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CEO Greene Ousted In VMware Shake-Up(TechwebNews.com Via Acquire Media NewsEdge) WHERE NEXT? VMware under Maritz still has several options open to it. It can maintain its high-end corporate dominance and expand market share as far as a richly featured product set will take it. It could seek some accommodation with Microsoft where it adds management features to virtualized environments that have a heavy percentage of Hyper-V virtual machines. Or it could stake its future on supplying virtual machine technology to cloud computing service providers, who are likely to have their own special needs for it. "Paul Maritz is very experienced in large enterprise computing. He would know how to keep moving that function bar up, up, and up," says Bittman. Yet there's a huge prize to be won among small and medium-sized businesses, where only 1% to 2% of servers are virtualized. Microsoft no doubt has that in mind when it makes an option available in the operating system at a low price. Maritz has plenty of choices for how VMware might respond. The only certainty is that it will be anything but business as usual as the next major round of competition gets under way in virtualization. Founder and CEO Greene gets her walking papers VMware has successfully sold software to some of the largest companies in the world. But now, with competition mounting and still a huge virtualization market to be gained or lost, it faces a crisis of confidence in its ability to reach deep down into the ranks of business. Will VMware continue to dominate a market it invented--virtualization of commodity, x86-based servers--or will its brainchild become a feature of the operating system, as Microsoft maintains with the launch of Hyper-V as an addition to Windows Server 2008? Whether customers view it as a separate, general-purpose technology, as VMware says they should, or as a feature of Windows may be less important than which company has the best mechanism for reaching new customers, especially those legions of small and medium-sized businesses eager to realize the benefits of virtualization for themselves. Microsoft, with its ability to add virtualization as a $28 feature to each copy of Windows Server 2008 that it ships, has one of the best distribution mechanisms available. As the market for EMC's independent subsidiary shifted, CEO and chairman Joe Tucci must have questioned what VMware's answer was and, as subsequent events seem to indicate, decided it wasn't good enough. DIG DEEPER IT'S COOL BUT IS IT SECURE? It's time to get serious about virtualization security. Download the InformationWeek Report free for a limited time>> See all our Reports << The first victim of the crisis is Diane Greene, one of five founders of VMware in 1998 and for 10 years its CEO, leading it on a blazing growth path to hit $1.3 billion in sales last year. Replacing her is Paul Maritz, a veteran of Windows development and marketing during his 14 years at Microsoft, which he left in 2000. He joined EMC when it acquired his cloud-computing firm, Pi Corp., in February and became president of EMC's new Cloud Infrastructure and Services division. Maritz's experience at Microsoft--he was a member of the executive committee that ran the company--will be useful since Microsoft is now the main threat to VMware's rapid growth. Since joining EMC, he has reported directly to Tucci. LANGUISHING SHARE PRICE A contributing factor to Greene's forced resignation appears to have been VMware's announcement that revenue for 2008 would be "modestly below" its projected 50% growth rate. Since Aug. 14, 10% of VMware has been publicly held, and its stock price reached a high of $125 in November, though it's fallen far off that peak. It closed at $53 the day before Greene's departure was announced and lost another 30% in value after the announcement. Greene and her husband, chief science officer Mendel Rosenblum, have been pillars of the company, popularizing not just VMware but the concept of virtualization. Rosenblum is still listed as "1998-present" on the VMware Web site, and so is still with the company. VMware declined to make executives, including Greene, available. VMware's stock opened the day following her resignation at $40.82 and dropped into $38 territory in a down market. The drop in stock value can be read as a decline in confidence in VMware's ability to rapidly expand the market share it owns, but also as reaction to the way a founder's departure was handled. "This was clearly abrupt," says Forrester Research analyst Frank Gillett, noting that Greene's contract had come up for renewal and the discussions may have led to a confrontation over how to respond to developments in the virtualization market. With one of the software industry's fastest growth rates, Greene had reason to be proud of the company she built and of its prospects. Gillett visited VMware three weeks ago and picked up no hint of an impending change. He contrasted Greene's departure with that of another company founder, Microsoft's Bill Gates, an exit so heavily orchestrated that by the end of June the only surprise was that it was still going on. As part of EMC, VMware operates independently and relies only to a limited extent on its storage company parent to land new customers. VMware can't count on piggybacking on EMC for dominance of the next phase of the virtualization market. That leaves Maritz to figure out where its advantage will come from. What, for example, will VMware do with a pricing schedule that shows an ESX hypervisor at $495 per dual-core processor, $995 for a small-business package, $2,995 for a high-availability offering, and $5,750 for an enterprise-class Virtual Infrastructure 3 package? "With no competition, you can get away with that," said Gartner analyst Thomas Bittman. "Now VMware has seven solid competitors. Regardless of whether Diane left, VMware needed to address pricing." Those other competitors, the likes of Citrix/XenSource, Sun, Oracle, Novell, and Virtual Iron, will have some impact. But it's Microsoft's presence that's sending shivers through the stock price. Direct comparison with Microsoft is hard because of the breadth of the VMware product line, which remains one of VMware's most formidable competitive advantages. However, in addition to Microsoft's $28 Hyper-V option, it will offer later this year Virtual Machine Manager, no pricing disclosed yet, as part of its System Center software. "Microsoft offers a far deeper server and infrastructure management solution than VMware," argues Joe Clabby, president of Clabby Analytics, in a report, "Six Reasons Why Microsoft's Hyper-V Will Surpass VMware," issued July 2. Microsoft, however, can't yet match VMware's VMotion, which provides the ability to move running virtual machines from one physical server to another without disrupting users. It will, however, have a near-live migration feature with its Virtual Machine Manager; nevertheless, it will require several seconds to execute a migration. The face-off between VMware and Microsoft reminds Burton Group analyst Richard Jones of a similar confrontation between Novell's NetWare and Microsoft's LAN Manager. NetWare was the market-leading product and Microsoft lagged significantly, but it eventually built local area networking into its Windows NT operating system and wrested market dominance from Novell. The VMware Virtual Infrastructure vs. Windows Server 2008 Hyper-V may be a similar confrontation, where Microsoft goes back and fills in a niche previously occupied by a specialist. Copyright ? 2008 CMP Media LLC |