Interview: VMware CEO Diane Greene5:00 PM EST Fri. Jan. 11, 2008
Diane Greene, president, CEO and co-founder of VMware Inc., the Palo Alto, Calif.-based developer of the software credited with starting the move to virtualize x86-based servers, has steered VMware from its beginning through its acquisition by and subsequent growth under EMC through its wildly successful IPO. Greene recently sat down with CMP Channel to talk about how VMware started, and where it is going.
CMP Channel: Where did VMware get its start?
Greene: Mendel Rosenblum, our chief scientist, is a professor at Stanford University and a world expert in operating systems. He was doing research in bringing isolation to operating systems for security, fault-tolerance, and resource isolation. He went up to give a talk at Sequent before they were purchased by IBM, and they said, 'This is great, and we really would love an operating system like this, but we can't afford to build a new operating system, and even if we could, it wouldn't run any of the old workloads.'
You know I'm married to him? And he came home that night, and he's like, 'I got it. I'm gonna revisit virtualization and fix all the problems that Sequent brought up, and it still lets you have your isolation, because you can run the old code and the new code, and it's non-disruptive, and you don't have to build a new operating system.' So he just went to work the next day and started doing a project to prototype it. They did it on the MIPs[-based computer]. We got to talking with the grad students and we said, 'Look, this would be really valuable to bring to the x86 industry-standard systems.' So we launched the company.
What were you doing at that time?
Greene: I was just finishing up some consulting I was doing for a startup. So I said [to him], I'll wrap that up, and I'll help you get the company going. I had already done a couple startups. So I joined to get the payroll going. I negotiated our BIOS agreement with Phoenix [Technologies, Milpitas, Calif.]. That was the first business deal we ever did. And I never left. I anticipated leaving, but I didn't.
If you look at VMware's history, there's almost like three phases. There's pre-EMC, then there's the EMC period . . .
Greene: An unusual history . . .
. . . and then there's the post-IPO period.
Greene: Still EMC somewhat . . .
About 90 percent.
Greene: No, 86 [percent].
OK. What were things like before EMC acquired VMware and what were things like after EMC acquired VMware? What were some of the big differences?
Greene: Interestingly enough, things didn't really change that much. We didn't have a stock hanging out there that was going to have a lot of upside any more. That's something that went away. Up until the time we were bought, everybody had stock in the company that they expected to be really different in value someday. Once we were acquired, everybody had EMC stock, which was pretty predictable.
We anticipated that we were probably going to get integrated. But what happened was, the day we were acquired we realized that this was a company built to partner. It's just in our bones. We went to market with IBM, then HP and Dell, and we had really strong relationships with them. We've expanded our relationships with them since then in terms of making sure our virtualization works well with their servers. And our resellers and VARs, it was such a huge partner focus to the company and how we went to market.
We realized that, if we suddenly had EMC selling our software, that's going to be destructive to our partner channel. And so, I said to Joe [Tucci, EMC chairman and CEO]—and we were small then, miniscule compared to EMC's revenue—'I don't think you want to disrupt this, because it's really going well.' I [didn't] think EMC should sell our product because we had immediately heard from a lot of our partners, and they were pretty concerned. So [I told him,] 'Let's send out these rules of engagement to all of our partners about how we're going to sell, and that EMC is not going to be selling our product.' And he said OK.
And so we never integrated sales. And if you don't integrate sales, you actually don't integrate. I didn't really understand that fully at the time, but that's exactly why we never did. If sales isn't integrated, how do you integrate IT? Or how do you integrate anything else? It doesn't make any sense. So we operated as an independent subsidiary.
What was EMC's reaction when you said you don't want to do this sales integration?
Greene: Joe really understood. He said, 'You're right, it makes sense.' They had just bought Legato and Documentum, and were going to be integrating them into the sales force. So that was enough, right? Our growth was good. And because it continued so well, it's like, if it's not broken, don't fix it.
Next: Model Of An Acquistion
Ever since then, when someone makes an acquisition, they point to EMC's acquisition of VMware as one model for the way to do it.
Greene: VMware, I think, had an unusually powerful product which immediately saved people money and gave them great flexibility. And it had a very strong partnering model going into the acquisition. And now we've really expanded our channels. When we got bought, there were hundreds [of channel partners]. Now there are 6,000-plus [worldwide].
I would agree, if you buy a company and they've got that kind of partnering model, that might be in conflict with [the model of] the acquiring company, you leave it as a stand-alone subsidiary.
I think we see that with Dell today, looking at how it's going to integrate EqualLogic.
Greene: Well [EqualLogic has] a great channel. That's interesting. You know, EqualLogic has some people with a lot of experience with VMware.
When EMC acquired VMware, was there an increase in the amount of resources you had?
Greene: The thing we did have, internationally, all of a sudden we didn't have to establish a legal entity in all these countries because EMC was there. So we could just hire people into this office. It's expensive and time-consuming to establish these legal entities. So we were able to scale internationally much more rapidly than without that acquisition. So I think that was a huge help.
How about post-IPO? How did things change?
Greene: We're just growing our business, keeping our customers and partners, doing everything we can for them to make sure they're happy. There's a little additional work now with being public.
I think it was an incredible marketing event for the whole virtualization industry. It was great for everybody. We're all working pretty hard to keep up with that.
Look at the valuation of XenSource [after its acquisition for $500 million by Citrix] . . .
Greene: Yeah, it's a really exciting time for this industry, because people appreciate how valuable these products are in someone's data center. And the ecosystem's building out much faster now, which just further enhances the value of deploying virtualization. More people want experience in how to deploy it and deploying the services. So it's on this upward spiral right now, which has been real exciting for all of us.
Some of the key initiatives VMware is working on now include working with the power utilities to offer rebates [for decreasing server power consumption]. What are some other initiatives that VMware is working on . . .
Greene: . . . that are publicly announced. There's a huge initiative in the channel. We do have some M&A going on as well.
What are the types of companies VMware looks at in terms of being suitable for acquisitions?
Greene: Well, we look at technologies where there's an area we want to build, and there's some key technologies that might already be out there in a startup. So we acquire for that.
We've also acquired a company in Bulgaria that we've been outsourcing a lot of work to that has just incredibly talented engineers. So we just acquired the whole company for its engineering talent.
Or then there's the example of Dunes (Technologies), where it's process automation for virtualization. That was a solution that our customers wanted integrated in with our virtualization suite. So we bought the solution, because it had been built specifically for our virtualization suite.
The acquisitions have been going well, in terms of people come in and seem to really enjoy joining the company.
So building out the product suites is the major initiative. There are a lot of major releases over the next year that haven't been announced necessarily.
What are the most important things going forward in terms of VMware's direction?
Greene: Well, the hypervisor. We can add so much functionality, like new hardware functionality, security and resource management.