A year after VMware’s successful IPO, virtualization has shifted gears from niche technology to the must-have underpinning for projects ranging from disaster recovery to data backup to desktop application delivery.
It’s not surprising, then, that other companies are developing products for the market that VMware has been synonymous with up until now.
So CEO Diane Greene is looking two steps ahead. And what she sees is that server virtualization was only the start. The end destination is a fully automated data center, with x86 virtualization as the lynchpin holding all the various parts together. In this virtual world, applications are built specifically for virtual machines and are moved from virtual to physical systems, regardless of the operating system.
To achieve this goal, VMware-the company Greene helped co-create in the mid-1990s and of which EMC now holds the majority stake-will have to face some stiff competition. Those rivals include Microsoft, which is entering the market later this year with Hyper-V and has a lock on ISVs building third-party applications.
For VMware, success in this field is about more than just the hypervisor-the specialized piece of software that makes virtualization possible. It also means changing the way IT thinks about, creates and delivers applications in a totally new data center.
Greene sat down with eWEEK Editor at Large Eric Lundquist and Staff Writer Scott Ferguson to discuss the company’s initial public offering, the future of virtualization and why all those other companies-including the big one in Redmond, Wash.-are getting into virtualization this year. Following is an excerpted version of the discussion.
In a few weeks, VMware will mark the anniversary of its 2007 IPO. How did that event change the philosophy and the dynamics of the company?
First, I would say that VMware is a company that is very used to change. We kind of thrive on change. We have had very rapid growth, doubling every year; you are a different company every year when you have that type of growth.
Then, of course, we went through [EMC’s acquisition of VMware in 2004], and that was a change, but our culture remained very intact as a company. So, by the time the IPO came around, we had become experts at maintaining consistency in the face of everything changing around [us], and I think we have done a really nice job of remaining who VMware is-a company that is really focused on innovation to drive value to customers and partners.
With the IPO, there is a new group of people that basically handle being a public company, and, personally, I am doing a quarterly earnings call, so there is more involved there. The IPO has meant increased attention and visibility, but that has been increasing all along, so it’s basically another stage in our evolution.
You mention the added attention that VMware receives. Can you explain a bit more about that and how it affects the company?
It’s a new set of responsibilities, plus people are now interested in what we have to say.
They see us leading [the virtualization] industry. They see us creating this industry, and they say, “Where are you taking this industry?” [VMware has] new sets of responsibility about communicating more broadly about where the industry can go and how we intend to get it there. Certainly, whatever we do, it is paid attention to. We have this sort of inherited culture of doing everything well, which is fortunate-when people are paying attention to what you do, you want to do it well.
How Virtualization Has Changed
How has virtualization changed during the last year and where do you see the technology going in the next 12 to 18 months, given that you said more and more companies feel this is the way we should be computing?
Virtualization has shifted from being something that [was] first used for server consolidation to something transforming the data center. At this point, it’s really transforming the software industry.
In fact, it’s transforming the whole ecosystem because you have the hardware vendors optimizing for virtualization, the processor adding hardware assists for virtualization, the servers and the storage putting in features to optimize around virtualization and support it, and then you have system management incorporating management and monitoring virtualization.
Then, [you have] this dramatic phase happening where it’s transforming how people develop, build and deliver software, so you have major changes for the ISVs.
So, we went from [saying to customers,] “OK, here’s a way to consolidate your data centers and do better test and development,” to “Here’s an architecture for your data center, and it’s a way to pool all of your resources and optimize everything and have a better service level,” to, now, “[Here is a way] for you to automate your data center, and it’s also a way to automate the building and delivery of software, and that is just continuing.” We were coming out with products to support this, and, with the IPO, there is a realization that there is this large industry. It gave us a framework to explain why it’s a large industry and where it’s going to go. So, it’s only natural that all of the big companies are coming into it. In fact, we are surprised that they didn’t come in sooner.
