Virtualization 2.0 and Karma

Three dramatic events over the past 11 months cemented the end of the beginning of the Virtualization phenomenon:

1. Citrix’s spectacular purchase of XenSource about year ago. Paying half a billion dollars for a small start-up with a negligible revenue stream may have seemed foolish at the time. Today it’s the foundation of their future.
2. Microsoft shipped HYPER-V early this past month. No that’s not a typo. For the first time in recent history, Microsoft shipped a major product ahead of schedule. You know they’re playing for keeps with this one.
3. Finally last week’s dramatic and sloppy announcement by EMC regarding new leadership over at VMware. Despite all their prognostications, this one felt a little rushed by EMC. Proof they too realized the game has changed.

Did anyone get left behind?

It’s clear we are now entering the next major phase of the Virtualization market. Despite what some vendors will tell you, nobody won the first phase of the Storage Virtualization market because the storage industry as a whole was never able to clearly articulate a solid value prop to the mainstream IT infrastructure customer base. Sorry, but occasional migration events do not a market make. Heard of any multi-billion dollar storage virtualization IPO’s lately?

OTOH – VMware clearly won the first phase of the Server Virtualization market – which is undoubtedly the only one that matters at the moment. They did that by defining the market, then dominating it by delivering the first usable implementation of the technology with immediate practical benefits.

We’ve seen this movie before

Much like Cisco did with routers, NetApp is widely credited with having created the NAS market, then dominating it. As a matter of fact, we were so successful at it that Stanford’s highly regarded Graduate School of Business created a set of courses covering three major phases of our corporate evolution to date:

1. Starting up
2. Tackling the challenges of rapid growth
3. Transformation to established enterprise vendor

To help EMC disprove all the  misogynistic  conspiracy  theories behind Diane Greene’s departure, I recommend Paul Maritz and his staff study these Stanford courses carefully as they plot the next phase of VMware’s evolution.

The burden of success

Did you know NetApp’s SAN and Data Protection & Retention businesses are about as big as our NAS business? Probably not. That’s because of a phenomenon I call “the burden of success”. Dominating the first phase of a market’s evolution risks typecasting you as a company that does little else.

Much as NetApp has successfully diversified, VMware too needs to move quickly on the VDI and Virtual Infrastructure Manageability fronts (among others), lest they be typecast as the “Server Virtualization Hypervisor” company.

Which brings me to another type of burden – Riding the crest of a wave. You can’t do it forever because waves have as many troughs as crests. Then you get very touchy during the fall.

It’s good to be Switzerland

EMC’s industry stature and stock ticker rose admirably during the peak of the virtualization hype cycle last year. Today they’re trolling in the trough since they’re damned if they keep majority control over VMware and damned if they don’t.

OTOH – NetApp is well prepared for the evolution of the virtualization industry:

• VMware’s market momentum makes it the hottest date in town for storage vendors. Fortunately we’re building on our massive success here by imminently shipping the most anticipated data protection solution in the VMware community,
• NetApp provides the only built-in native storage adapter plugin for Citrix XenSource,
• Based on our investments in joint engineering with Microsoft, NetApp was the only storage vendor to live demo HYPER-V at the recent MS TechEd 2008 conference, as well as among the first to announce full support now that Microsoft has shipped 1.0.

Ironically many analysts have concluded EMC has not technically leveraged their VMware ownership position via tighter product integration compared to NetApp, and now that other visualization players are establishing themselves, EMC finds themselves in an awkward position of having to invest in those partnerships at their own expense!

Virtualization is proof that Storage Karma exists :)

Comments

[Val Bercovici]

Virtualization.Info gets it.

[Val Bercovici]

Gene Ruth @ The Burton Group gets it too.

[Roanoke]

Uncanny! From this overview of VMware's ugly Q2 con-call with the Wall St. analysts, it looks like Paul Maritz read your blog about the 3 phases of corp evolution for market-making companies :)

http://www.theregister.co.uk/2008/07/23/vmware_q2_2008_earnings/

[Investor]

The Microsoft Enterprise Volume License (EA) headwind has finally kicked in. As you say, it's a different world now. Welcome to the confirmation fo next phase of the virtualization market.

[VM-Guy]

Actually, this is great news for all storage vendors. It signals that VMware will finally be unshackled from EMC as early as 2009.

A truly independent VMware will thrive with a strong 3rd party storage ecosystem in ways not possible today under EMC's thumb.

[Val Bercovici]

Scott Ferguson continues the discussion over @ eWeek.