VMware Killed the Past. Can It Claim the Future? The company that helped bring in cloud computing could become a tired relic or lead big business customers to a whole new kind of computing

AUGUST 24, 2013, 9:00 AM

VMware Killed the Past. Can It Claim the Future?


VMware is a 15-year-old tech company with a market capitalization of $36 billion. Next week, it will host 21,000 customers in San Francisco and will start to find out if that means it is young or old. “It’s a statement of our success how quickly we’ve become mainstream,” said Pat Gelsinger, the company’s chief executive. Now, however, he says, “we’re at the crossroads.” As what he calls “the last great company of the client-server generation,” VMware is going through much of the same transition to the world of cloud computing, big data, and mobility, that bedevils so many giants of the old tech world. Uniquely, the company has a legitimate claim to have helped destroy the software world in which it started. VMware’s main product, virtualization software, allows one computer server to do the work of many, and for complex tasks to be shared across several machines. That disrupted the old computer server business, and helped usher in the current model of big data centers and cloud computing. But now, as other companies offer both proprietary and open source virtualization, VMware has to move on from the world it helped destroy.Next week at VMworld, its annual customer event, Mr. Gelsinger will lay out the most detailed plan yet for how VMware will move ahead. VMware will be offering public cloud computing, much like Amazon Web Services and Microsoft’s Azure, but with higher service levels and quality of service guaranteed.

The cloud, spread across the data centers of about 20 service providers, will supposedly work better with the VMware products now at 500,000 companies worldwide than the competition can.

In other words, the cloud-era VMware is aimed at mainstream business, as opposed to the start-ups that rely on Amazon Web Services, or A.W.S., for data hosting. Other initiatives, like device virtualization that enable a single phone to be partitioned between work and personal lives, seem likewise aimed at more formal corporate customers.

VMware’s software-defined networking, a product of last year’s acquisition of Nicira for $1.26 billion, will also be on show, both as a way to more efficiently run businesses, and make devices work better in a corporate cloud.

There will also be an interesting “franchise” business plan that seems like a blend of the old software reseller model and the newer trend of building a big base of developers. The 11,000 companies in 70 countries that currently sell VMware virtualization software will be able to remain independent, selling the software and developing services and software around it, or they can agree to what Mr. Gelsinger termed a “highly prescriptive” relationship with VMware.

VMware will also sell its products direct, particularly to big corporate customers. “We can see customers using multiple outlets,” Mr. Gelsinger said. “A bank in the U.S. with lots of information technology assets might work with us directly, but use a third party for its Middle East operations.”

“Every one of our customers is moving to a cloud, mobile, multidevice world, and they have to save money along the way,” he said. “They’re all under pressure to build for the future.”

He could have been describing his own company, too. This “let us lead you to the cloud” is not the most original strategy from an old guard company – Hewlett-PackardCisco, Oracle and Microsoft all push versions of the theme. A.W.S., meanwhile, is striving to make itself more attractive to mainstream businesses.

As the company that both came from and killed the old world, VMware has an interesting claim on knowledge of where its customers (and resellers) were, and where they might need to be.

The kinds of questions Mr. Gelsinger is likely to face, including his plans for offering good ways to run new kinds of databases, analytics, and data storage – as well as how well his resellers like their new deal – will say a lot about how much this is also a company for the future.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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