New VMware CEO Pat Gelsinger faces challenges as the company approaches VMworld, which is scheduled for later this month in San Francisco and again in Barcelona, Spain, in October. There are four things VMware should do to help itself regain the initiative in the virtualization market.
The company is currently going through a period of reorganization as the Pivotal piece is spun out and end-user applications are sold off. This retrenchment, along with the arrival of Gelsinger and the departures of key executives such as VP Bogomil Balkansky and CMO Rick Jackson, suggest that some of the changes are roiling the ranks.
VMware has unloaded Zimbra to Telligent for "an undisclosed amount," but it's unlikely it got anything like the $350 million with which Yahoo originally purchased Zimbra in 2007. Whatever VMware paid Yahoo in 2010, it's also unlikely that VMware got its purchase price back. Earlier, VMware dispatched SlideRocket to ClearSlide for another undisclosed sum. Both of these acquisitions to me reflected a PC-era belief that a next-generation killer application guaranteed future virtualization customers. Former CEO Paul Maritz' sense of competition, cultivated at Microsoft, might have gotten the better of his judgment on those two.
[ Want more on how VMware's prospects appear to have fallen on hard times? See Don't Count VMware Out In Rough Seas. ]
In a larger sense, VMware is being forced to roll back its once cherished belief that as a young company, its universe was constantly expanding. It was an unquestioned assumption that having conquered one domain, it was necessary to expand into the next. All software companies go through a redress of this assumption as they run up against unexpected limits, and VMware executives are going through theirs. The fact that Gelsinger is the imposer of these changes can't make him popular in certain circles of the company.
Likewise, the sense of things not being as they used to be can spur departures for those with options. Perhaps no one has noticed, but few of the departures suddenly announced that they're leaving for personal reasons or to spend more time with their families. On the contrary, to have worked for the virtualization market leader is a ticket to a seat in a venture capital firm, into the ranks of a competitor or a high position at a startup looking for experience. Former CTO Stephen Herrod didn't leave in a snit; on the contrary, he will be attending VMworld and tweeted Tuesday how strange it will be to view the show from the floor instead of the stage.
As a firm goes through a transition, as is happening at VMware, a wave of departures often takes place. The downside of this cycle is that it's possible that some VMware executives have started to think their management isn't calling the shots -- that they are being called by owner EMC. (According to some financial analystsEMC still owned 41 million shares or 32% of the company at the end of 2012.) If employees are thinking this way, some of those who don't like it have left. More worrisome is that others have stayed, but are unsure of their own role or what happens next.
Thus, it's incumbent on Gelsinger to disclose his hand at VMworld. While VMware has lost some people, it has made some strong hires from other firms, such as former SAP mobile computing chief Sanjay Poonen. Who's the brain trust now? How much confidence does Gelsinger have in them and they in him? It will be a prime opportunity to put a restructured leadership team on display -- and VMware customers at this point hope that one is in place.