Did you expect these other companies to come in sooner? Are they late to the game at this point?
I think they are. We actually expected them years ago.
You talked before about virtualization transforming the way software is developed. Can you take us through what that means and what VMware is doing in that area?
Once you have a virtual platform-say, ESX Server-on all the hardware, you have enabled yourself to have a next-generation system infrastructure for doing reliability, high availability, disaster recovery [and] backup. You have the ability to do that.
Once you start putting all of your software packaged in virtual machines … you can optimize for power management, you can optimize for load balancing, you can optimize for downtime.
The next thing you can do is add automation. We are rolling out four automation products right now because, when software is sitting in a virtual machine, [it] can run anywhere you have the VMware Infrastructure.
So, we have a way to automatically configure, test and deploy disaster recovery. We have an automatic way to do testing and development and manage the images and self-service provision. We have an automatic way of staging and going into products and the provisioning there, so you get into this ability to do the really superior management and automation of your software.
VMware keeps innovating, and we keep broadening our line. … You can now start thinking about where you run-on premises, off premises-and have that ability to move around and maybe use peak capacity off premises instead of what you have on premises. In effect, this notion of a cloud-where pieces of the cloud are on premises and pieces of the cloud are off premises-the virtualized system infrastructure can support that transparently.
Then there is a whole other area that starts getting into application infrastructure. One proof point of that would be in security. We recently launched VMsafe with the ISVs, and this is a proof point of how this is transforming the software industry. This is changing how you build apps. We now have about 30 software companies that have joined our VMsafe initiative, which is essentially creating APIs that let you secure what’s in a virtual machine because you know everything that is going in and out of it. So you can catch a virus before it gets in, and maybe prevent having to patch; you can say what’s allowed going in and out of a virtual machine.
Apps for the Virtual Environment
So, are applications being built and designed to operate in the virtual environment?
Some of the ISVs that [create] functionality for those applications are building to the APIs to maybe give security to the applications. What that means is that when someone builds an application, [the application doesn’t have to have its own] high availability or security, and so forth. [The developers] can just concentrate on the business.
If this addresses security, what about virtual sprawl?
That’s what we have with our suite of automation products around software life cycle. You can let people self-provision, but you can assign roles and permission and expiration, and you can impose all kinds of policies around these machines.
Are these the issues you hear about from customers-concerns in the areas of security and sprawl?
We haven’t heard that from our customers. It’s more been from other vendors that have an interest in talking about it that way. But we have always seen it as a huge opportunity.
In fact, Mendel [Rosenblum, chief scientist at VMware,] does a lot of research into security and virtualization at Stanford, and we have always seen the opportunity that virtualization offers in a more secure, new and powerful way. We are now finally realizing that in ways that customers can take advantage of.
What does VMware have to do to stay competitive when companies such as Oracle, Microsoft and Citrix Systems are now heavily involved and investing in new virtualization technologies?
We have been expecting people to come into this market for some time because it’s a transformation in the industry. We have the most reliable, the most functional, the best hypervisor-ESX Server. We have system infrastructure around that for high availability, disaster recovery, backup, load balancing and serviceability. And now we are launching our automation and management products.
This isn’t just about data transformation; this is about the transformation of the software industry. So, when the software industry is transforming, there’s a lot of opportunity for VMware to broaden our product line, and we can pay attention to the application infrastructure.
We are innovating-moving the products forward-and it’s a pretty strong road map. And that road map will continue to get broader as well as deeper, but we are also expanding our partnerships. …
We have a really secure desktop product, and we are moving that into our hosted desktop product. … Next, we will be bringing out some new technologies around scalable image management. Everyone always says, “The desktop? How come now?” Everybody has been trying to do it for years. Well, this new technology that we will be deploying lets you run online and offline, so it lets you check your virtual machine out and then check back in.
People want a server-hosted desktop for manageability and security, but they don’t want a server-managed desktop because they want autonomy and they want their desktop with them. We offer the best of both worlds, and it’s a complete desktop environment-everything works.
