Paul Maritz took the helm of VMware, Inc. in July 2008, just as the company confronted a radically new competitive environment. Maritz moved quickly and boldly to respond to the Microsoft threat--by deciding to offer a version of VMware's own virtualization platform product for free. The case study offers an overview of virtualization technology, a brief history of VMware, including descriptions of its acquisition by computer storage giant EMC, its August 2007 IPO, and Maritz's arrival as CEO.
David B. Yoffie; Andrei Hagiu; Michael Slind
Harvard Business Review (709435-PDF-ENG)
September 18, 2008
Case questions answered:
- Why is the argument about who is at the bottom of the stack important? To whom is it important?
- Assess VMware’s strategy vis-à-vis the strategic intent idea.
- What is happening on the hardware side of the world that is effectively a part of VMware’s strategy [whether stated or not]?
- Describe the Eco-system around VMware. What is their eco-system strategy?
- Do a Five-Force Model analysis for VMware’s industry. What does it tell you?
- To whom are virtual appliances scary? Why?
- Looking forward at the investments that VMware is considering, how serious is their priority [and $] conflict? [Target the high end and go up the stack? Do SMB well? Can they do both?]
- In your opinion, is this a browser wars re-enactment? Defend your answer.
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Case answers for VMware, Inc., 2008
1. Why is the argument about who is at the bottom of the stack important? To whom is it important?
The argument about being at the bottom of the stack is important as it is the first layer of software that takes control of the physical hardware and acts as a mediator layer between layer atop and hardware hence being the control layer in the system architectural design. Traditionally, an OS was the lowest level of software on a computer; it performed basic tasks such as allocating memory, managing hardware, and monitoring system performance. By the introduction of Virtualization, in the hypervisor approach, the layer sat between the OS layer and the hardware layer, while the OS managed the applications only, hence taking over the control from the OS layer. It was important for VMware to advance to hypervisor approach as the hosted approach incurred a large performance penalty since it required three layers of software (host OS, virtualization layer, and guest OS) to run any application. Also, VMware leaders acknowledged that virtual appliances had the effect of commoditizing the OS market by competing with full-featured OSes.
It was important for Microsoft, by far the dominant provider of operating systems, as the scope of OS was only limited to running applications. Also, with VMware’s belief of hypervisor being part of the hardware will bring fundamental changes to the computing architecture.
2. Assess VMware’s strategy vis-à-vis the strategic intent idea.
- Strategic intent is defined as a specific point of view of the future aspired that is conveyed in a compelling statement about, where an organization is going, that briefly conveys a sense of what the organization wants to achieve in the long-term.”
- In 1998, VMware founders announced, aimed “to be a path-breaking system Software Company whose software will become pervasive by the year 2005”.
- From its desktop virtualization to cloud computing, as for proliferation of its platform, VMware adhered to a strategy that targeted all segments of its emerging market.
- It worked to extend its reach within enterprise data centers, even as it sought to crack the SMB market through its distribution partners.
- It invested heavily in R&D to develop “killer apps” in the server virtualization space, while also pushing to bring virtualization to the desktop market.
- VMware had an immense lead in the virtualization market: Its products ran on an estimated 75% to 95% of all virtualized servers
- By 2008, more than 100,000 customers were using VMware products making it a universally used virtualization product. The company offered two dozen products in all, ranging from free entry-level platform offerings to the high-end virtualization solutions that accounted for…