting their stock value at $29 and earning
$1 billion of revenue a year later. Between 2009 and 2011 the company presented vSphere as a
cloud computing platform and vCenter as a management application for automation of operations
and control of virtual environments.
As you can see on the Fig.4, VMware was a leader of
market for x86 server virtualization in 2011 based on ability to
execute and completeness of vision. The company had their own
unique product and deliverables, or amazing innovative idea that
was attractive for reliable usage. It was an example of productivity
frontier that is a sum of best practices at any given time. According
to Porter’s research, managers should turn the vision of company
as a whole into the “core” competencies, “critical” resources and
“key” success factors. Fig.4 Leaders Quadrant
The founders of company knew that they need to install their distinctive OS called
hypervisor and use existing technologies, as a server with settled CPU, memory, storage and
network. The companies were interested in this technology not only for decreasing the price for
electricity for about 30%, but also for reducing of space, cooling equipment and staff that provide
technical support for infrastructure. Nevertheless, it was important to keep strategic position that
required trade-offs with need to choose and build internal limitations. Another striking feature of
the strategy was the combination of activities that fit and reinforce one another in order to create a
real economic value. Once company combines the activities with the second and third order fit",
which occur when activities are reinforcing and going beyond to optimization of effort, then more
sustainable its advantage will be. So, the company strived to develop in different industries and
purchased network virtualization company Nicira in 2012 and mobile device company AirWatch
in 2014 for about $2.8 billion in total.
However, any successful achievements in one activity will be followed by dividends in
others. Once these activities complement each other, competitors will gain benefits of imitating
till the whole system is completely matched. Thus, Amazon company, which used the service of
VMware at the beginning and paid for its products, later built their own OS for virtualization and
established its position not only in area of online shopping, but also in server virtualization and the
biggest shark within cloud computing.
Fig.5 Transformational results
VMware in cloud with own software
Due to rapid market changing, the company decided to expand its business and moved
towards the development of cloud computing and IoT. Surprisingly, in October 2016 VMware and
AWS announced about the partnership and confirmed the new technology of utilization of
VMware data center management on the AWS cloud computing service. The CEO of VMware",
Pat Gelsinger, explained this partnership as the result of their customers telling what they needed.
There was a heated discussion regarding the choice of the current leading cloud computing
provider in the market, which in its own perspective seems to be a perfect way to pick off
VMware’s customers. Thus, VMware suggested “hybrid cloud” that includes a combination of on-
premises, private and public cloud deployments of its infrastructure.
Fig.6 The road to cloud infrastructure
Another competitive advantage of this announcement is the ability to utilize the Relational
Database Service (RDS) of AWS that allows enterprises to manage databases in cloud. Even if it
is quite tricky solution, may be temporary or not, clients still use VMware on AWS with existing
contracts that is better than migration from VMware entirely. It means that Amazon will be primary
“public” cloud partner of VMware, while VMware will be primary “private” cloud partner of
Amazon. Even if the software of both companies can run together with familiar interfaces, APIs
and CLIs, it is important to have clever software engineering staff and technical support. Therefore",
VMware cloud on infrastructure of AWS will be sold, managed and operated by VMware
including vSphere, virtual SAN and NSX and set of data center technologies.
According to the news of 2017, VMware is planning to combine VMware Cloud
Foundation using a hyperconverged form factor with the VMware Cloud managed service so as to
deliver end-to-end service via software-defined data center infrastructure. Also, the further plans
include the development of IoT, namely 5G that promises to transform the entire scalability of IoT
and keep leading position in this direction.
Current situation of VMware
Moving to the current value of company that can be represented by the stock value of the
company, the changes during the last 12 years can be monitored on Yahoo finance source. Based
on storyline of the latest changes, it seems that the stock value was fluctuating but still increasing.
