Old computing ideas never seem to die. For instance, grid and other forms of utility computing are updates of classic time-sharing. Besides the fact that both ideas are based around the idea of shared resource, both were — or are — being driven by brute economics. Twenty years ago, few companies could afford their own mainframe. Today, hardware has gotten so cheap that most companies have bought too much of it, winding up with lots of spare computing capacity that are inflating IT overhead dollars.
Behind the idea of shared resource is the notion of virtualization — a way to make multiple systems, or multiple parts of a system, look like one. An established idea from the mainframe world, the concept is gradually being introduced to the heterogeneous computing world, where virtualization has long proven easier said than done.
That’s especially been the case in storage, where the market for storage networks and tools has been highly fragmented (standards take-up has been slow). But for Intel machines, one company — VMware — has created a de facto standard. Initially a geek tool for partitioning test and development machines with several instances of Windows and Linux, the company’s business took off and entered the black last year when it introduced server virtualization. Today, over half of VMware’s revenues are coming from its newer server line, which isn’t surprising, since data center budgets are typically higher than development teams.
With little if any competition (Microsoft’s Virtual PC lags in server functionality), 5-year old VMware has been a rare bright spot in a down tech market. At roughly $635 million — roughly triple anticipated 2004 revenues — EMC paid dearly for the privilege. Originally, EMC was going to wait until next summer to buy VMware, because the ink is still drying on its 2-month old Documentum acquisition (expected to close in a few days). However, given VMware’s growth, EMC had to nip what would have been one of 2004’s most highly awaited tech IPOs in the bud.
The VMware acquisition is a solid but costly buy for EMC. The proof is that there is already significant customer overlap. That makes sense: If you’re virtualizing storage, you probably want to consolidate servers as well.