VMWare proving the doubters wrong. For now.

VMWare have released their figures for the first quarter of 2008 and don’t things just look mighty rosy, eh? $438 million revenue, up 69% on Q1 last year, and $48 million income, up a couple of million on 2007. The stock price has shot up again and it looks like the next chapter is now being written in what is surely the most volatile share price rollercoaster rides in recent high-tech history. Having started at $29, it ballooned up to $125 and then crashed back down to $42. All in just 8 months.

Being so heavily involved in the Citrix world (I’m new to this blog so I better identify myself as being the Product Manager for Citrix at COMPUTERLINKS, a distributor for Citrix and what used to be called XenSource), I could say that this is very bad news for those hedging their bets, as we are, on Citrix XenServer being a success. I could also do an Alastair Campbell on it and say that VMWare’s impressive growth is validation of the potential of the market and Citrix only stand to gain from that. But I’m not going to do either because, to be honest, that would be a bit dull.

Diane Green, the CEO of VMWare, claims there are only two other software companies, other than VMWare, who have been capable of maintaining 50% year on year growth or better after hitting the $1 billion revenue mark. That puts VMWare up there with the very best. And for the doomsayers of late that have been predicting the demise of VMWare because Citrix and Microsoft happen to be doing something similar, this will be a sharp wake-up call. VMWare make cracking products and they are streets ahead of everyone else in this market. Fact.

Nevertheless, the competition cannot be disregarded. Can it?

What actually is the competition then? Citrix? Microsoft? Virtual Iron? Parallels? Citrix XenServer, whilst admittedly coming on in leaps and bounds, is nowhere near where it needs to be to challenge VMWare on server virtualisation. Microsoft don’t even have a proper product yet. And as for the rest, well they will never have more than the scraps to feed on in my humble opinion, loud as they may like to shout.

So, effectively, VMWare currently don’t really have any competition at the moment. This places them (somewhat ironically, seeing as they keep pinching their staff) in a similar situation to where Citrix were a few years back. The biggest challenge is not another vendor beating you to the deal but the customer not actually doing anything at all.

There are some crucial differences, though, to the Utopia that Citrix used to revel in.

Firstly, not doing anything at all, when it comes to server virtualisation, is quite definitely the wrong decision and IT Directors and CTOs know that. Server sprawl is immense and the business case for virtualisation is rock solid. When we look back in 5 years time, we will wonder how we ever thought it a good idea to have so many servers doing so little.

Secondly, the competition is looming. Citrix dominated their SBC market masterfully, Ericom, Tarantella, Jetro and the rest of them never even came close. VMWare don’t have this luxury because server virtualisation is going to be a much bigger market. Server-based computing and thin client technology was a niche area that you either loved or couldn’t quite understand. On the other hand, virtually every company in the world that uses technology uses servers and only 6% of them were virtualised last year. Now that is an entirely different proposition altogether.

Then, thirdly, there’s that Microsoft thing…

Where Microsoft has been more than happy to sit back and watch in unadulterated glee as the millions upon millions of Terminal Services CALs (that would not otherwise have been sold) rolled in, VMWare is (or will be) in direct competition to the Redmond behemoth.

Microsoft would never bite the Citrix hand that fed it, why would they? Why would you spend your money developing Terminal Server when you can just get your little brother to do it instead and take the cash for the TS license anyway? Just ensure you give the system a perfunctory scrub-up every couple of years to make sure the anti-trust people don’t get too excited, invite Citrix to your party and anoint them as your official best friend every so often and Bob’s your uncle.

VMware is different. Microsoft doesn’t like them. VMWare are the school bully. They’ve been beating up Microsoft’s little brother and stealing his lunch.

Someone said to me recently that, whilst listening to Diane Green speak at VMWorld in Cannes this year, he was strongly reminded of Ray Noorda (RIP), the CEO of Novell from ‘82 to ‘94. Similar personalities – both are/were very intense, technical, academic. Actually both were very dry, uninspiring speakers if we’re being honest.

In the “Compete” seminar at VMWorld, my source mentioned the same sort of arguments were used by VMWare against Microsoft Hyper-V as Novell used all those years ago against NT: version 1 product, won’t be any good, will be slow, fat, unreliable, full of bugs.

Look what happened to Novell.

VMWare certainly are proving their doubters wrong. For now.