Where VMware Is Outdoing Cisco
1:00 AM -- Is VMware Inc. (NYSE: VMW) about to pull off what Cisco Systems Inc. (Nasdaq: CSCO) couldn't?
I'm not talking just about the acquisition of Nicira Networks Inc. -- although Cisco might, in the long run, wish it had done that instead of trying to build Insieme. (See VMware to Buy SDN Startup for More Than $1B, VMware Insists It's Not Warring With Cisco and Cisco Outlines an SDN Plan.)
I'm talking about company transformation. Cisco prides itself on having survived multiple industry catastrophes, each time emerging as a remade entity with a broader mission. CEO John Chambers even said he's preparing for those transitions to come more frequently. (See Chambers Promises a Simpler Cisco.)
But it's VMware that looks like it's preparing itself for the next industry phase, one that it's calling the software-defined data center.
On its earnings call Monday, VMware described Nicira and other recent acquisitions (DynamicOps Inc., Wanova Inc.) as R&D fuel -- purchases that won't bring any revenue this year but are driving VMware toward that software-defined future.
On top of that, VMware is starting to embrace open-source developments. It leads Cloud Foundry, the open-source platform-as-a-service project, and has kept it open. And Nicira is heavily into Open vSwitch, an open-source virtual switch that competes with VMware's own -- and which VMware so far says it will continue to support.
A more literal sign of change is that Pat Gelsinger took over as CEO last week, while former CEO Paul Maritz moved to EMC Corp. (NYSE: EMC), VMware's parent company. Granted, this could be unrelated to Nicira; it looks like Maritz is being groomed to be EMC CEO eventually, and this might just be the first phase in the changing of the guard. (See VMware Preps Its Next Act.)
This all adds up to VMware moving now -- while the company is still doing well -- to react to a major shift that's coming. Its executives are not waiting for a threat to emerge, and more importantly, they're showing a willingness to dilute today's product franchises (not necessarily by a lot) in order to keep from being left behind tomorrow.
Cisco, by contrast, has responded to software-defined networking in a way that would preserve the importance of routers. Its approach of using application programming interfaces (APIs) to make the network programmable might work, and it might win out in the market -- but a lot of people see it as Cisco being unwilling to endanger its router franchise. (See Cisco Takes ONE Step Beyond SDN.)
I think Cisco is sincere about wanting to transform itself more quickly. It's just that for this particular transition, VMware might be showing Cisco how it's done.
— Craig Matsumoto, Managing Editor, Light Reading