VMware, or why is infrastructure suddenly sexy again?
November 15th, 2007 by Benjamin KuoI’ve been rather amused by the amount of coverage given recently to VMware, a Palo Alto-based company which makes system virtualization software. Their software is used by enterprise IT datacenters to consolidate the amount of hardware they are using for applications. For example, instead of buying six different PCs to run six different applications, you can instead buy one big box and run all six “virtual” PCs inside that one box.
It’s a great solution, which for many, many years has been gaining traction in the enterprise space.
All of the sudden, however — after the firm’s blockbuster IPO — everyone seems to be paying attention to everything the firm is doing. The company was actually purchased by EMC back in 2003 - EMC is still a majority shareholder — and the whole growth story is much older than the IPO. I remember attending VMworld 2004, the firm’s annual conference, as an exhibitor, and thinking how smart of a move EMC made in buying the firm. (They paid $635M for VMware in 2003; the market cap today is right around $32.5 billion). I worked very closely with people at VMware in my position (at that time, socalTECH was still just something I was running as a hobby) and it was incredible how much growth they were seeing–but how no one in the technology or business press noticed.
I actually think the recent interest is a result of an overall — but subtle — shift in interest, and some funding, away from Internet and Web 2.0 investments, towards investments in infrastructure, software, hardware, and chips. It’s probably the nature of the cyclical cycles in the technology industry, with some counter-trend investors starting to look at the more neglected industries as valuation (and hype) gets a bit too lofty in the Internet/web areas.
In many ways, the interest in the area is a repeat of the post-bubble syndrome seen with Internet companies. Immediately after the bubble, Internet companies were shunned–everyone removed the dot com from their names, no one could get funding, much less a meeting from a VC, and you wouldn’t want to mention you worked for an Internet company at a cocktail party. But, because of that, no competitors were funded, companies who had real business models could quietly build their businesses, and–at least here in Southern California–we saw a number of huge, successful, and very profitable firms built.
I think there is the potential for that to happen in the infrastructure, software, and hardware firms of today. Left to their own devices, they have not been attacked by dozens of startups, if they’ve figured out their business model should be quietly building their business, and will be the next big winners. Time will tell.
