Is VMware a one hit wonder?


In my opinion, VMware is much too dependent on their vSphere product suite. This is not an analysis of VMware’s sales or market share. This is a practical look at innovation. It is a look at what happens when companies quickly grow and do not continue to innovate. The innovation needs to compel customers to continue to spend money on new products. In my role as an advisor to the enterprise, I try to look toward the future of enterprise IT. Earlier, I wrote a post on VMware’s path to ruling the datacenter. I also wrote a post on how VMware maybe on the path of previous tech giants such as Novell.

vSphere is the crown jewel and the cash cow of VMware’s product portfolio. Take away vSphere and what is VMware exactly – A Cloud company? No one is making money on enterprise Cloud. Just ask Rackspace. Are they a datacenter management company? When not running vSphere name me a compelling reason for running their management tools? VMware is a victim of its own success. VMware is caught in the same position of many companies that have a runaway hit. They are in need of a bridge over to the next great thing.

Prior to this year, VMware has consistently included new product features at varying levels of vSphere licensing. Up to recent changes in the organization, they’ve delivered on the value promise year after year. Last year, for example, they added Storage DRS, which was a great new feature. When they introduced the concept of distributed virtual switches it came via a higher level of licensing for vSphere. VMware was so confident in their market lead that they attempted to raise the price of vSphere via new fees related to virtual memory licensing. This proved to be extremely unpopular with their customers who prior to the increase just went with the flow of vSphere licensing and paid the upfront premium over Hyper-V and XenServer.

Since the leadership changes in the CEO office, VMware seems to be attempting to shift away from vSphere licensing as the primary source of revenue. They are at least looking to diversify their revenues. This makes perfect sense as there are no questions about what’s happening in the hypervisor market. Both Microsoft’s Hyper-V and Citrix’ XenServer have either achieved feature parity or in some areas have surpassed vSphere in capability. VMware continues to maintain the gold standard as the virtualization management leader. I believe many enterprises will find good is good enough for most use cases. VMware has not had a death ear.
VMware does understand the value of free. With both Microsoft and Citrix giving the hypervisor away and solid options for open source hypervisors, VMware began to offer a free version of ESXi. They also off course changed their pricing strategy with vSphere virtual memory. Their customers do not seem satisfied. Gartner has mentioned that there is a great amount of interest in using OpenStack as an alternative to their Cloud management tools.

Screen Shot 2013-12-16 at 10.06.45 AM

VMware has shifted focus to the datacenter and Cloud. As a result, they have started to create products out of solutions that would have been features in earlier regimes. vSAN is an example. I’ve heard great things about VMware’s vSAN product, which is currently in beta. vSAN allows allows the creation of a virtual SAN using a 3 (or more) node cluster. In addition, it can potentially enhance performance of an existing hard disk based SAN using local SSD storage. It is a product that I’m excited about but like so many of their other products, built on the vSphere suite. It can not be used as a SAN for your KVM hosted OpenStack environment as an example.

Another product/feature is VMware’s NSX.  I get the impression VMware is counting on NSX to carry revenue flag going into the future.  Unlike vSAN, NSX is built independently of the vSphere suite.  VMware hasn’t made public pricing for NSX, which is unusual for the company.  Also, unusual is VMware’s hesitation to make public a downloadable trial of the solution.  VMware has a slick video on the product page showing a virtualization engineer downloading and installing the product in a short period of time and amazing the network administrator with the capability of the product.

Unlike vSphere, vSAN and their new Log manager, VMware has kept NSX close to its chest.  To me it’s an indication of how important the product is to their future.  I get the impression VMware doesn’t want to risk the bad press of some hack like me downloading the product and not having a smooth experience.  A bunch of vExperts writing bad reviews of the product would be more damaging than a bunch of bloggers writing about the pay wall of getting the demo.  VMware seems to want to control the messaging around NSX, which seems very un-VMware like.

Again, this isn’t a financial post but a post from the enterprise’s perspective.  The bottom line is what does this mean for the enterprise?  VMware is obviously in a strong financial position and has some of the most talented people working for them.  However, some consideration needs to be given to where you invest your software dollars and talent resources long-term.  Does it make sense to start spinning up small development and test environments based on competing technologies or services?  Is the value of VMware’s management stack enough to keep you tied to what is perceived to be an expensive hypervisor stack?

I believe VMware has some time.  Projects like OpenStack are still too hard to use for the typical enterprise admin.  Microsoft and Citrix haven’t proved to be extremely competent in providing a management stack that competes with vCenter etc.  I’m just looking forward to seeing VMware introduce products that don’t tie us to the vSphere suite.  I question if it’s a good long-term strategy.

Published by Keith Townsend

Now I'm @CTOAdvisor

5 thoughts on “Is VMware a one hit wonder?

  1. I agree with you, but I feel that VMware has turned the corner with products like vCAC and NSX which are cross platform (hypervisor and Cloud Management Platform, (or even the lack of either).

    Has VMware felt growing pains, sure. I think they have been the little kid who doesn’t want to share, but over the past year and a half started to play well with others. I think VMware’s interim report is good. VMware appears to want to better technology and go back to innovating (and to do that they are acknowledging, not everyone will be a 100% VMware shop.) For them, that is starting to be okay.

  2. I disagree when you say “Microsoft and Citrix haven’t proved to be extremely competent in providing a management stack that competes with vCenter etc.”

    If you look at the old standard server virtualization, Microsoft has been very successful lately and the market share climb of Hyper-V is significant (~30% last time I checked). It’s true that OpenStack is somewhat difficult for the average admin today, but that will change quickly within the next year. OpenStack will have the heart and mind of many Linux folks that values freedom, and Hyper-V will have the heart and mind of many Windows admins where the licensing makes perfect sense.

    When you say NSX will be a future revenue stream you might be right, I just always thought they would try to write off the 1B$ as quickly as possible and then bundle NSX with a standard VSpehere Enterprise Plus license.

    1. I agree the Microsoft’s market share has risen but I’m not add quick to attribute it to the quality of their management platform opposed to the perceived price difference.

      Thanks for joining the conversation.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: