VMware Shifts Leadership

Assessing VMware's management reshuffle

July 17, 2008

4 Min Read
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No technology subject over the past 18 months has elicited more opinion, prognostication, and idle chatter than virtualization. And ironically, the company at the very the center of this verbal storm is not the one that originated the technology (IBM) or those (including Sun and HP) that have extended it to other enterprise-class platforms, but the company that developed virtualization for Industry Standard x86 platforms: VMware.

An interesting confluence of events has heightened VMwares position in the media spotlight. First, the company enjoyed a memorable IPO last year and ended 2007 by earning over $1 billion in revenues for the first time. More provocatively, VMware stands firmly in the crosshairs of one of the tech industry’s ablest and most ambitious vendors, Microsoft, whose competing Hyper-V virtualization solution became available for download just a couple of weeks ago.

The importance of Diane Greene to VMware cannot be overstated. It is useful to remember that when the company arrived on the scene a decade ago there were serious concerns and debates about whether business IT should even be entrusted to Intel and AMD-based solutions.

At its inception, many considered VMware an eccentric niche player, at best. Instead, as the company’s fortunes rose with the tide of x86-based server sales, VMware became a poster child for stepping into the right place at the right time. During those years, Greene and the rest of VMware’s management stayed ahead of competitors by driving virtualization into new markets and capitalizing on emerging trends. For example, VMware’s server consolidation capabilities allowed the company to position itself as a leading green IT vendor, a point that Greene punctuated at a recent IT analyst event.

Since every virtualized physical server eliminates about 7KWH in annual power usage, she said, the total amount of energy saved by deployed VMware solutions is enough to power the entire country of Denmark.Memorable factoids aside, though, the virtualization playing field has been shifting rapidly.

Microsoft’s aggressively priced Hyper-V is certainly responsible for part of this, but other formidable players, including Citrix, Oracle, and Red Hat are crowding the pitch, as well. In addition, the larger technology marketplace is suffering from deteriorating economic conditions and increasingly conservative business IT spending.

The reasons for Greene’s departure are thin on the ground, though the company’s cryptic mention of its 2008 earnings being “modestly below” previous guidance is likely to be seen by some as a smoking gun.

We expect, though, that VMware may simply be experiencing a change in executive tenure that is historically common in IT. The truth is that few executives are up to every task they confront. That, after all, is why delegating responsibilities tends to be an effective business strategy.

But along this line, it is seldom that a leader who successfully founds and guides a business through its startup process is able to lead it to full maturation. The skills needed to assemble and drive an organization during those heady and uncertain times are simply different from those required to manage and sustain a maturing business with hundreds of millions or billions in annual revenues. That Diane Greene led VMware to enormous initial success will never be disputed, but the company’s board obviously decided that someone else should manage its next phase of growth.Fortunately for VMware and its shareholders, Paul Maritz was available for the job. Not only does Maritz boast a long line of successful product development and marketing efforts at Microsoft, but during his time there the company was going through a startup-to-sustainability transformation analogous to what VMware is now experiencing.

Maritz’s intimate knowledge of Microsoft could aid competitive efforts, but we expect his depth of experience with cloud computing (an area of intense interest to VMware) may be an even more valuable attribute over time.

Overall, we believe that Maritz’s ascension to VMware’s leadership bodes well. Though the company has lost an intelligent, innovative and able leader, it has gained another of at least equal ability and stature. While Greene helped the company create a memorable past, we expect Maritz will lead it to a notable future.

— Charles King, Pund-IT president and principal analyst, focuses on business technology evolution and interpreting the effects these changes will have on vendors, their customers, and the greater IT marketplace. Charles began working in Silicon Valley in the early 1990s writing on technical, business, and strategy issues, then became an IT industry analyst in 1998. Since founding Pund-IT in December 2004, Charles has published the Pund-IT Weekly Review, which contains this blog and additional industry analysis. King has also produced numerous client projects, and has been quoted in a wide variety of IT industry and media outlets.

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  • Citrix Systems Inc. (Nasdaq: CTXS)

  • EMC Corp. (NYSE: EMC)

  • Hewlett-Packard Co. (NYSE: HPQ)

  • IBM Corp. (NYSE: IBM)

  • Microsoft Corp. (Nasdaq: MSFT)

  • Oracle Corp. (Nasdaq: ORCL)

  • Red Hat Inc. (Nasdaq: RHAT)

  • VMware Inc.

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