July 17, 2012
With the tech press going into a tailspin yesterday over long-time Googler Marissa Mayaer being appointed as Yahoo! CEO, an equally exciting piece of news and separate but connected rumor was largely ignored. GigaOM reported that VMware is likely planning to spin off some of its assets into a separate company. These assets will likely be joined by some specific products from the EMC stable to create a cloud-specific business. As GigaOM reports it;
From what we have learned, this new company would include the following pieces:
- Cloud Foundry: This is VMware’s platform-as-a-service offering that lets developers easily deploy applications built using a wide variety of programming languages, frameworks and other components. Thus far, Cloud Foundry’s associated open-source project has attracted more attention than VMware’s paid service, serving as the platform for AppFog, Iron Foundry (a .NET implementation) and ActiveState’s Stackato on-premise PaaS software.
- Greenplum + Chorus: Greenplum is EMC’s big data division, which sells its namesake analytic database as well as two Hadoop distributions and analytics collaboration software called Chorus. Greenplum also sells preconfigured appliance, called the Big Data Appliance, on which to run all its software.
- Project Rubicon: This is the name of an EMC and VMware joint venture created earlier this year and appears to be the IaaS play. Rubicon has an independent board, but people working for it are paid by VMware or EMC. At its creation, the Rubicon employees consisted of the technical team behind Cloud Foundry, but not the marketing or operational staff. The venture was designed to help give the sense of independence from EMC and VMware for Cloud Foundry customers. Project Rubicon includes IaaS-type technology developed by the Mozy team. Mozy was a storage company acquired by EMC in 2007 and taken over by VMware in 2011.
At the same time, GigaOM also detailed the, currently unconfirmed rumor that VMware CEO Paul Maritz has been ousted as CEO. No official word on the speculation from VMware, and no indication on where Maritz will end up but GigaOM speculates that Moritz may be offered the chairmanship of the new cloud spin out company.
What is obvious however is that Maritz’s leaving is closely tied to VMware essentially ignoring the rise of cloud computing until very recently. While they’ve continued to pursue their enterprise hypervisor business, and have made some interesting (if a little confusing) application acquisitions that, thus far, have proved to be uninspiring for the business. More recently VMware has softened its approach towards heterogeneity and the recent acquisition of DynamicOps is a particularly interesting move for a company that, until now, has been all about extreme lockin.
The new CEO, and the board when making their deliberations about possible spin outs, have a number of difficult facts to face;
- VMware’s traditional business is highly lucrative, but being eroded by cloud companies such as Amazon
- VMware providing a more compelling cloud story would likely be toxic to its high margin business as above
- VMware’s application assets are disconnected and disjointed and largely irrelevant
- VMware has a vibrant growing ecosystem around CloudFoundry but PaaS adds confusion to the existing, and a potential cloud-specific future business
MyPOV – What VMware should do
So what’s a CEO to do? Here’s my plan for the VMware business(es);
- Ditch the niche applications – Sliderocket is a great product, but it’s completely disconnected from everything else VMware does. Zimbra is similarly an outlier. Socialcast could be a useful tool to create a social fabric across the other VMware product catalogue but at this stage it’s yet another silo off to the side. My advice is to flick off Sliderocket and Zimbra, and make an assessment on whether Socialcast can be folded in as a fabric quickly and easily. If a “black ops” team could do what is necessary on Socialcast in say, a couple of months then do so, otherwise give Socialcast the flick also. It will be hard to admit the acquisitions were unwise, but better a quick dose of pain than long term confusion
- Understand that the future is heterogeneity – the DynamicOps acquisition speaks to this realization within VMware, but the company needs to double down on a mixed view of the cloud. Create a standalone entity that is focused on cloud infrastructure – include DynamicOps in with this and direct the existing infrastructure business to “play nicely” with the new unit. The new business “VMCloud?” can be a stellar vendor of public and private cloud technologies and the DynamicOps inclusion can mean that the products have a compelling story when seen alongside customer use of existing VMware products and services. In doing so VMware disrupts the IT management and service provision space before other players (BMC anyone?) are able to do so themselves
- If VMCloud won’t fly, do a Microsoft – Microsoft has signaled it is finally going to play a compelling game in the hybrid cloud space. I’m predicting an expansion of the “private Azure” play well beyond service providers. If VMware decides that it wants to keep all of its infrastructure business together, then it has to do the right thing and forego some short term hyper-profit for long term stability. Provide DynamicOps to customers as an accessible and open turnkey solution to bringing together all their assets (physical, virtual, public and private) under one pane of glass and make sure that they incentivize their salespeople to effect the move – it’s going to be hard but some kind of quota system that mandate lower margin but longer term cloud sales is going to be necessary
- Let PaaS shine – the biggest barrier to CloudFoundry hitting it out of the park (beyond customer confusion about what PaaS actually is of course) is the uncertainty around VMware’s intentions. But by spinning off CloudFoundry alongside IaaS plays, this confusion is replaced by a stack-level confusion. While I realize AWS is successfully moving from IaaS to PaaS while still articulating a compelling story, VMware has the added confusion from the fact that CloudFoundry is an open source product. My advice is to let CloudFoundry be its own business unit, and bolster the platform by the addition of some smart management tools (thing DynamicOps for PaaS). Obviously I’m bullish about this particular area since I’m an investor in PaaS management and marketplace vendor Appsecute (see disclosure page). I would say that the reaosn for my investment in the company stems directly from the fact that it’s a very necessary addition to the PaaS stable – and as such something of a no-brainer
VMware is a big, established company. But not so big and established that it can’t innovate quickly. The key challenge is being prepared to forego short term revenue for longer term stability and sustainability. The entire organization needs to see that they’re standing on a platform that, while possibly not burning, is at least smoldering slowly. The rate of change is increasing all the time and VMware risks being left irrelevant by changes that a bearing down on it. Innovate or die!