From my observations, VMware is beginning to believe its own PR. I don't think it's as focused on the channel and channel marketing as it should be, and I don't think it is taking the Microsoft threat seriously enough.
My first proof point on how important the channel is or isn't to this company comes in the form of a question. Why didn't CEO Paul Maritz attend the company's recent worldwide partner event? The company says he was in Europe doing some "presentations." Translation? The indirect channel and all the business it creates and drives for VMware isn't important enough to the CEO to make sure his schedule coincides with the event that the company schedules at its convenience months and months before it happens.
Then there is the Microsoft threat. I've seen the boys in Redmond come late to the dance before, but somehow by the time the music stops the company generally figures out a way to go home with the pretty girl.
Late on word processors but owns the category. Late on spreadsheets; owns it now. Late on Web browser; dominates it now. Late on network operating systems and a dozen other things we don't need to get into. The only place it has consistently underperformed is in the consumer space.
But the market isn't as easy to maneuver as in the past, and Google is cleaning Microsoft's clock in search, you might say. However, when it comes to virtualization and ultimately cloud computing, Microsoft is fighting on a battlefield it knows all too well. VMware should liken it to the faint sound of bagpipes approaching on battle day and how they can sound eerie and unnerving as they get closer.
The cloud poses a new threat to Microsoft and its traditional model, with its profit coming from licensing software. Furthermore, virtualization is an important step toward the cloud, and VMware got there first and has been the company most associated with virtualization. Microsoft clearly knows this.
But I look at it like this: VMware's being synonymous with virtualization just means that it will fall harder. Netscape was synonymous with Web browsing. Lotus stood for the spreadsheet. WordPerfect meant word processing, and Novell was first in and once owned network operating systems. How did those all work out? Novell was the only one able to reinvent itself. The rest are fun to talk about in the context of "remember when."
Here's the way I think it is going to play out. Microsoft will continually improve on its product set and gain on VMware from a technical standpoint. At some point, the comparisons from a technical standpoint are going to be a toss-up. But Microsoft comes in at a lower cost and it's really hard to compete long term with free.
Microsoft also knows how to leverage the channel. VMware has a channel as well, but the organization takes too much for granted. It's got itself convinced that its product is so good that it sells itself. It has itself convinced it has a robust channel marketing and strategy plan. It has itself convinced that it owns this space.
The reality is it is renting the No. 1 slot, and if VMware's executives think holding a partner conference is a channel marketing plan and a channel strategy, this won't end well.
Netscape made the same mistake of thinking market ownership came as a result of product superiority. I remember sitting in Netscape Senior Vice President of Marketing Mike Homer's office when it looked like the company could do no wrong and it was unstoppable, and seeing the same things happening that I now see at VMware. Just my opinion, but it comes from experience.