Uploaded byKobi Magnezi
VMware analysis and strategy
The document analyzes VMware's current strategy and financial performance, highlighting the shift from virtualization to cloud computing and the importance of hybrid cloud solutions. It outlines key recommendations for enhancing pricing strategy, reallocating R&D focus, and forming partnerships that can strengthen market positioning. The competitive landscape and emerging market trends indicate a need for VMware to adapt to maintain growth in the evolving cloud environment.
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VMware analysis and strategy
- 1. VMware: Strategy, Analysisand Recommendations Team D9: Gian Calvesbert Kobi Magnezi Will Reid Sarah Rubinton Abhishek Sinha
- 2. 2 Agenda Industry Terminology andBackground Industry Analysis VMware History and Current Performance Current Corporate Strategy Recommendations Forecast and Predictions
- 3. 3 What is Virtualization?:The Traditional Server Concept Web Server Windows IIS App Server Linux Glassfish DB Server Linux MySQL EMail Windows Exchange
- 4. 4 What is Virtualization?:The Virtual Server Concept Virtual Machine Monitor (VMM) layer between Guest OS and hardware
- 5. 5 From Virtualization toCloud Virtualization • Not bound to physical hardware • Easily scalable Automation • Get less/more servers as needed • No need to manually install or configure Cloud • Economy of scale • No CAPEX • Pay per use • OPEX can directly link with demand The global cloud computing market is expected to grow from $37.8 billion in 2010 to $121.1 billion in 2015
- 6. 6 All servers arevirtual and run inside a company using a cloud automation product (like VMware vCloud) Servers maintained by other company and offered through pay-per-use pricing Some servers run inside the organization and some run outside in the public cloud Hybrid Cloud Computing
- 7. 7 Rivalry Barriers to entry Buyer Power Threat of substitution Supplier Power IndustryAnalysis High R&D Costs Companies need to offer multiple products Functional alternatives exist. High cost for technology change High attrition rate for IT professionals. Patents protect firms. High switching costs. Business customers making large purchases.
- 8. 8 Breaking the OldGuard, Hybrid Cloud Time ROI Virtualization Hybrid Cloud 1 2 Hybrid cloud is disrupting computing structures Tie with public and private cloud Customers WTP to manage both private/public cloud
- 9. 9 VMware: Corporate Background 1998 2004 2007 2009 Founded Acquiredby EMC for $635M Independent subsidiary EMC 2012 Revenue: $21.7 Billion EMC owns 80% of VMware Class A Stock and 100% of Class B IPO Introducing vCloud Suite, integrated products to automate and manage cloud-based data and networks
- 10. 10 VMware: Current FinancialPerformance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 04 05 06 07 08 09 10 11 12 $Thousands Year Revenue and Change revenue Revenue Change $4.6B Revenue 84.3% Gross margin $745M Net Income ROE 14.19 ROA 7.74 Stock Performance
- 11. 11 VMware: Current CorporateStrategy Management has defined 3 pillars for continued growth Software-defined data center • Virtualized infrastructure is automatically managed Hybrid cloud computing • Virtual machines can move from private to public clouds End-user computing • Focusing on the multi-device era
- 12. 12 Competitive Positioning Cost LeaderDifferentiatedNarrowBroad
- 13. 13 Sustainability and BestPractices VMware Microsoft OpenStack Value High High Low LowPrice
- 14. 14 Sustainability: Change inVMware Value Capture WTP WTS WTP WTS TotalValueCreated VMware Value Share Old Market Model Current Market Trend
- 15. 15 Need For Change Revenuegrowth has flattened off Pricing model is too volatile and too high Fierce industry competition, customers wary of lock-in with any one service provider R&D expenditures not matched with evolutions in market demand VMware has a superior underlying foundation. Reallocation of resources is required to successfully match resources to market trends and demands.
- 16. 16 Recommendation 1: PricingStrategy 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 04 05 06 07 08 09 10 11 12 $Thousands Year Revenue Components License Service Revenue model • Transition licensing revenue from Virtualization and Hybrid Cloud products focus to service-based revenue focus • 45% of current revenues from licensing, 55% from services Product price • Reduce price on Virtualization product to increase adoption and ongoing service revenue Market penetration • New Hybrid Cloud product set to enter the market in late 2013, take on an early adoption strategy through a lower initial license price point
- 17. 17 Recommendation 2: ShiftR&D Focus “VMware still depends on vSphere revenue as it expands into higher-level management and automation software” Gartner Magic Quadrant for Virtualization Infrastructure. June 2012 Focus R&D on building top-end inter-operable hybrid cloud platform
- 18. 18 Founded in 2009,VCE (Virtual Computing Environment), is a joint venture among EMC, VMware and Cisco. Recommendation 3: EMC & VMware Cloud Security
- 19. 19 Recommendation #4: EndUser Lock-in via Apple Partnership Apple vs. Microsoft • Apple’s advanced desktop OS • Microsoft still dominates the enterprise desktop OS Personal Virtualization • Transfer entire PC to Mac • Leverage current Windows investment • Seamlessly run Windows on a Mac Bundling • VMware & Mac OS X • Lower switching cost • Lower the barrier to enter • Increase market penetration • Increase brand awareness • New source of revenue
- 20. 21 Epilogue Pricing • Licensing contributes45% to current revenues Focus • Choose which customers to serve, and which ones not to • Constantly innovate and serve these customers extremely well • Vulnerable to competitors locking-in customers Bundle • Customer may dislike this new “lock-in” feature that Apple introduce. • "lock-in" bundle may be subject for United States antitrust law There's no such thing as a free lunch
- 21. 22 Epilogue But there isa way to match market demands and trends Over the next three years hybrid deployments will make up 60% of all deployments The market will balloon to $3.3 billion by 2016
- 22.