Name: Bhagyasree Chebrolu
Email: schebrolu@scu.edu
1. The companies, which hold a position at the bottom of the stack, have a control on the market. It is because all the other layers are built on the top of the bottom layer. Operating systems lies on the bottom of the stack and acts as a Graphical User Interface(GUI) between the user and the machine.
The new software VM Hypervisor software is built in such a way that it sits in between OS and the hardware. It can directly interact with the hardware and is not build on the top layer of OS. Hence it can individually interact with the hardware without the need of the OS. Therefore VM ware Hypervisor had a high potential of affecting all the core operating systems market since VM ware also came to the bottom of the stack with the launch of Hypervisor. The key aspect of any operating system is to provide the application software a suitable environment. Thus by providing this VM ware has the ability to affect the entire core OS market.
VM ware was acquired by EMC in the year 2003 for $635million. In the year 2007, it went public and raised over a billion dollars. 86% of the company share was retained by EMC . Intel and Cisco Systems bought 2.5% and 1.6% stake for $218.5 million and 150$ million respectively. The revenues also doubled in 2007. VM ware now has a potential to be a leader in the market.
2. The ecosystem of the VM ware consisted of Software developers, Hardware vendors and the distribution channel players. By 2007, VM ware has already partnered with more than 500 software and hardware companies, had distribution channel players over 10,000. VM ware’s strategy was to build their relations by partnering was their way of adoption in the market. Their leaders ensured that a network of ISV’s was formed who developed applications on the VM ware platform. VM ware gave access to their ESX source code to more than 350 developers from more than 30 companies which played an important role. Their strategy was to collaborate with ISV’s by giving them access to their API’s. By doing this the companies can implement VM ware virtualization with respect to their software.
VMware ensured its compatibility by working together with companies like Dell, IBM and the x86 chip manufactures like ADP and Intel. Virtualization gave these companies an advantage to market their high end servers. VM ware also partnered with Cisco Systems to improvise their networking nature of their products and thus ensured their compatibility in the ecosystem. The main distributors of VM ware products were Value added sellers(VAR’s), system integrators,x86 system vendors and VM ware nurtured relationships with them. Their channel partners drove more than 75% of the sales in the year 2007. VM ware partnered with OEM’s and by 2008 Dell, Fujistu , HP and IBM started bundling their servers with ESX.
3. Virtualization is the process in which many operating systems can run on a single system through partitioning the hardware and by replicating the software. Therefore there were major changes to come in the hardware for partitioning, Isolation and Encapsulation to be achieved. The share of the hardware resources to different OS’s was possible with partitioning which led in server consolidation. This gave the hardware vendors a huge advantage to market their higher end servers. Since the corporate servers used only 15-20% of the capacity, instead of using a single server for each system, users could now use “one” high end server for multiple OS’s implemented through the concept of virtualization. It reduced redundancy and brought down the maintenance expenses. But there were some complicating factors like (i) Decrease in the performance: Virtualization slowed down the system performance by 20-40% in hosted architecture and by 10% in Hypervsior architecture. Over a period of time this won’t be an issue since the CPU performance would double every 18 months and the cost would also come down. (ii) Virtualization increased the complexity of the systems. (iii) There raised security issues since the same hardware is shared between multiple OS’s. (iv) Management issues also came up for which they needed extra hardware support from the Hardware vendors. VM ware strategy is that by building relations and by partnering with the vendors they can resolve or reduce the above drawbacks over a period of time.
4. Five force Model for VM ware:
(1) Degree of existing rivalry: It is very high. They should come with strategies not for the best design of the product but to “ Strengthen their survival ”in the given market conditions. The concept of VM ware virtualization compromised the position of the OS vendors at the bottom of the stack. They have to compete with the “up the stack” market with their management tools and at the same time get the support of the software vendors. They have to face a tough competition in the market.
(2) Threat of potential entrants: It is very low. Since VM ware has already become dominant. By 2008 they had customers from every company from the Fortune 100 and more than 900 from the Fortune 1000. Its vey hard for any company to compete with VM ware virtualization.
(3) Bargaining power of suppliers: This is low. Their revenues increased from 26% in 2005to 32 % in 2007. However there might be a chance that even their suppliers might increase their cost since VM ware is getting a lot of profits. There is a slight risk of this factor going up in the future.
(4) Bargaining power of Buyers: This is moderate. VM ware has to hold its position in the market and buyers are its key assets. Without the buyers support and with the existing rivalry VM ware will have a tough time. Hence VM ware should make sure its products are adapted and installed throughout.
(5) Threat of Substitutes: I don’t think there is any substitute for virtualization of VM ware. Even though Microsoft came up with Hyper-V, it won’t be as strong as Hypervisor because it a OS vendor. VM ware pioneers in virtualization.

5. The enterprise software vendors are threatened by the virtual machines. Companies like Oracle sell their products based on the count of CPU’s used. Its hard to determine how many CPU’s are actually used in a virtual environment. Hence companies like Oracle refused to certify the use of their applications with VM ware.
Microsoft on the hand who owned Windows OS was worried about the VMware, which was implemented by Hypervisor architecture. VM ware simply lets people use multiple operating systems on a single machine for which licenses should be bought. In spite of the fact that whenever VM ware is implemented, users should buy the OS, Microsoft didn’t like the concept of VM ware Hypervisor directly interacting and being connected to the hardware. Hence the OS scope will be limited and It was a threat for Microsoft to hold its stack position in the market. Microsoft always wanted its OS to be on the bottom of the stack and all the other software layers to be on the top to have the control.
Additionally, VM ware can also pose a threat to all the OS business in a way that it allows small applications run on VM OS, which comes as a bundle. Therefore it had a strong potential of affecting the OS market by bringing more than 700 virtual appliances to the market.

6. VM ware is pioneer and technically “unbeatable ” in the virtualization world. It holds the leadership of its virtualization of 75 to 95% of the servers. Has customers more than 900 in the fortune 1000 companies with high level of customer satisfaction. VM ware strongest by being in the “bottom of the stack” and by nurturing all the relations it has with the hardware and software vendors. VM ware is being over ambitious with its idea of moving up the stack. It cannot compete with the market up the stack with its SMB. VM ware was facing high rivalry in the market. By moving to the management tools, this rivalry will worsen. There is no guarantee that it will excel up the stack because its not VM wares area of expertise. It will face a potential threat by jeopardizing the nurtured relations in the market. Moreover it should spend so much of its revenues on R&D is not a good thing. Hence VM ware should not go up the stack and compete with SMB market.

7. From my point of view it is definitely not a browser war re enactment . Microsoft tried to attract customers by bundling its OS with a free IE browser and its own virtualization tool called Hyper-V. Microsoft is the OS giant where as VM ware is the virtualization giant and Netscape is relatively smaller. It can grab the market from Netscape by the free bundled IE browser but Microsoft never in its nearest future can compete with VM ware’s Hypervisor just by bundling its OS with Hyper-V .The Fortune 1000 companies are not going to switch from VM ware to Microsoft Hyper-V so easily. They have to think about the installation and switching costs. Even if they are willing to pay money, the performance of Hyper-V wont be better than that of Hypervisor. (Since Hyper –V is integrated in OS and according to the data given, any virtualization which is implemented on the top of OS, will decrease the performance of the system by 20-40%). No doubt Microsoft lags behind VM ware when it comes to virtualization, since it has to deal with all the compromising factors attained by bundling Hyper-V with its OS. Therefore it will take Microsoft years of R&D to come to the level of VM ware’s Hypervisior.