At the beginning of this week VMware announced the acquisition of SpringSource for $420 million ($362M in cash and $58M in unvested stock and options).
The company tried to clarify the deal with a public presentation hosted for its investors and an article published by Steve Herrod, the company CTO, on his corporate blog:
VMware has traditionally treated the applications and operating systems running within our virtual machines (VMs) as black boxes with relatively little knowledge about what they were doing. However, whether it’s around speed of deployment, application performance guarantees, or providing resiliency in the face of component outages, we will be able to provide even more capabilities as we bring even more knowledge of the application and infrastructure layers together. We will do this by adding interfaces into vSphere that SpringSource offerings (and other application frameworks) can take advantage of and by extending our management and automation capabilities to be aware of these interactions. A lot of our early “vApp” thinking has been based on this separation of application code from the requirements it has on the infrastructure on which it will be running.
This is the largest acquisition in VMware’s history and the most complex to evaluate as it radically changes the company mission and market position.
Easy to predict, that part of the worldwide press that doesn’t just republish press announcements is still trying to figure out the sense of this investment.
Surprisingly, the announcement led to an unexpected number of negative comments, some of them completely unrelated to the acquisition (like this one and this one).
The financial analysts highlighted the high price, and the investors didn’t seem too impressed so far:
Who is SpringSource
SpringSource is a small company (157 employees as reported by LinkedIn) founded in 2004 and funded with $25M in two investment rounds (led by Benchmarks Capital and Accel Partners).
The firm offers a Java framework called Spring to develop enterprise-grade applications that can run on Java application servers like Tomcat. The company claims that Spring has been adopted by almost 50% of Global Fortune 2000 and Gartner estimates that 2 million developers use it.
SpringSource also offers its own version of the Tomcat application server, called tc Server, and its own version of the Apache web server, called Enterprise Ready Server (ERS).
The company even offers its own Java application server: dm Server.
Both the Spring framework and the dm Server are available as open source (and VMware already said that it plans to keep this model).
In May 2009 SpringSource acquired Hyperic, an infrastructure management firm that offers products (HQ and IQ) for every major operating system (from Microsoft Windows to IBM AIX), every major application platform (from LAMP to Microsoft .NET) and every major enterprise service (from Microsoft Exchange to Oracle Database) on the market.
The Hyperic solution also monitors VMware and Citrix virtual infrastructures and the Amazon implementation of Xen.
For each supported product Hyperic can do a wide array of activities, from auto-discovery to real-time health monitoring, from capacity planning to event tracking and alerting, up to granular reporting.
Even here SpringSource has a big tap into the open source world as the Hyperic management platform is also available in a open source edition.
In total the company may score around $20M in sales as CNET suggests.
Where VMware position itself now
It seems clear that for VMware virtualization is no more about virtual machines, and not even about enterprise virtualization management.
A few months ago virtualization.info speculated on the fact that VMware is turning into an infrastructure management company, getting ready to compete against the big four: BMC, CA, HP and IBM.
VMware already has a lot of technologies that could easily extend to the physical world. And the Hyperic management suite is a new, big piece of the puzzle.
So while the possibility to control the physical layer gets more concrete every day, VMware also has to move forward with its cloud computing plan.
In 2006 virtualization.info suggested that VMware may want to shift its focus on the cloud computing space to avoid a direct competition against Microsoft and its free hypervisor. The idea at that time was that the Microsoft slowness in entering new markets would give VMware more time to further consolidate its position. But something unexpected happened: Microsoft was quicker than usual in embracing cloud computing and announced Azure.
With Hyper-V Microsoft is able to empower any Infrastructure-as-a-Service (IaaS) cloud provider.
With Azure, it can also empower Platform-as-a-Service (PaaS) cloud providers, or become one by itself.
Last but not least, with the upcoming version of Office online and a number of hosted services (from Exchange to SharePoint), Microsoft also becomes a Software-as-a-Service (SaaS) cloud provider.
If Microsoft can efficiently and quickly combine Hyper-V with Azure and port most of its products online, then it will become a global cloud computing provider much earlier than expected.
And this may be a good reason for VMware to accelerate its plan, by investing $20M in the hosting provider Terremark (equal to a 5% stake) and now trying to integrate IaaS and PaaS clouds.
Of course the executives in Redmond are downplaying the upcoming competition, or at least this is what the Corporate Vice President for Microsoft’s Management and Services Division, Brad Anderson, did during the last investors meeting:
…I look at that [VMware-SpringSource deal] as a response to what Microsoft has been communicating in the market about the application architecture,” Anderson said in a Webinar. “But I think they’re moving into a space that really is away from what their core competency is, and moving into a space where, if you look at what Microsoft has with Visual Studio, I think Microsoft has a lot of strength there…
Ultimately, even if the company doesn’t admit it (and there are evident reasons to do so), it seems that VMware is trying to take full control of the physical, virtual and cloud space, leaving to its customers just the bother to plug in their applications (and if they plug-in a Java application rather than a .NET one it’s even better).
If true it’s a dreaming plan: these are the building blocks of a fully autonomic computing environment, which still seems so incredibly far away.
Such ambitious plan would also explain very well why Cisco is so interested in VMware and invested $150 Million in it.
At the right moment (read: when it’s ready to compromise its relationship with Microsoft) Cisco may even decide to acquire VMware and connect the dots.
Of course the risk of such plan is that VMware tries to do too much altogether and too quickly, which may translate into a poor execution.
Who are the new competitors
Excluding Microsoft (already discussed above), Google and Salesforce (which are not interested in the IaaS layer as far as we know) there are not many companies that may compete with VMware on this new game.
Citrix has a well-defined vision of how to optimize end-to-end the application delivery process but at the moment it’s not something that involves the full control of the physical layer or a PaaS architecture.
Cisco may be everything but a competitor considering its interest in serving and interconnecting the software platforms that VMware offers.
The only major vendor that has the pieces and the money to become an infrastructure management company with full control of the cloud is Oracle.
With the acquisition of Sun, Oracle has even more than what VMware has today: a full computing stack, including physical servers, storage and thin clients, no less than three hypervisors, an enterprise-grade operating system, several application servers, widely adopted back-end services, a management platform to control everything mentioned so far, and even a dormant IaaS and PaaS infrastructure.
And yes, Oracle has a significant control on the Java language too.
It must be seen if Oracle also has the ambition to become what VMware is trying to become.