Wednesday, May 13, 2009

Is VMware The New is more than simply the market leader for software-as-a-service (SaaS). While others (notably NetSuite) came to market sooner, was the first company to successfully sell the idea of hosting software in its own data centers and delivering it as a service via the Internet on any kind of scale.

It did this by becoming the most vocal proponent of SaaS, and in so doing became arguably the biggest pole around which other SaaS vendors organized themselves.

VMware is in a similar position to where found itself three or four years ago. It is the most recognized name in the industry, enjoys the largest market share, and has taken it upon itself to vaunt the virtues of the technology, which promises to lower customers’ power and hardware costs by replacing physical servers with virtual ones.

Like with Salesforce in those early days of SaaS, there is very little difference between talking up the virtues of virtualization and talking up the virtues of VMware. In the process, it is also helping niche vendors like Parallels, which specializes in virtualized desktop infrastructure (VDI).

There is a critical distinction, however, between the respective standard-bearers. Marc Benioff, CEO of, tilted against the very idea of traditional on-premise software (even proclaiming the “death of software“), but didn’t have to worry about a huge rival breathing down his neck.

His enemies were either established software vendors like Microsoft, which tried to deride the idea of SaaS, or the likes of SAP and Oracle, which offered hybrid versions but were years behind in terms of producing code that could support reliable cloud-based services.

VMware, on the other hand, has long been aware that Microsoft was looming, despite Redmond’s setbacks with bringing Hyper-V to market on time.

There is no doubt in anyone’s mind that Microsoft will become a significant player soon, and market research firm Gartner suggests it may even overcome VMware’s lead within five years.

VMware is using its head start by extending the use of virtualization all the way up the hardware stack, in many cases using partners to add expertise it doesn’t own.

Also like, which created a business platform called the AppExchange to provide a venue for companies to sell complementary software service offerings, VMware is creating an ecosystem through alliances with the likes of Cisco and Intel that allow it round out its offering.

There is one important difference between them, however.

Companies that want to integrate their applications seamlessly with’s platform have to develop programs using the company’s proprietary Apex programming language. Salesforce claims it needed to create Apex in order to improve its customers’ ability to customize their applications, but another consequence–whether intended or not–is that once customers build applications using Apex, they are less likely to defect to rival SaaS vendors where Apex is useless.

VMware, on the other hand, has committed to using standards-based technology to make it easier for potential partners to work with it.

This past week has seen rivalries in the space intensify, as VMware announced deals with Cisco and Intel, which Microsoft ally Citrix made news of its own by announcing that it would make its XenServer virtualization technology free of charge.

As the two companies start to lock horns in earnest, it remains to be seen whether VMware continues along a path of openness or succumbs to the temptation of circling the wagons by developing proprietary technology to lock in its customers.


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