VMware: The Charging Bellwether

The upcoming VMware IPO will be more than the most interesting storage-related stock offer this year. It's also likely to be the watershed event in the virtualization revolution. (See VMware to Spin Out and VMware Closer to IPO.)

Think "revolution" is calling it too strongly? Considering the growth VMware's had this year already, it doesn't seem so: Sales totaled $703.9 million in 2006, 82 percent over 2005; and software licensing revenues went up 71 percent. (See VMware Files With SEC.)

Server virtualization is already showing signs of eroding hardware sales. In March, IDC reported that the growth of multicore server architectures and virtualization have the firm revising its forecasts for x86 server shipments. Now, instead of growing 61 percent by 2010, IDC predicts growth of "just" 39 percent.

Note too how EMC is dealing with VMware, giving the young spin-in cum spin-out carte blanche, while ensuring the ties that bind are secure. On top of this, EMC's ongoing rhetoric about the importance of software and services (as opposed to disk arrays) speaks to the importance the SAN market leader places on virtualization.

Virtualization's momentum is undeniable. As an issue, it resonates with firms' need to maximize expenditures, curb resources, and conserve energy. (See Time to Turn Green.) Its promise and VMware's success – have launched a new era of innovation. To note just a few examples: Newcomers like 3Leaf are talking about virtualizating processors, I/O, and other aspects of the hardware system. (See 3Leaf Sprouts Up.) New and established players are exploring desktop virtualization. (See Insider Eyes Virtual Desktops.) And larger vendors, most notably Microsoft, are rearranging their strategies to accommodate the virtualization boom. (See Microsoft Revamps Virtual Manager and Insider Eyes Virtual Desktops.)All revolutions are disruptive, and this one's no exception. Virtualization's dark side roils with untrustworthy vendors, performance problems, management complexity, and security issues. (See Wall Street Virtually Guarded, VMware: The Virtualization Drag, Virtual Tip of the Iceberg, and Devil's in the Virtual Details.)

But in a sense, VMware's upcoming IPO legitimizes the growing pains. For the first time, a company totally dedicated to virtualization will hit the public markets. Considering that VMware parent EMC is a leading bellwether in storage networking, it's going to be a debut worth watching.

Indeed, this IPO could create a new bellwether in VMware, one that's tied to the hottest issue in data center management.

— Mary Jander, Site Editor, Byte and Switch