At VMworld 2011, VMware CTO Steve Herrod gave a compelling roadmap of how the company is forging ahead.  If you look under the covers, a lot of the underlying technology and consequently growth, for VMware comes from a series of acquisitions over the last two years.  Take a look at two exhibits below:

Here are some questions that are worth considering:

1. Acquisition pattern and strategic intent: Is there a pattern in how VMware went about acquiring the companies in the picture? Did managers at VMware formulate a strategic intent on how they were going to offer a vision of VMView that is now (or at VMworld 2011) being offered, back in 2009? Or did they just stumble into it?  In other words,  was this acquisition picture carefully orchestrated, or simply a series of experiments that created a coherent picture much later?
2. Acquisitions, growth and innovation:  For technology companies, are acquisitions the only way to grow?  How can a technology company that serves enterprise users innovate continuously?  Is that innovation coming out of acquisitions only? (what about scaling?, integration?)
3. Leadership change: Did a CEO change contribute to any of the change in VMware’s growth? 
4. What can managers facing disruptive forces do in light of 1, 2 and 3 above?

I don’t have answers to these questions (because I’m not privy to how managers at VMware made these decisions!), but I’ll offer my point of view as an observer.  In this post, I’ll expand on question 1) and follow up with another for the other two questions.

Zig-zag?

First on the acquisition pattern and strategic intent:  If you had followed VMware pre-Aug 2009, they had only acquired 6 companies until that time, and all of them were directly related to their virtualization technology, except possibly one (TRANGO Processors) which was about running VMs on mobile phones and even that was too close to virtualization.

Until VMware acquired SpringSource, there were no significant events in core enterprise technologies (read: impacting developers) for VMware.  Most strategists at the time VMware acquired SpringSource would have thought the natural adjacency for the hypervisor would have been a management technology for the hypervisor, not a developer framework.  But VMware declares its intentions for a bigger vision by acquiring a development platform.  Or did managers at VMware really know Spring was going to serve VMware’s PaaS forays today?  In fact,  even managers within VMware would have questioned on why invest in something so far from what VMware was already doing is good.  That would have been a tough pill to swallow - managers would have after all wanted investments driving their current product lines not a new category.  You’ll see over this period of active acquisitive growth, VMware goes about collecting pieces on the chess board small, unrelated, yet opportunistic assets as some might say.

What does VMware do after acquiring SpringSource? You’d think immediately after acquiring SpringSource, VMware would go and acquire a bunch of technologies close to SpringSource to “complete the stack” for developers.  Actually, VMware didn’t do that at all.  It switched all the way up and out to a hosted email service (Zimbra) next.  That acquisition was puzzling to many watchers.  That made no sense to the casual observer.  

SaaS? Developer? Operations? All of the above?

Did VMware want to play in the SaaS marketplace?  Did VMware want to get into the collaboration software business?  If that were true, you’d think at this point in time,  they’ll go and buy a set of SaaS assets to play in the desktop application space.  Not until two years after (i.e. just a few months back), did they acquire three more SaaS assets (SlideRocket, DigitalFuel and SocialCast) to make a “starter pack” for enterprise SaaS. 

 Is it possible that Zimbra was an “experiment” for VMware?  To test the application space? Maybe Yahoo’s divestiture was just a serendipitous moment for VMware to enter the application space so far away from the hypervisor.  Yet, today, it looks so naturally close to it.

After acquiring Zimbra, VMware acquired a whole bunch of management technology assets from parent company EMC.  My guess is, around that time virtualization was already getting to the tipping point of large scale adoption, and management of virtual machines was becoming a problem.  So VMware changed gears, and acquired management technologies to beef up its vCenter portfolio.

Soon after VMware moved further down the stack (from management) and acquired Rabbit MQ.  Why?  AMQP was emerging as the best protocol for messaging in middleware and Rabbit MQ implementation was the perfect integration that someone who already had Spring would look for to broaden enterprise adoption of Spring. 

But wait.  If you thought VMware was paying attention to developers only then  you are wrong.  Suddenly cloud became the buzz word everywhere and security the #1 concern to cloud adoption.  What does VMware do?  Strengthen security with TriCipher and NeoAccel acquisitions.

Again, VMware switches back to developer needs acquiring an IDE (WaveMaker).  

Enterprise Collaboration SaaS Starter Pack (yes, that’s a lot of words)

Finally VMware goes back to actually completing a simple usable starter pack, it started almost 2 years before with that Zimbra experiment. So SaaS starter pack = Zimbra + SlideRocket + SocialCast – which can, conveniently be bundled with their resurrected VMView at VMworld 2011.  Pretty impressive, eh?  At VMworld, I chatted with Javier Soltero, CTO for SaaS, App Services at VMware and he asked me (I should say, gleefully) “does it all make sense now?”  Of course, it does!  In fact, my colleague Cote has a “we get it post” aptly titled The VMworld 2011 Application Story.

Deliberation vs Experimentation

But did managers at VMware set out on this journey with deliberate intent? Was there strategic intent at VMware in August 2009 to be where it is today? I would argue it doesn’t look like that at all.  The portfolio looks like a zig zag map that got filled out progressively (and will continue to) and the puzzle appears to be getting solved.  Well, sort of.

Last week, I had the opportunity to speak with Michael Dell – himself an incredible experimenter – no less than creating a $61B global technology leader that he started out of his college dorm room.  I asked him what drives good strategy.  His response was direct – two words – “listening, learning”. 

If you look at VMware’s acquisition strategy, it seems to fit that description.  But do we know that?  Is VMware adopting an Agile acquisitive strategy? (small experiments, little bets, listening and learning, iterative continuous improvement) - More on all of this in post#2.