How VMware Plans to Conquer More of the Data Center

• Company: VMware
• Headquarters: Palo Alto, Calif.
• Employees: 11,000
• 2011 Revenue: $3.77 billion
• CEO: Pat Gelsinger (as of Sept. 1)
• What They Do: VMware provides virtualization and virtualization-based cloud infrastructure software designed to help organizations streamline the way they build, deliver and use IT. In July, VMware acquired Nicira, whose OpenFlow technology will be folded into VMware’s portfolio of virtual networking software.

The Pitch

VMware has helped so many businesses virtualize their servers that now the company wants to help them virtualize entire data centers.

Virtualization helps organizations cut hardware and power costs while gaining greater flexibility, and VMware has captured the lion’s share of this server virtualization market. So now the company wants to virtualize other aspects of IT operations, such as storage, networking and support for client devices. VMware’s vision is to tie all of these resources together to create “fully virtual data centers,” says Steve Herrod, VMware’s CTO.

“By having all the major pieces controlled by software, the software-defined data center can be used to provision all enterprises services on demand,” Herrod says. Such an architecture, in theory, would require fewer machines and fewer support personnel. It would also allow organizations to respond faster to changing market conditions.

The Catch

The software-driven data center looks promising for VMware. “The whole idea of the enterprise data center is being rethought and moved into the cloud,” says Gary Chen, an analyst at IDC (a unit of CIO‘s parent company).

Beyond server virtualization, though, VMware is in uncharted waters. As CIOs broaden the scope of virtualization, they’ll need management tools to automate and watch over their virtual resources, only some of which may be VMware’s, says Carl Brooks, an analyst at 451 Research. “That is a very different proposition than providing a hypervisor,” Brooks says.

VMware’s vCloud management tool may excel at managing VMware cloud deployments, but IT organizations will want a single console to deal with both VMware and non-VMware resources. This is why the company’s acquisition of DynamicOps in July was a key development; DynamicOps’s software can manage both VMware-based clouds and alternatives such as Amazon’s cloud.

Also, the audience for virtual data centers may be limited, given that VMware requires organizations to use x86 hardware. It will take some time for many organizations to move mission-critical applications to x86 hardware, says Charles King, lead analyst at Pund-IT.

Nor are all enterprises gung-ho to virtualize every aspect of their data centers, King adds. “The cost of failure, especially for large enterprises, typically outweighs the benefits of wholly virtualized environments, so it makes sense for organizations to support those processes and applications with dedicated mission-critical systems,” King says.

The Score

Despite potent competitors such as Microsoft and Citrix, VMware still leads the way in enterprise virtualization–a springboard for providing cloud services. “The virtualization vendor best-suited to enable that market evolution is VMware,” King says.

Although VMware itself doesn’t offer a public cloud service, more than 100 third-party hosting providers now use the company’s vCloud management package for their own cloud services. According to VMware, those cloud services are used by 350,000 customers in 24 countries.

“We want to offer a lot more choice in regions and types of clouds,” Herrod says. “It’s about developing a large ecosystem of public clouds.”