Today’s news about Dell buying EMC reminds about me of the last line from Tracy Kidder’s wonderful book, “Soul of a New Machine.”
“It was a different game now. Clearly, the machine no longer belonged to its makers.”
In 2005, as the product manager for VMware’s enterprise desktop business, I made the pilgrimage down to Round Rock, Texas to meet the executives running Dell’s PC business. This was a year before I created VDI (Virtual Desktop Infrastructure) and VMware was still the small but fast growing, and recently acquired division of EMC. For almost an hour I pitched Dell on the virtues of desktop virtualization. The Dell executives smiled, nodded politely, and at the end of the meeting they asked me, “You understand that we sell PCs here? Why would we ever want to commoditize our differentiation with virtualization?”
I collected my things and flew back to Palo Alto. I made similar trips to Fort Lauderdale for Citrix, Palo Alto for HP, RTP, North Carolina for IBM, and many other large incumbent technology vendors. Just like with server virtualization, many companies understood the value of virtualized desktops, some didn’t, some resisted change, and even the companies that understood the value of Workstation, ACE, VDI, et al, still couldn’t embrace virtualization for fear of commoditizing their existing business. Seven years later, Dell fully embraced VDI by buying Wyse and the business that started as VMware Workstation has become the End User Computing business unit at VMware, generating hundreds of millions of dollars in annual revenue.
Today, Dell announced the largest technology M&A in history with a proposed $67B buyout of EMC and VMware (via EMC’s 80% ownership of VMW). The combined company will have over $80B in revenue, employ tens of thousands of people around the world and sell everything from PCs, servers & storage to security software and virtualization software. Not to be overlooked is the fact that Dell and EMC will be private companies and free from the scrutiny of activist investors.
I have mixed feelings about the whole transaction. As with all large M&A deals, there will be winners and losers here that will be revealed over time. The VMware journey that started in a small office above the Village Cheese House in Palo Alto is far from over, and will continue for many years; I wish my former colleagues and friends the best in the months ahead. The further away I get from my days at VMware only continues to reinforce the fact that Diane and Mendel along with Ed, Ellen, and Scott built something truly special. Platform companies that touch almost every aspect of computing (servers, storage, networking, security, and management) at scale are once in a generation companies. However, VMware is also now the legacy incumbent vendor and must deal with disruptive innovation, just like its new parents. In VMware’s case, the move to cloud computing like Amazon Web Services (AWS), containers like Docker, and developer defined infrastructure (DDI) are tectonic waves that VMware and the rest of the industry must embrace. The irony is that public cloud providers like AWS in essence sell hosted VMs-on-demand, a business VMware should have been best prepared to dominate.
If you are an executive at any technology company, I hope the next time a young product manager from a startup comes knocking on your door, you don’t dismiss her with a rhetorical question.