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The Cloud Hanging Over VMWare

Before the public cloud, there were hypervisors, and VMware was nearly synonymous with the technology. Now VMware is facing multiple threats to its business.

VMware rose to prominence, and its eventual acquisition by storage giant EMC in 2004 for $625 million, by selling hypervisors that helped big companies make more efficient use of their data centers. Hypervisors let multiple “virtual” computers run on a single physical machine. So-called “virtualized data centers” functioned somewhat like small, private clouds.

Today, Amazon, Microsoft and Google are selling access to their the extremely large and efficient public clouds. Embraced initially by startups as a way to get to market without building their own data centers, public clouds are now luring mainstream businesses that still maintain private fleets of servers. That shift poses a long term threat to VMware's core business. Activist shareholders are now prodding EMC, which still owns about 80 percent of VMware, to spin off the company.  

Tony Scott, VMware’s chief information officer, has a unique view of the challenges because he both crafts corporate strategy with his fellow executives and runs VMware’s own IT operations. The peers he regularly chats with at other companies and industry gatherings also happen to make up VMware’s core customer base.

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"What VMware is trying to do is reduce the friction between what you can do on-premise in your own cloud and what you can do in the public cloud."