Fig.7 Stock value history of VMware
As you can see on the picture above, the stock price fell due to crisis situation in US in
2009 and the large deal as acquisition of EMC Corp. Including VMware by Dell Inc. for $67 billion
in 2015. This deal gave some uncertainty what is going to happen with VMware and how it will
be operated later. However, it is impossible to predict what is going to happen with VMware even
after the partnership with Amazon. Obviously, Amazon will receive more benefits as fast attraction
of big enterprises to use their services and products, while VMware will be able to stay in business
and provide cloud infrastructure using cloud storage of Amazon.
Curious thoughts appear in my mind about their future plans to build their own cloud as it
was in history with the invention of hypervisor, but then what was the purpose of this partnership?
Nowadays, other technology giants as Microsoft and Oracle are responding to market change and
planning to build own cloud infrastructure, in case of Microsoft the cloud solution called Azure
was not successful in comparison with AWS, but it is still developing. Personally, I think that
VMware was too self-confident and blindfolded with the success of one product so that their efforts
failed and they stopped building own cloud called Vcloud Air that flopped due to awful user
interface, limited multi-tenancy and bad scalability. As far as I understand, in competitive market
environment it is impossible to stay in high demand with the same product that already has similar
alternative and cheaper price. Also, I guess now managers of VMware understand their mistakes
having realized that cloud computing is a breakthrough in IT world, try to extend time to innovate
and use the service of AWS temporary. Making some research I found out that the hypervisor of
VMware was not built for public cloud and it was required to make major alterations to enter this
market. Some people consider this solution as the end point for the company, while others believe
that it hides something special for the world that can preserve its difference as gamechanger in the
industry not only of virtualization and cloud computing.
Another thought was regarding the choice of Amazon instead of Microsoft. As for me, in
case of the partnership of VMware and Microsoft, whose target customers are big enterprises that
provide huge investments, need office productivity software and ask for technical support, the
Amazon would suffer and receive less market share. Even if the cloud product of Microsoft is not
efficient enough, the power and strategic thinking of its management are definitely unbeatable. On
the other hand, Porter stated that once rivals imitate achievements of each other, the competition
becomes a series of races with similar paths so that nobody can win. Following by the wars of
attrition and performance pressure, there is no better option than buy company. Therefore, it can
be considered that in case of this partnership Microsoft will just buy the VMware one day with all
its benefits and it is going to be the end of its bright history.
In any case, it can be noticed that the strategy of innovators worked very well attracting
enterprises and gaining their trust during the last two decades. The basics of the strategy were to
define unique position, make trade-offs and forge fit among activities. They understood that the
operational effectiveness is important part of management, but it is not a strategy. Let’s follow
their success and stay inspired by the achievements and unbelievable opportunities that were
possessed by the great company VMware.
References:
1. Bloomberg, J. (2018) VMware extends strategy from data center to cloud to edge.
Retrieved from: https://www.forbes.com/sites/jasonbloomberg/2018/08/30/vmware-
extends-strategy-from-data-center-to-cloud-to-edge/#379ae14715db
2. https://finance.yahoo.com/quote/VMW?p=VMW
3. Stephan, T. (2012) Virtualization 101: Everything you need to know to get started with
VMware. Retrieved from: https://www.slideshare.net/idatapath/virtalization-101-
everything-you-need-to-know-to-get-started-with-vmware
4. https://www.vmware.com/company.html
5. Dignan, L. (2017). VMworld 2017. Retrieved from:
https://www.zdnet.com/article/vmworld-2017-everything-you-need-to-know-about-
vmwares-hybrid-cloud-strategy/
6. Vanian, J. (2016) Amazon and VMware are now best friends when it comes to the cloud.
Retrieved from: http://fortune.com/2016/10/13/amazon-vmware-partnership-cloud-
computing/
7. Claburn, Th. (2016) Amazon AWS and VMware. Retrieved from:
https://www.theregister.co.uk/2016/10/13/amazon_vmware_unite/
8. https://www.quora.com/Why-didnt-VMWare-thought-of-cloud-services-before-AWS-
even-though-they-created-virtualization-products-first