We also have application virtualization, which helps manage the applications with the desktop.
The Effects of the Economy
With the economy in an uncertain state, do VMware customers want to move faster toward standardization on VMware Infrastructure because they see a cost savings, or do they want to slow down?
It’s an interesting trend.
We do see people accelerating their deployment of virtualization because it lets them do more with less. If they can free up IT dollars in their IT budget, that’s a good thing. Not only does VMware Infrastructure let them do server consolidation very effectively and very reliably, but they don’t need as many people to manage the system because of the management products and the automation products. [They also] get high availability and load balancing, and they really optimize around the power.
Another interesting trend that we are seeing is in emerging countries.
Last quarter, we had 15 emerging countries that had triple-digit growth. When I go to India and China and meet with the customers, these people are in a hurry. They are building and modernizing their countries, and they are skipping all the steps that the modern-day countries went through. … In the U.S., sometimes people jump right to a virtualized infrastructure, but, for the most part, they go through all these stages I have talked about. … In these emerging countries, they skip them all and they want to standardize on VMware Infrastructure and they say, “Next!”
Are you moving into countries such as China and India because that’s where the market is going, or does VMware want to diversify its own business in times of a recession?
We are finding these countries to be very high-growth adopters of VMware’s value proposition, and so we are seeing rapid deployment in these countries. We long ago said we were going to be a global company.
When we launched VMware Workstation in 1999, we sold it over the Web. From Day One, 50 percent [of sales were] overseas. So we have always … thought about it as one big world market, and that’s because the Internet lets us do that. So it’s very natural and just how we grew up. We run engineering all over the world for talent reasons-talent and cost reasons-and we have moved out into all the different global markets as well.
We like [doing business in places like China and India] in that it protects against the economy, but we would be doing it anyway because it’s a growth opportunity. It’s also very exciting to work with these countries because they are on fire.
Is there any advantage to these companies adopting virtualization first before going through those steps?
The sooner you virtualize, the sooner you save money. It’s an immediate ROI. … In these countries, where they don’t have a large, established infrastructure and way of doing things, they don’t have to go through any sort of process transition. They just develop the processes around their VMware Infrastructure from almost Day One.
Another trend that we see, to put this in perspective, is that small companies will buy our software and then immediately standardize on it. They move very quickly. … [It’s a much slower process for] large enterprises because they have such large IT groups with such established ways of doing things. There’s a lot more education and training that has to go on.
VMware vs. Microsofts Hyper-V
What does VMware have to do to differentiate itself from Microsoft and its Hyper-V product, which is coming out later this year?
We have been expecting Microsoft and all these other large [companies] to come into the virtualization space from the very beginning. We have known for years that it would happen, and it’s a validation of the market that now they are finally here.
They are coming in with a point product-with a 1.0 hypervisor. VMware is a new software infrastructure-it’s an architecture, and we are transforming how software is developed and delivered with a broad suite of products, a broad suite of alliances and a broad suite of APIs that are integrated with the industry.
It is apples and oranges.
Do you see further consolidation in the industry-with several large companies within the virtualization space?
I think virtualization is just a really rich area for new companies. You have a new platform for building software that lets you do things in a completely new and better way. There are going to continually be a lot of startups in this industry, and if you go out and talk with the venture capitalists, they invest very heavily in this space. They understand it, and it’s a very exciting time in an exciting area.
I think you see opportunities in security, you see opportunities in availability, you see opportunities in management, you see opportunities in application delivery, you see opportunities in optimizing the applications themselves.
The other thing that is going on with virtualization is that it’s going to accelerate people’s ability to develop new software-say, business applications-because you can just build it for a virtual machine and take advantage of all the services that virtualization gives and you don’t have to test it for every available operating system that the customer may have. You just build it for a virtual appliance and just ship it.
It’s going to have really positive repercussions for customers and for startups in terms of their ability to get to market quickly.