4 Things VMware Must Do At VMworld

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.

The second thing VMware needs to do is bring more clarity to a field that begs for leadership: virtual networking. VMware in effect has opted for a collaborative, group effort in virtual networking. It bought Nicira for $1 billion, then encouraged Martin Casado and other Nicira talent to continue contributing to the virtual networking project of OpenStack. How will VMware capitalize on the rapid buildout of a virtual networking platform being constructed there? It's now clear that virtual networking will fit into the larger virtualized data center, but it's not clear where customers should first invest to bring that resource closer to reality. Rapid gains were realized in the consolidation of x86 servers on VMware hosts; can those gains be repeated in networking?

Third, VMware is too intensely focused on the role it can carve out for itself in cloud computing. It has a natural role to play as the purveyor of the private cloud, which requires extending the virtualized data center into a more standardized, policy-driven operation with end-user self-provisioning. The need for the company to play a larger role in the public cloud is less clear, even though it's succeeded in convincing everyone that it feels it must at all costs be a major player there as well.

I'm not so sure. VMware with its grasp of virtualization is a natural data center systems company, and it will be able to extend its position there into hybrid cloud computing in several different ways. One would be to let Amazon Web Services -- and eventually other cloud vendors -- accept VMware workloads, which Amazon already does. Allowing this to set off a burning sense of competition with Amazon puts management in the position of saying that it's not only the best at virtualization; it will be the best at public cloud computing too. And that puts more management credibility on the line than is perhaps warranted, given the head start and capabilities of the competition.

VMware will pick up its share of the hybrid cloud market. Some customers will want an all-VMware world and will want the assurance of transferring their workloads from one vCloud Director to another as they take advantage of the public cloud. But there are going to be other solutions, and getting this issue into perspective would go a long way toward convincing customers that VMware has got its priorities straight. Most of them didn't know VMware was worried sick about cloud competitors until Gelsinger and Carl Eschenbach told them so at the Partner Exchange in April.

Fourth, accept the reality that it's a multi-hypervisor world and there's nothing wrong with that. Windows and Linux rule the data center, which means Microsoft will slowly but relentlessly take market share. The future of virtualization is managing all those virtualized resources as a single operation, including Hyper-V. Gartner's Magic Quadrant says Oracle VM is edging up as a challenger, but I believe the bigger threat is KVM, still down among the niche players. VMware should do everything it can to be the level-headed broker of these resources as well, and concentrate those management capabilities behind its concept of the software-defined data center.

Those who assume virtualization is a saturated market, and that it's inevitable it will move to commodity products, don't understand how much virtualization has changed things, how much it will continue to change things and how much some customers will continue to rely on VMware to lead those changes far into the future.