Changes in direction are always a challenge, both for vehicles and for companies. What’s particularly problematic are changes in direction that take a company from a historical, comfortable, incumbent position and out into the wild and competitive world. VMware is facing that kind of direction change, and their current quarter says their approach could use some tuning.
VMware’s numbers for the quarter were OK, but guidance was an issue, and this compares with other tech companies who’ve reported both strong quarters and decent guidance. There’s been a perception that the waning COVID issue has pushed companies who deferred projects to catch up, creating a general boost to sales, especially for incumbents. If VMware didn’t capitalize on that trend, then they may be dependent on new areas for further growth.
Right now, in today’s world of tech, computing and networking are undergoing a massive and interrelated set of changes. When this is all over, neither will be done in the way they were in the good old days. The “wild and competitive” world I mentioned is also a new world. Given that, let’s start with the good news. VMware as well-positioned to face this new world, in product terms, as any vendor out there. There’s not much of anything that’s going to happen that VMware doesn’t have a product to address, and that’s a huge asset. Product development has a long cycle, and the market may not allow the time it would require.
The bad news is that this brave new world is so different that it’s totally outside VMware’s experience and comfort zone. VMware is a pioneer, perhaps even the pioneer, in virtual machine hosting. They attracted a significant enterprise market in that space, and built up a set of products/tools that continually enhanced their success. That they were largely owned by Dell, who was a giant in servers, didn’t hurt them a bit. The good times rolled, and it probably seemed like it would never end. And, in a sense, it didn’t, and that was and is VMware’s problem.
What created the challenge VMware now faces is a combination of the inertial pressures of their past and the juggernaut twins of containers and cloud computing, which in a sense are related. The largest driver of new servers and virtual machines in the data center was the attempt by enterprises to build responsive new front-ends to legacy applications. That mission demands a highly elastic resource pool, which VMware could build. But when the cloud came along, it quickly became clear that the cloud was a lot more elastic, and so the cloud became a threat that could tap off the justification for those new virtual hosts in the data center.
The cloud also created an opportunity, though. If enterprises pushed their front-end components to the cloud, using the web services offered by cloud providers, they risked cloud-provider lock-in. VMware’s own initial cloud positioning was aimed at citing the value of a single platform in the cloud and on premises, but that fell short for two reasons. First, VMware didn’t have all the web service tools that cloud providers offered, and so couldn’t really create a portable framework. Second, containers.
Containers were designed to make deployment of applications easier, by creating software containers that held not only the components, but also the necessary parameterizations, service dependencies, and so forth. Containers were way easier to use than VMs in hybrid and multi-cloud applications, the proof being that they’ve largely taken over those spaces. But as recently as a year ago, VMware was still wedded to virtual machines, was slow to see or leverage container value. They fixed that problem, but they were late in doing it, and why that was (and is) true goes back to the difficulty in changing direction from the comfortable to the competitive.
The difference between “sales” and “order-taking” is proactivity. The sales process assumes that the prospect needs some nudging or even pushing to get them to the customer level, where order-taking assumes that all you need to do is whip out the old order form and fill it in. You can probably see that a company that’s been not only incumbent in a space, but kind-of named after it might have some issues with suddenly answering questions about “why you?”, “what justifies this?”, or “what are you doing about this new technology?” Those aren’t the biggest challenge, though.
The biggest challenge is that sales, in a new area, doesn’t work without marketing, and marketing doesn’t work without positioning. Sales in a new area of tech is like herding cats, which we all know is the exemplar concept for something both disorderly and impossible in the end. Marketing/positioning is like staking out a bail of catnip; everything you want is suddenly concentrated in one place, looking for one thing. Sales is a lot more efficient, and in fact without marketing/positioning, sales can be so inefficient that you can’t retail good people because of the frustration and low commission levels they’ll likely face.
VMware’s marketing and positioning is missing the excitement that marketing has to provide in order to be effective. Excitement is what gets your press releases and announcements into the news. Excitement is what makes prospects read that news, and excitement is what then makes them go to your website to get more information. If the website can promote even more excitement, that’s what makes that prospect ask for a sales call, and what combines with good sales strategy to convert the prospect into a customer.
On VMware’s earnings call, the CEO is actually doing a form of marketing, but on the most recent call, VMware’s CEO said “We are at an exciting time in our industry as organizations large and small transform and modernize to become software-based digital enterprises. This transformation is characterized by an explosive growth in new business applications and new digital experiences delivered from the cloud, from the data centers and from the edge to employees and consumers on diverse smart devices.” OK, true but trite. What’s said here that everyone hasn’t said, heard? That’s not excitement.
Excitement is one thing, and positioning effectively once you get them excited is another. That starts with having a clean structure for the product vision that fits your view of market evolution. We are in the age of the cloud, the age of containers. The age of Kubernetes. The primary vehicle for VMware has to be cloud, containers, Kubernetes. That primacy may be there in the hearts of VMware marketers, but it’s not all that obvious.
VMware, like a lot of companies with a long history, has a laundry list of products, the names for which are almost always non-descriptive. Tanzu, which is an excellent container/Kubernetes framework, is commonly referenced as Tanzu Application Platform. VMware has/had a Tanzu Application Services product too, and that was based on the Pivotal/Cloud Foundry cloud-native PaaS toolkit. They originally wanted to somehow merge the two, but that seems to have been abandoned. Meanwhile the company still does a lot of cloud stuff based on virtual machines, and VMware people still tell me that “we’re a VM company” in a container age.
The key truth for VMware may be that they surely can’t keep thinking of themselves as a VM company, but they probably try to realign to be thought of as a container/Kubernetes company either. That’s not exciting, not news, since almost everyone else in software is already there. They seemed on the investor call to want to think of themselves as a “multi-cloud” company, but that’s also been done to death in the media, and it offers them no real differentiation. Then there’s the fact that they tried, on the call, to redefine “multi-cloud” to mean the stuff I cited from the call, linking it to trite statements and trying to redefine a term the industry is already widely using in its original sense.
Multi-cloud really should be redefined, which is the pity. Enterprises really want cloud portability more than cloud multiplicity. Their “hybrid cloud” doesn’t link private and public cloud, but data center legacy apps and cloud front-ends. There’s a big opportunity to set the market straight, and that could be news. It could also be the best way to showcase VMware’s still-superb assets.