Of Verbs and Strategy

"Timothy, Can you please FedEx the latest documentation to Plano to reach them by tomorrow morning?", set me thinking about why I "FedEx-ed" documents instead of "USPS-ed" or "UPS-ed" them. Solidcore uses all three services from time to time. Though much smaller than UPS or USPS, FedEx is THE VERB in their category. Is it because, "FedEx-ed" sounds much better than "UPS-ed" or "USPS-ed"?

I'd never have known that they were smaller than UPS or USPS, had I not seen the following bookmark (a piece of great marketing collateral) from USPS -


How is it that smaller companies like FedEx outmarket bigger players? Watch this space.

Why would you join a startup?

I feel great - shortly after I wrote my last post about KVM and Xen, News.com covered the story in greater detail. I recently read a great article in the CIO magazine which set me thinking about the reasons I enjoy working at startups.

Based on my research, I found the most common reasons given by startup employees as -

1. Make Money - I'd like to build a successful company and cash out
2. Be King - I got tired of working for someone else; thought I'd start my own company.
3. Don't fit - I lost the appetite to work in a big company.
   

I have come across other reasons also, including the inability to secure a promotion or a raise. I'd venture to guess that angst caused by such a failure is often exacerbated because the feedback/review mechanism never gave the employee a reason to suspect that they were not performing. This point is brilliantly made in the manhattan effect article in the CIO magazine. In his article, Jerry Gregoire makes the point that "Depending on the nature of your business or geography or whatever, it might be pretty tough to get meaningful feedback from your customers, but your managers and employees are a different story. If you're not getting meaningful feedback from them, there's no point in spending a lot of time wondering why. The reason is you."

Thinking about this made me realize that one of the things that I really enjoy at Solidcore is the fact that I get real-time feedback about my performance. I feel great when I head to work every morning because I know that I work at a real meritocracy. Do you?

What is a startup to do?

Another post motivated by happenings in the Virtualization space! I met some RedHat folks during the RSA conference a few weeks ago and quizzed them about the new Kernel Virtual Machine (KVM) that Linus merged into the main Linux Kernel. The answer was surprisingly candid and straightforward and was reinforced by a recent announcement by RedHat's CTO. Expectedly, RedHat is hedging its bets by bundling both Xen and KVM in its Fedora Core line of products.

Apart from the fact that RedHat seems to have good internal communication, this announcement has significant ramifications for all the big Virtualization players. Xen worked really hard to get RedHat to package it by default, hoping that it will help them establish a big footprint in the Linux market. They even had some disastrous PR failures when RedHat claimed that Xen was not ready for primetime (see here). And finally, just when their effort was nearing fruition, Qumranet sprang a surprise by getting its KVM technology endorsed by Linus and RedHat.

Though Xen has first-mover advantage as the default virtualization technology available in RedHat and is probably more mature than KVM, this news could not have come at a worse time. Bigger and more mature (read risk-averse) IT organizations that were looking at Xen on Linux will now prefer waiting for KVM to be available before investing heavily. Smaller enterprises may also pilot KVM to see if it will satisfy their needs or at the very least slow their adoption of Xen.

Now, what should Xen do faced with such a situation? They may still have some good ways of fighting VMware/Microsoft from upstream and KVM downstream -

1. Learn from VMware - VMware was faced by a similar assault in 2005-06 from Microsoft and Xen. Xen was downstream and offering a free product and Microsoft, though not technically upstream, used its vantage position to make deep price cuts. VMware responded by giving away significant parts of its base virtualization platform for free and building out Management Infrastructure software that it is now the primary cash cow.
2. Drive adoption of the platform in applications - One of the often underestimated drivers of VMware's growth its integration with applications. VMware has successfully evangelized many vendors (Vizioncore, Surgient, NetExam, Opsware, Leostream, etc) to use its APIs to build their application. Though this is arguably a small channel for VMware, Xen should not ignore this altogether as this market has a lot of potential. VMware has had better success in this area than the open-source Xen - can they do something about this?
3. Don't lose track of your endgoal - winning a slice of the Virtualization pie. Face it, Xen - you came close to winning the Linux market, but looks like you will have to suffer a huge heartbreak! You'll never own the low-margin Linux server virtualization market - probably the best thing to happen to you. Stop running behind Linux and instead focus on out-innovating VMware in one or two niche areas on Windows and Solaris.
4. Acquire smaller players - Xen should look at acquiring Virtual Iron or other smaller players to help fasttrack your move into Management Infrastructure or Application support.

Do you have any other ideas? Send them to me

VMware to go public!

Word has just broken that EMC has decided to offer 10% of VMware stock to the public through an IPO (link here). This will definitely help EMC to raise more capital as VMware is one of its fastest growing subsidiaries. Tying VMware to EMC stock never made any sense to begin with.

My outlook is that VMware stock will do very well in the next couple years. Buy, Buy, Buy!!!

