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Harvard Case - VMware and the Public Cloud

"VMware and the Public Cloud" Harvard business case study is written by Raffaella Sadun, Christine Snively. It deals with the challenges in the field of Strategy. The case study is 24 page(s) long and it was first published on : Mar 29, 2017

At Fern Fort University, we recommend that VMware adopt a multi-pronged strategy to navigate the evolving public cloud landscape. This strategy involves leveraging its existing strengths in virtualization and software-defined infrastructure, expanding its cloud offerings through strategic partnerships and acquisitions, and embracing a hybrid cloud approach to cater to the diverse needs of its customers.

2. Background

The case study focuses on VMware, a leading provider of virtualization and cloud computing solutions, facing the growing challenge of the public cloud. As major cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) gain market share, VMware needs to adapt its strategy to remain competitive. The case highlights the company's strengths in enterprise virtualization, its efforts to expand into the public cloud market, and the potential threats posed by cloud giants.

The main protagonists are:

  • Paul Maritz: CEO of VMware, tasked with navigating the company through the public cloud revolution.
  • Pat Gelsinger: CEO of VMware's parent company, Intel, who is also involved in strategic decisions.
  • VMware's executive team: Responsible for formulating and implementing the company's strategy in the face of evolving market dynamics.

3. Analysis of the Case Study

Competitive Landscape:

  • Porter's Five Forces:
    • Threat of new entrants: High, due to the low barriers to entry in the cloud computing market.
    • Bargaining power of buyers: High, as customers have numerous cloud providers to choose from.
    • Bargaining power of suppliers: Moderate, as VMware relies on hardware vendors like Intel and others.
    • Threat of substitutes: High, as open-source alternatives and other cloud providers offer similar functionalities.
    • Rivalry among existing competitors: Intense, with constant innovation and price competition among cloud providers.

VMware's Strengths and Weaknesses:

  • SWOT Analysis:
    • Strengths: Strong brand recognition, established customer base, expertise in virtualization and software-defined infrastructure, robust partner ecosystem.
    • Weaknesses: Limited public cloud offerings compared to competitors, potential for customer lock-in, dependence on Intel hardware.
    • Opportunities: Growing demand for hybrid cloud solutions, expanding into new markets like edge computing, strategic partnerships and acquisitions.
    • Threats: Increasing competition from cloud giants, potential for technological disruption, evolving customer preferences.

Value Chain Analysis:

  • VMware's value chain is centered around its virtualization and cloud software solutions, which are delivered through a network of partners and distributors. The company's core competencies lie in its technology development, product innovation, and strong customer support.

Business Model Innovation:

  • VMware needs to innovate its business model to compete effectively in the public cloud market. This could involve:
    • Hybrid cloud solutions: Offering integrated solutions that combine on-premises infrastructure with public cloud services.
    • Platform-as-a-Service (PaaS): Providing a platform for developers to build and deploy applications in the cloud.
    • Subscription-based pricing: Shifting from traditional licensing models to subscription-based pricing to attract more customers.

Strategic Planning:

  • VMware needs to develop a comprehensive strategic plan that addresses the evolving cloud landscape. This plan should include:
    • Market segmentation: Identifying target customer segments and tailoring solutions to their specific needs.
    • Blue ocean strategy: Creating new market space by offering unique value propositions that differentiate VMware from its competitors.
    • Disruptive innovation: Exploring new technologies and business models that could disrupt the existing market.

4. Recommendations

1. Embrace a Hybrid Cloud Strategy:

  • Recommendation: VMware should focus on developing and promoting hybrid cloud solutions that combine its on-premises virtualization expertise with public cloud services. This will allow customers to leverage the best of both worlds, providing flexibility, scalability, and cost optimization.

2. Expand Public Cloud Offerings:

  • Recommendation: VMware should invest in expanding its public cloud offerings, either through organic growth or strategic acquisitions. This could involve building its own cloud infrastructure or partnering with existing cloud providers to offer VMware-specific services.

3. Foster Strategic Partnerships:

  • Recommendation: VMware should actively seek strategic partnerships with other technology companies, including cloud providers, hardware vendors, and software developers. These partnerships will allow VMware to access new markets, technologies, and customer segments.

4. Embrace Digital Transformation:

  • Recommendation: VMware should leverage its expertise in virtualization and cloud computing to help businesses undergo digital transformation. This could involve offering consulting services, training programs, and technology solutions tailored to specific industry needs.

5. Focus on Innovation:

  • Recommendation: VMware should continue to invest in research and development, focusing on innovative technologies like AI, machine learning, and edge computing. These innovations will help VMware stay ahead of the curve and maintain its competitive edge.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core competencies: Leveraging VMware's existing strengths in virtualization and software-defined infrastructure.
  • External customers: Addressing the diverse needs of customers seeking hybrid cloud solutions, flexibility, and cost optimization.
  • Competitors: Differentiating VMware from cloud giants through strategic partnerships, innovation, and a focus on hybrid cloud.
  • Attractiveness: The recommendations are expected to drive revenue growth, increase market share, and enhance VMware's long-term sustainability.

6. Conclusion

VMware faces a challenging but exciting future in the evolving public cloud landscape. By embracing a hybrid cloud strategy, expanding its public cloud offerings, fostering strategic partnerships, embracing digital transformation, and focusing on innovation, VMware can position itself for continued success in the years to come.

7. Discussion

Alternatives:

  • Acquiring a major cloud provider: This would be a bold move, but it could give VMware immediate access to a large customer base and public cloud infrastructure. However, it would require significant financial resources and integration challenges.
  • Focusing solely on on-premises solutions: This would be a risky strategy, as the public cloud market is growing rapidly. However, VMware could continue to dominate the on-premises virtualization market.

Risks and Key Assumptions:

  • Competition: The public cloud market is highly competitive, and VMware needs to be prepared for ongoing challenges from cloud giants.
  • Technological disruption: New technologies could emerge that disrupt the existing cloud market, requiring VMware to adapt its strategy.
  • Customer preferences: Customer preferences are constantly evolving, and VMware needs to stay ahead of the curve to meet their changing needs.

8. Next Steps

  • Develop a comprehensive strategic plan: This plan should outline VMware's vision, goals, and key initiatives for navigating the public cloud market.
  • Implement a hybrid cloud strategy: This should involve developing new products and services, partnering with cloud providers, and educating customers about the benefits of hybrid cloud.
  • Invest in innovation: This could involve funding research and development, acquiring promising startups, and fostering a culture of innovation within the company.
  • Monitor market trends: VMware needs to stay informed about the latest developments in the cloud computing market and adjust its strategy accordingly.

By taking these steps, VMware can position itself for long-term success in the evolving public cloud landscape.

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Case Description

In 2015, VMware, a pioneer in server and network virtualization and a member of parent company EMC's "federation" of companies, had set its sights on becoming a leading public cloud provider. Two years prior, VMware first entered the public cloud market with its vCloud Air offering. In order to gain market share and compete with major cloud providers Amazon Web Services and Microsoft Azure, what strategy should VMware pursue? Should the company try to partner with an established cloud player, or build out its public cloud offering through its own internal investments and acquisitions?

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