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vSphere--VMware's Big Bet

Implications:
vSphere represents the fruition of the product roadmap Paul Maritz introduced at VMWorld 2008 in Las Vegas. So it's not actually a new announcement. vSphere is big news because it removes the lingering vestiges of doubt ever present in the minds of risk-averse technology directors and financial directors. And it "colonizes the cloud" and deems it safe for settlers. The announcement signals VMware's(NASDAQ:VMW) success in creating a competitive strategy and executing on that strategy. What is the strategy? It's a couple of things.

Analysis:
vSphere changes the frame for virtualization. Rather than remain a "server" solution, vSphere chooses the datacenter as its battleground. And this location and the timing of VMware's(NASDAQ:VMW) announcement comes as Microsoft(NASDAQ:MSFT) goes to market with Windows Server 2008 and promises to deliver the virutualization components soon. So while Microsoft(NASDAQ:MSFT) works on it's server virtualization capabilities, VMware(NASDAQ:VMW) now positions its product line as a Data Center solutiono. And this distinction substantially disrupts both the Cloud marketplace as well as the server operating system marketplace.

How does VMware(NASDAQ:VMW) disrupt the "Cloud Space"? The Data Center Operating System might be perceived as a "forking-move" in that it simultaneously seizes the "Data Center OS" territory, while it also marks the cloud territory as "safe for settlers and their horses." While Amazon.com(NASDAQ:AMZN) and other vendors have cloud solutions, corporate IT likes to host its own applications and nobody wants to try to invent their own "Cloud." As a metaphor the "Cloud" addresses many of the challenges IT Directors face with their own internal datacenters. And it fully realizes the impulses that currently drive the drive to virtualization.

And yes, the "cloud" part is important because CIOs and IT directors seeking a data center solution can't help but hear the music of the cloud. And so when choosing a Data Center "strategy" VMware's solution fully addresses the performance, scalability, security, and manageability challenges of Data Center virtualization, while simultaneously proving a well understood and logical avenue to the future--to the Cloud.

While few large or medium data centers will go to production in the cloud this year. VMware's(NASDAQ:VMW) vSphere solves the problems facing IT Directors in the here and now. Firms with highly heat or space constrained data centers have a heightened incentive to execute a server consolidation in 2009 and 2010. The credit crunch makes it more difficult to allocate scarce capital to construct new data centers.

Vmware's(NASDAQ:VMW) vSphere enables firms to consolidate and manage on an enterprise scale by enabling firms with a total business solution to data center virtualization. vSphere gives firms that already use VMware(NASDAQ:VMW) a strong, much needed, and business friendly reason to fully execute on the virtualization strategy. Microsoft(NASDAQ:MSFT) technology while present in every data center is better tolerated that it is well-liked (does not play well with others, and tends to hog the ball). Moreover, no technology administrator, no matter how loyal to Microsoft(NASDAQ:MSFT) could honestly say that stability and security come to mind when describing the Microsoft(NASDAQ:MSFT) operating system. But this same director would very much like to run a Microsoft(NASDAQ:MSFT) operating system within a well-secured virtual machine.

Microsoft will make inroads in small business, but VMware(NASDAQ:VMW) now has a whole new world of opportunity ahead. The business of helping



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Brian McCallion Bronze Drum works with executives to develop Cloud Strategy, Big Data proof-of-concepts, and trains enterprise teams to rethink process and operations. Focus areas include: Enterprise Cloud Strategy and Project Management Cloud Data Governance and Compliance Infrastructure Automation

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