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Will VMware become the next Novell?

Mike Laverick questions whether or not VMware will become the next Novell in this column.

Well, it has surfaced again. The old chestnut: Will VMware become the next <insert-former-vendor-who-dominated-the-market-but-then-rapidly-declined>? This time it's David Cappuccio on the Gartner Corporate Blog:

Similarly, Reuters is reporting that the stock market is now bearish about VMW shares, and the company could see its share value fall:

The answer to this question is yes, if you believe what Karl Marx said, that “History repeats itself – the first time as tragedy, the second time as farce”. Personally, I’m not a believer in historical inevitability or determinism. I don't believe that just because something happened in the past it is destined to happen in the future. It’s what convinces me that I’m not Marxist.

So what does VMware have to do to avoid becoming the next Novell/NetScape/Lotus? A couple of very simple things, which boil down to the general good things that all businesses should do and they are:

  • Don’t annoy or antagonize your existing customers. People are generally quite loyal to companies once they have got them in-house. They generally recognize the benefits of sticking with what they have got if they cannot see a compelling reason to move to another vendor.
  • Offer easy and cost effective upgrades. Getting customers on the latest release is paramount to keeping the impression in place that the software is getting better, and old gripes are being taken care off. Recognize that markets and demands do change, and react to them. Avoid repeating old mantras that will increasingly fall on deaf ears the more they are repeated.
  • Produce stable products that work. Customers react negatively to even the slightest degradation in quality, especially if a previous release set the bar at a high-level.
  • Innovate. Add to and extend existing functionality and introduce brand new bleeding edge features that no-one else has. Customers put a great deal of store against “Unique Selling Points” often at the mistake of valuing them above core functionality.
  • Make it easy for new customers to climb on board. Attracting new customers as well as retaining the ones you’ve got is a central plank of any business. But in order to attract new business you must offer models which allow customers to get into the product easily, and also upgrade to high level editions with ease.
  • In a recession. You have do these things twice as well as you used to…

Now, most of the time I believe that VMware achieves these rules. BUT (and there is always a but…) I increasingly hear gripes from customers about the upgrade from Vi3 to vSphere4 being too pricey. However, it does seem that things are up for negotiation. Without mentioning any names – I have a friend who has been sending me emails describing his upgrade costs. Much of this centers around what I would regard as complicated calculations for working out the value of existing Vi3 SnS, and then working out how much that is worth in vSphere4 SnS. The first calculations resulted in what my friend thought were punitive upgrade charges. So expensive in fact, as to make him reconsider his upgrade plans. The second calculations for the upgrade he received (that’s the “Let me speak to my manager…” part of the story) came back with a significantly reduced number….

I subscribe to the “there’s no such thing as a free lunch” and “you get what you pay for” perspective. But even I recognize that in the current market place as Reuter’s article indicated – that in a recession, price becomes a sensitive issue.

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