VMware’s next growth spurt: All about mobile?
In January, VMware (VMW) announced that it would acquire mobile device management provider AirWatch for more than $1.5 billion. The move, decidedly aggressive, signaled a bet that the data center virtualization company’s next wave of massive growth would come on the back of mobility. For Sanjay Poonen, the newish general manager of VMware’s end-user computing business and a former SAP executive, it was also a bold first major move.
While it’s still early days for the AirWatch-VMware integration, the smaller company is an important addition to Palo Alto, Calif.-based VMware’s arsenal as it tries to fend off competitor Citrix Systems (CTXS) and smaller players like newly-public mobile device management player MobileIron (MOBL).
Fortune caught up with Poonen to ask about the opportunity in mobile and where AirWatch is going next. What follows is an excerpt from the conversation.
Fortune: Did you know coming in that making it in mobile would take a large acquisition? That it wasn’t something that you could try to grow organically?
Poonen: I’d seen VMware’s organic efforts from the outside in and I told Pat [Gelsinger, VMware’s chief executive] and Joe [Tucci, chairman of VMware’s board of directors] quite frankly that it was going nowhere. Ironically at that time Pat was talking to me about what advice I had as a partner, when I was with SAP. But it was clear that VMware had missed the opportunity to do something bold in mobile because you’d seen other companies, one after the other, get bigger and bigger in their capability set.
But it wasn’t too late; I still felt like mobile was in the first or second inning. For the most part CIOs told me that they didn’t know that VMware cared about this business [end-user computing]. They felt like, well, you’re a data center company, you’ve conceded that space to Citrix. I think it really wasn’t a fact that the products weren’t good, I don’t know that there was intestinal fortitude to say, hey, we’re going to take this space seriously and invest in the product and make the organic and inorganic grow.
When I came in I shook up the management team in end-user computing. There was tremendous support from Pat and the executive team to do that. All along we were preparing the case for what we needed to do that was a bold move in mobile. If there were any skeptics that thought we weren’t committed to end-user computing, the acquisition of AirWatch silenced them.
Why do you think VMware didn’t make a bold enough move earlier on?
I think when you’re growing so fast you look at the pot of gold in front of you, the data center business. If you look at the top 15 companies in software growth, we’ve gone from zero to $5 billion in 15 years. The next fastest-growing company is Salesforce (CRM). After that is Oracle (ORCL) and Microsoft (MSFT), which took 19 years to get there. So when you’re growing so fast you just look at how you can keep growing. This data center space is big and we’re focused on driving that. It wasn’t really clear how big of an opportunity there was in end-user computing. The mobile opportunity became clearer after the iPhone and iPad and the bring your own device trend. And I think [VMware] had a few false starts with leadership.
How big of an opportunity do you see in mobile today?
The bulk of our business will always be the data center and we’ll be known for that. But in end-user computing we want to take the same advantage we have in the data center and bring that to the way people’s lives at work are managed. We call this working at the speed of life. If you start your day at a desktop and then you go for a walk, for example, you probably have a tablet or a phone. We want to make sure that all of your content is with you. Today you don’t lug your CDs around, it’s all in the cloud. You should be able to get into the United Airlines (UAL) terminal at the airport and access the same stuff that’s sitting on your computer. We want to be the company that in the post-PC era, can manage and secure and analyze and virtualize that experience all the way from desktop to any machine.
You mentioned VMware being one of the fastest-growing companies. How does mobile help continue that growth?
If you look at our last results, in Q1, it was our fastest-growing business. My goal is to hopefully make this—right now it’s about 10% of our revenue—an increasingly bigger part of the revenue of the company. I hope one day we’re 20%, or 30%. It’s all about growth. If we’re the fastest-growing company, end-user computing needs to be the fastest part of the fastest growing company.
We look at the mobile space and say some company, post-BlackBerry, is going to be the equivalent of Symantec (SYMC) or BMC (BMC) in the post-PC era. If we can be that company, that’s a growth business, that’s a billion devices that we can manage in the enterprise. So it’s our responsibility to look for all of those opportunities to help us grow. Mobile now adds a nice new dimension and with AirWatch this year we get a new growth machine.
And AirWatch is a device management play or more than that?
AirWatch is mobile management and security. Anything around a tablet or phone or machine we want to manage and analyze. Competitors do one piece of that very well. But what we saw in AirWatch was a much broader platform. We can manage the device, the application, the content. Think of it as the Symantec in the post-PC era for mobile. Many clients are now asking us to secure things like medical devices.
Where do you see companies like Box fitting into this ecosystem?
That’s the next phase: managing content. AirWatch has a product in this space called Content Locker, so they already play in this space. We think that our advantage will be that you shouldn’t have to buy a desktop management product from a Citrix, a mobile management product from a MobileIron and then a content collaboration product from a Box. There will increasingly be unified solutions.
Most of these companies who’ve done content collaboration only work in the cloud and for many countries that won’t work. For us to be successful you need to have a cloud solution but a significant part of Europe and Asia want an on-premise solution. We will be hybrid, and that notion is very core to our proposition. We don’t see the world through a lens of being only public cloud.