COMPETITIVE ADVANTAGE
The main contributing factor to the success of the company is the virtualization technology. The products of the company ran on almost 75-95% of the servers. Another important factor contributing to the company’s success is the high customer satisfaction level and this can also be proved by the fact that the services area of the company has been performing impressively and the revenue from services is more towards fixed. Apart from this, the company was also now looking to make Hyper-V, VMware and ESX in their core product offerings to attain the maximum potential of the virtualization technology. Also the installed base of the company was very strong and the company was also standing strongly in the face of the biggest operating system player, Microsoft. The market leadership of VMware was very strong. These all facts made up the company’s competitive advantage in this young growing industry.
THREAT OF MICROSOFT
The biggest threat facing the current strong position of VMware in the software industry was from the side of Microsoft. This company had the ability and the capability to cause serious problems in the area of virtualization ecosystems.For instance, in the year 2007, Microsoft had installed certain built in software into its operating systems that prevented the users of that operating system from deploying their virtualization software. This was a clear attack from the side of Microsoft.
The company’s management had the fear that Microsoft might enter the virtualization technology. If we look into the history of Microsoft than it is also evident that similar moves had been played by Microsoft. For instance, the company had targeted Netscape in the war of browsers, by providing built in internet explorers. This is the reason that Microsoft might respond to the growing pace of the virtualization industry. Another reason is that, Microsoft considers VMware as one of its acquisition target since 2002. It was then in 2003 that the company and targeted the virtualization technology, however, the hypervisor platform of VMware was much stronger. Apart from this, Microsoft has also not targeted the desktop virtualization market. It might respond to the product offerings of VMware and soon it will as it considers VMware one of its potential acquisitions.
RECOMMENDED STRATEGY
Looking at the nature of attacks by Microsoft in the past and also their history it is clear that VMware needs to adopt a new strategy from the 4 options listed in the section below, to counter attack Microsoft’s actions. Therefore, the most recommended strategy for VMware in these circumstances is a combination of two strategies. First the company should continue to target its high end customers to keep on generating its current revenue levels. Along with this the company should focus on its core competencies to maintain their competitive advantages in the area of virtualization technology and also they should take steps to undermine the actions and attacks of Microsoft. This strategy will help the company to sustain in the long term and maintain a competitive edge.
STRATEGY, STRATEGIC OBJECTIVES AND TACTICS
Paul Maritz had replaced Greene in July 2008. He had the responsibility now to protect the strategic position and strategic objectives of the organization. VMware had a recruitment and growth strategy. The founders of the software company had focused on growth through acquisitions. After Microsoft had threatened the company, it started to look for a change in the company’s strategy to counter attack the emerging competition that would be created. The company has always focused on its high-end customers. The company was also acquired by EMC Corporation in 2004 and it was in 2007 that EMC had sold about 15% of the company through an initial public offering in the New York Stock Exchange.
Currently, standing in 2008 the strategy of the company is to make their product as a core component of the customer data center. The management of the company wanted to proliferate the platform. Apart from that, the company wanted to move their focus from server consolidation to IT transformation. The company had long focused to virtualize the data center.Apart from this proposed strategy under which the company had to face direct competition from Microsoft, the other strategy that is available to VMware is the strategy of leaving the ground which means that if VMware cannot fight with Microsoft, than they can join them.
The company’s strategic objectives focused on becoming the leading player in the virtualization software. The company had also created value for itself through a new approach which was known as the hypervisor approach. Under this approach the first layer of the software is installed on the hardware of the machine.This technology was better suitable for use on servers.
The licensing business of VMware had been also divided into 2 categories: automation and management tools and platform products. The revenue of both of these businesses had been increasing from 2005 to 2008. Also in 2007 The company’s management has also restructured.................
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Paul Maritz VMware took the helm in July 2008, as the company faced a fundamentally new competitive environment. Since its founding in 1998, VMware has been a leading provider of software for virtualization. Now she is faced with the threat that every software company feared most: Microsoft, the largest software maker in the world, was to take direct aim at its core market. As of June 2008, buyers of Windows from Microsoft Server 2008 operating system was free, complete version of Hyper-V, advanced virtualization product platforms. Looming over the upcoming competition between the two companies had a history of "browser wars", in which Microsoft overwhelmed browser maker Netscape connection, tying Internet Explorer browser with the operating system Windows. Did a similar fate awaits VMware? Maritz moved quickly and safely respond to the threat of Microsoft - decided to offer its own version of the product virtualization platform VMware, free. But he still had to define a common strategy VMware correct. The case provides an overview of virtualization technology, a brief history of VMware, including descriptions of its acquisition of computer storage giant EMC, its August 2007 IPO, and the arrival of Maritz, a CEO, a summary of its product lines, discussion ecosystem in which the company operates, as well as overview of the major competitors, including not only Microsoft, but Citrix Systems and other vendors that use Xen virtualization platform. Finally, for a description and analysis of several strategic options available for VMware. "Hide
by David B. Yoffie, Andrew Haji, Michael Slind Source: Harvard Business School 28 pages. Publication Date: September 18, 2008. Prod. #: 709435-PDF-ENG
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