Virtual computing has been a hot trend for a long time. The market might even be close to saturation because it's been going like hotcakes for so long. According to Raghu Raghuram, senior VP of cloud infrastructure at VMware
But VMware still sees plenty of growth left to explore, and the secret sauce is called cloud computing.
So what's the magic?
In this week's earnings call, management laid a heavy load on the shoulders of cloud computing. Virtual computing simplifies the management of your data center, squeezes more work out of the same hardware, and lets you run a more flexible IT operation with fewer machines and lower staffing levels. That's the part that's already generally accepted as best practices in enterprises everywhere.
The next step in the transformation VMware wants to market starts from this platform. And then you use it to do things the old systems never could handle. The new ideal is to run private, secure cloud services on a fully virtualized infrastructure.
Best-case scenario, the software teams don't have to care about the hardware. They just write, run, and support applications on a malleable mesh of servers, storage, and networks. Users consume these programs over private networks, often delivered in secure tunnels over the open Internet. There might be specialized client programs or mobile apps involved, but Web browsers are a very typical user interface. Everything is automated, easily changed, and exactly as public or private as you need it to be.
Delivering this whole package is at the core of VMware's strategy today. "We think that customers view infrastructure as incredibly important, but it's not the thing that they want to spend more of their time and money on," says CEO Paul Maritz. "Instead, they would rather be able to redirect their focus toward things that really are going to differentiate them in the marketplace versus their competition. When that happens, customers tend to place a greater premium on getting a complete suite of functionality, and that's what we're doing for virtualized infrastructure and for private clouds."
Mainframe concepts for smaller systems
If that operating model sounds familiar, even old-school, you're probably used to working with big-iron IBM
And you'd be right. But this time, the underlying hardware isn't one perfect system. It can be a mishmash of smaller machines, running various operating systems on widely varied hardware. But VMware makes it look and feel like one easy-to-manage mainframe. You don't need a million-dollar mainframe to work like this anymore.
Doing this takes a lot of add-ons to the virtual server structure that's so widespread today. That's why management sees such a rosy growth future, even after every system is managed as a virtual server. And on top of that, these systems can perform workloads that plain old hardware or even a simple virtual server never could. So there's another growth angle -- expanding the total market for server-class computing.
Doesn't everyone else have the same idea?
This isn't the only company working on a similar model, of course. The Microsoft
Different strokes for different folks. According to the analysts at Gartner, VMware still dominates the server virtualization market it invented, with a crushing 65% market share. Microsoft runs a distant second at 27%, and nobody else comes close despite their best efforts.
Overall, VMware grows sales at a 30% run rate. Trailing earnings more than doubled over the past year. This strategy is clearly working. Learn all about the cloud-computing revolution in this special video report. It's free to Fools, but only for a limited time, so why don't you watch it right now?
Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Amazon.com, IBM, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Amazon.com, and VMware, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.