Techies to Grapple With Big Changes; VMware’s annual conference, VMworld, comes as a technology approach that the company pushed—to change how servers are used—is beginning to affect other markets

August 25, 2013, 10:34 p.m. ET

Techies to Grapple With Big Changes

DON CLARK

SAN FRANCISCO—VMware Inc. VMW +2.74% isn’t exactly a household word, at least outside of Silicon Valley. But the software maker’s annual conference has become a key meeting place for those who help manage computer rooms—a techie tribe grappling with major changes. The event it started, called VMworld, is kicking off in a convention center here this week. It comes as a technology approach that the company pushed—to change how servers are used—is beginning to affect other markets.VMware, which is majority-owned byEMC Corp., EMC +1.66% popularized a concept called virtualization—adding a layer of software on server systems that allows each one to run multiple operating systems and applications. Companies use it to save money by getting more work done from their servers, and to get computing jobs up and running in minutes, rather than weeks.

The San Francisco event is expected to focus in large part on how far the concept can be pushed in other fields, particularly in the devices that pass data among server systems and to the Internet.

Virtualized or “software defined” networking—suddenly one of the hottest buzz phrases in high tech—promises to shift some communication tasks from costly, specialized boxes to the standard servers that evolved from personal computers. SDN, as the trend is abbreviated, may reduce the cost of networking.

Happening This Week

Monday

Durable-goods orders

VMworld continues in San Francisco.

ITEXPO begins in Las Vegas.

Tuesday

Midwest IDEAS Investor Conference takes place in Chicago.

Earnings: DSW, Movado, Tiffany, TiVo

Wednesday

Earnings: Brown-Forman, Express, Guess, Williams-Sonoma, Zale

Thursday

GDP and jobless claims

Earnings: Campbell Soup, Krispy Kreme Doughnuts, Salesforce.com

Friday

Personal income and outlays

The Taste 2013 begins in Los Angeles.

Pax Prime, an event for game players, gets under way in Seattle.

Earnings: Big Lots

“It’s about separating the intelligence from the hardware, making the network programmable,” says Joe Skorupa, an analyst at the research firm Gartner Inc.IT -0.07%

Few companies have actually deployed such technology in their data centers. But some big bets are being placed.

VMware, for example, paid more than $1 billion last year for Nicira, a prominent startup in the field. Meanwhile, the potential appeal of the technology has prompted most makers of networking hardware to work on their own SDN offerings rather than see sales go to new rivals.

They include networking-hardware giantCisco Systems Inc., CSCO -0.62%which is a sponsor of VMworld, even though the software company—because of SDN—could turn into a competitor.

Patrick Gelsinger, VMware’s chief executive, said he welcomes the move by networking companies to compete with or co-opt SDN. He expects that whatever the networking specialists do in software, they will make it easier for his company to create higher-level programs that companies can use to manage data-center hardware.

“We are delighted they are jumping on the SDN phrase,” Mr. Gelsinger said.

At the same time, VMware faces threats of its own. They include big rivals likeMicrosoft Corp. MSFT +7.29% as well as low-cost or free alternatives to its current virtualization technology and future SDN offerings, based on what the industry calls open-source software.

“People are tired of paying the VMware tax,” said Patrick Moorhead, an analyst who runs a firm called Moor Insights & Strategy. “I think enterprises will be afraid more taxes are involved here.”

The arguments tend to be quite technical. But there is no debate that VMworld is one of the key places the debate will play out.

VMworld, in its 10th year, isn’t as large as events being hosted in San Francisco this fall by Oracle Corp. ORCL -1.94% and Salesforce.com Inc. CRM -0.37% But it has certainly grown, from 1,600 attendees in 2004 to more than 21,000 expected this year. Many companies and their employees come to show off products and attend keynotes, panels and parties.

Besides SDN, other hot topics this year include such new-wave technologies as applying virtualization to data storage and technologies that allow desktop workloads to be managed on servers.

The underlying bet is that such technologies will ultimately reduce the cost of computing, in turn creating more demand and more business for everyone.

“Any time we see the cost of computing go down, the market size goes up,” said Gary Orenstein, an executive vice president at Fusion-io Inc., FIO -0.19% a data-storage company exhibiting at VMworld.