VMware, EMC: Where Does Virtualization Go from Here?

The next chapter in VMware's history is about to begin.

With the departure of CEO and President Diane Greene, the question now is where VMware, which did more than any other company to bring x86 virtualization into the mainstream, will go from here as a company without the leader so closely associated with its success.

When the VMware board of directors announced Greene's departure July 8, speculation began almost immediately about whether it was VMware's falling stock price, the entrance of Microsoft and other vendors into a market where VMware had a stranglehold for a number of years, or a clash of personalities between Greene and EMC executives that led to her exit.

However, the real question for the company's customers is: Where will VMware and its technology go from here?

Greene was the public face of VMware, and her approach to the role of CEO, while understated compared with those of other chief executives, offered VMware what one analyst called a sense of credibility and belief in the company and its technology as its relationship with EMC loomed in the background.

Now, that credibility is being put to a test.

A number of analysts predict that VMware's products, technology and road maps will not change much in the coming months. However, Greene's departure could mean a change in VMware's relationship with parent company EMC.

When VMware announced its initial public offering in 2007, the company only offered about 10 percent of its stock to the public, while EMC, which bought VMware in 2004 for about $630 million, kept control of the company.

It was EMC CEO Joe Tucci, in his role as VMware board chairman, who announced that Greene had left, and it was believed that Greene was the main force keeping VMware from being absorbed into the EMC portfolio.

Now, with Greene gone, VMware could get pulled more into the EMC storage product portfolio, and this allows EMC to offer a number of features with its storage offerings that its competitors can't. This also provides a way for EMC to differentiate its products. These added features could include security, virtual storage, archiving, compliance and disaster recovery.

"What I expect to see is EMC-slash-VMware looking at ways VMware can differentially advantage EMC storage gear," said Gordon Haff of Illuminata. "That's not to say that VMware is going to yank NetApp from its list of certified storage vendors. What we may see is the conjunction between VMware and EMC hardware and software that offers products that you wouldn't see anywhere else."

What Haff and some other analysts agree on is that VMware and EMC are likely to concentrate their efforts on the enterprise and concede some of the midmarket and small and midsize business space to Microsoft and its Hyper-V product as well as Citrix Systems with its Xen-based virtualization.

John Humphreys, an analyst with IDC, said he is not convinced that EMC will absorb VMware as it has with other acquisitions. The success of VMware, Humphreys said, is the company's ability to work with a number of other OEMs such as Hewlett-Packard and Dell.

Humphreys said he sees VMware's continued success as separate from EMC.

The key to continued success is VMware driving innovations such as VMotion, which allows a user to move a virtual machine from one physical machine to another, he suggested. This will distance its management suite from what other companies such as Citrix and Microsoft can offer.

"They [VMware] have built their success on moving quickly, being aggressive and innovating with technology that [has a great] impact and directly solves business problems that the customers are facing today," Humphreys said. "They need to continue [to] out-innovate everyone else … What is the next VMotion that is going to make them stand apart from everyone else?"

Another possibility is that VMware could move deeper into cloud computing.

Paul Maritz, Greene's replacement, previously worked at Microsoft and then started a company called Pi that developed products for the cloud. Maritz was made president of the EMC Cloud Division after EMC bought Pi earlier in 2008.

Rachel Chalmers, an analyst with The 451 Group, said VMware plans to offer a new suite of cloud computing at the next VMworld Conference and that Maritz's expertise in this area could mean that EMC was looking for someone new to take VMware in a different direction.

There is also a chance that EMC could sell its stake in VMware in 2009 to another company or spin off the business as its own separate entity. While this possibility has been floated since VMware's IPO in August 2007, EMC has continued to deny that it will sell off its share of the company.