VMware’s Aggressive Cloud Strategy is Fraught Both With Risk and Opportunity, According to New Report from GigaOM Pro

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With 85% of the virtualized server market, VMware has a substantial presence in the enterprise market, and the company will make a further push into the cloud computing business with announcements at VMworld

While in today's environment VMware is a strong favorite against any single vendor, given its broad solution set and dominance in virtualization, the hypervisor eventually will become a commodity, leaving management software and cloud platforms as the ultimate competition spaces.

VMworld 2010 kicks off in San Francisco, Calif. next week, and industry watchers are expecting major cloud computing announcements from the virtualization market leader. According to a new report published today by GigaOM Pro, the anticipated new products advance VMware’s already-aggressive strategy to transition its dominant virtualization market share position into a full-scale takeover of the cloud computing market. Whether it can capitalize on its large footprint, however, remains to be seen.

A recent Spiceworks survey indicates that the company has an 83 percent share of the market for virtualized servers: an incredibly strong beachhead for aggressive transition into cloud computing. But VMware’s strategy is fraught with potential risk due to strong competition and consumer reluctance to embrace a broader cloud computing offering.

According to Derrick Harris, Senior Curator of Infrastructure at GigaOM Pro and author of the report, "While in today's environment VMware is a strong favorite against any single vendor, given its broad solution set and dominance in virtualization, the hypervisor eventually will become a commodity, leaving management software and cloud platforms as the ultimate competition spaces."

Over the past few years, VMware has girded for battle to grow beyond the virtualization market, with a goal of becoming a force — if not the force — in the cloud computing market. Through a strategy of acquisition, partnership and development, the company has created a solution set that offers something along every layer of the cloud stack.

However, while virtualization is growing extremely quickly — going from 44 percent today to an estimated 70 percent by year’s end — cloud computing is not seeing the same swift buy-in among IT users. According to a recent survey of Spiceworks users, 62 percent of IT respondents have no plans to deploy cloud computing services in the next 12 months. This means VMware's strategy of leveraging its strong market share among hypervisors may be tempered somewhat by slower cloud adoption among IT organizations concerned about security, performance and the unproven nature of cloud models.

"Over time, more and more organizations will embrace cloud computing, but the embryonic state of today's market and conservative nature of IT decision makers relative to cloud offerings could give VMware's competitors, such as Microsoft and Oracle, time to make up the distance afforded by the company's strong lead in virtualization market,” says Harris. “That lead is the company's primary competitive leverage in the broader transition to cloud computing.”

The report, entitled “VMware’s Cloudy Ambitions: Can It Repeat Hypervisor Success?" examines the details of VMware’s cloud computing strategy, including the company's virtualization and hypervisor product suite, its offerings in the broader private and public cloud markets across the IaaS, PaaS and SaaS space, and the broader competitive market for cloud computing services. The report utilized data from GigaOM Pro partner Spiceworks, which taps into a million-plus-member community of IT pros and 150,000 IT service providers to extract rich and meaningful real-time usage data of key technology products.

About GigaOM Pro
GigaOM Pro gives you insider access to expert industry insights on emerging markets. Focused on delivering highly relevant and timely research to the people who need it most, our analysis, reports and original research come from the most respected voices in the industry. Whether you’re beginning to learn about a new market or are an industry insider, GigaOM Pro addresses the need for relevant, illuminating insights into the industry’s most dynamic markets.

Visit us at: http://pro.gigaom.com.

About Spiceworks
Founded in 2006, Spiceworks™ develops the first free social IT management application that combines network management and help desk software with a “Facebook-like” online community of IT professionals to help over 1 million IT pros and 150,000 IT service providers simplify everything IT. Spiceworks makes it easy for businesses to manage IT products and services on-premise or in the cloud, collaborate to solve technology problems and find the IT knowledge and products they need day-to-day. Through its Voice of IT™ market research program, the company enables direct conversations with IT professionals, conducts surveys and provides insight on important technology usage, staffing and purchasing trends by small and medium businesses worldwide. Spiceworks is a privately held company headquartered in Austin, Texas with funding from Institutional Venture Partners (IVP), Austin Ventures and Shasta Ventures.

For more information visit http://www.spiceworks.com.
For information about the Spiceworks data used for this report contact Ted Nitka.

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