The shares will be available for trading from Aug 14, 2007 (Symbol:VMW)

Is Google Really Innovative?

Its a sensationalist title I know, but I couldn't resist the urge to respond to Rishi's comment that despite all the hype, very few innovative products have really come out of Google. A quick search (using Google :)) helped me find this link showing the market share of various Google products.

I completely agree with Rishi that Google has picked up some really nice products through acquisitions. However, I believe that a good acquisition strategy is almost as important to growth as organic innovation and in this respect Google is a real winner. Granted some of the acquisitions were based on very optimistic valuations, but by methodically acquiring some of the best web-based application companies, Google has indeed shown that it values innovation!

Now, the second aspect of Rishi's comments is more intriguing. Are Google's Research and Engineering teams really producing successful products? I have mixed feelings about this one. Google image search and Gmail were developed by Google themselves and have the second and third best marketshare amongst all their products. Though their marketshare is small, almost minuscule compared to Google search, they'd be considered very respectable for any other company. Besides, innovation and marketshare do not always go hand in hand. Apple, which has less than a 5% marketshare of the PC market is a great example of how innovation does not necessarily translate into marketshare.

That said, Rishi does make a very valid point that Google's Research and Development seems to be getting more mindshare than marketshare. We always hear about how tough the Google interviewing process is, how great an employer Google is, how every engineer is encouraged to devote 20% of their time to their own project, etc. The amount of press the products get pales in comparison to the "Google is Great" hype being generated today. Google is minting money through its search engine and everything else is insignificant to everyone - the press, the investors and most likely Google themselves. However, as a mature and very smart company, they are focusing on increasing their footprint and penetration of the web (which ultimately leads to more search revenues) through successful product acquisitions and also on putting a very positive spin on things :)

Yahoo-Google-Microsoft Acquisitions

I decided to look at the major acquisitions done by Yahoo, Google and Microsoft in the last few years (Note - this is not a comprehensive list - I've looked only at Web related technologies). Click on the image above to get a closer look. Microsoft has done a lot of Acquisitions in the Gaming market, ostensibly to provide more games for XBox. Google has worked on acquiring more content (Usenet archives, Youtube), bolstering their search/ad offerings (Kaltix, Applied Semantics, Zipdash) and more web services (blogs, maps, photos, spreadsheets, word-processor, wiki). Yahoo has concentrated on search (oveture, inktomi), Music (Musicmatch, Launchmedia), social networking (wretch, upcoming, Dodgeball) and some very diverse products (kelkoo, Konfabulator, Bix)

VMware - risks and opportunities

Many newsletters, articles and advisors issue investment guidances based on the financial statements of a company and their future outlook. In this post, I'm going to focus only on the latter since the financial statement analysis is available from many investment websites (Note - You'll have to look at the financial statements of VMware's parent company - EMC).

The last couple of years have been extremely good for not just VMware but also many other VM vendors. VMware's greatest threat has been its own success - sensing a huge opportunity, companies both large and small have moved into the VM space. However, VMware still has first-mover advantage in many fields and may still be able to outmaneuver their competition.

Notable among VMware's competitors is XenSource, whose flagship product is based on an another University research project. XenSource has been slowly making inroads into the market and has a lot riding on the next release of Redhat's Enterprise Linux (v5) which will bundle Xen's VM environment (http://www.redhat.com/archives/rhelv5-announce/2006-September/msg00000.html). Acknowledging the importance of the technology, the Linux community has decided to make the Linux KVM project (http://kvm.sourceforge.net/) part of the next mainstream kernel. And finally, Microsoft is giving away its product (http://www.microsoft.com/windows/virtualpc/default.mspx) for free and will most likely support native virtualization in their Vista server product line in the near future. These tactics are bound to put tremendous pressure on VMware in 2007-08.

These developments are but natural - as technology matures and becomes a commodity, its value reduces and vendors have to move upstream. In a bid to move upstream, VMware has been focusing on building software and infrastructure that make the management of hundreds of thousands of VMs easy. They have also been toying with other ideas like the VMware appliance (http://www.vmware.com/vmtn/appliances/) hoping to create new markets. To avoid being a roadkill, VMware has also started giving a fair amount of their software away for free. Are these measures enough to outmaneuver their competition? I remain cautiously optimistic that VMware will be able to overcome what might be the biggest challenge they have yet faced. Whether they come out with their flags flying high or barely alive from the looming attrition wars remains to be seen.

Bottomline - VMware's parent is EMC, an 800 pound gorilla with a market cap of $30 Billion and annual revenue close to $12 Billion. Large-cap stocks like EMC are known more for being steady movers than exciting growth prospects. Given that EMC's stock prices have been stagnant over the last couple of years and also the serious challenges facing VMware, I would not buy their stock. However, If I'd already bought into EMC, I'd hold them for a few more months.