• Operating systems (Linux),
• Development tools (JBoss/Java)
• Virtualization (positioned as a “sister organization” to Linux within RedHat, and focusing on integration at the operating system level)
• Security (focusing on security integrated with Linux and virtualization)
• Messaging (working toward levels of performance and consistency superior to Windows and other proprietary data center environments)
• Broad-based IT management (focusing on data center-level IT management, beyond Linux systems)

• Enhancements and related offerings are targeted to provide broad and deep functional capabilities required to efficiently operate and manage a customer’s data center; and
• Separate offerings with ongoing enhancements are targeted to provide cost effective management of a customer’s array of desktops.

To emphasize the fundamental importance of these two related focus areas, the other three presentations during the main-tent morning session concentrated on these two themes. Raghu Raghuram, VP of Datacenter Products and Solutions, followed Greene and articulated VMware directions for continued improvements in reducing customer data center infrastructure and management costs.

Jeff Jennings, VP of Desktop Products and Solutions, explained plans for further improvements in reducing customer costs for managing local and remote desktops. And, Steve Herrod, CTO, painted the picture of VMware’s vision of future customer data centers and desktop networks.

Why Is It Happening?   Virtualization and Open Source, which until fairly recently were considered fringe information technologies, are definitely mainstream today.  The revolutions of SaaS, open source software, and virtualization have enabled IT improvement and growth beyond what was considered attainable only a few years ago.

And though significant improvements in capabilities, standardization and reliability have been made in all three areas, more than any other factor, their perceived ability to enable more cost-effective IT has driven widespread adoption and acceptance.  Immediate operational benefits and low acquisition and implementation costs are the underpinnings of their mass appeal.

But virtualization, open source, and SaaS have more often been adopted for point solutions, rather than as enterprise-wide foundations. As a result, VMware and RedHat both enjoy high cash flows as point solution vendors. But top management at both firms clearly understands that the costs of customer acquisition and support increase almost exponentially – and unaffordably – in such scenarios. Becoming “real” data center IT providers should allow both vendors to increase margins while improving their abilities to work with channels, their abilities to deliver customer service and support, and their abilities to streamline and expand product portfolios.

Market Impact:  The positioning and announcements of RedHat and VMware signal that the barbarians are no longer laying siege at the gates – they are in the bazaar and gaining commercial power. While many, if not most, traditional IT vendors focused on defending the walls and gates, they neglected to understand why their customers were in the marketplace in the first place – looking for affordable sources of flexible and useful IT. RedHat and VMware were invited into the bazaar by customers who were not satisfied with the offerings of the traditional marketplace Master Brands.

Saugatuck sees the data center focus of both firms as a solid long-term strategy that – if executed according to their plans – could shift RedHat and VMware into mainstream IT relationships and purchasing processes.  Both firms’ executives are smart enough to realize that once they are established as Master Brands in the user data center, it is difficult and unusual to lose such positioning and relationships.

But, RedHat’s and VMware’s strategies are not synergistic or symbiotic. Both are seeking to become the defacto standard for data centers. In fact RedHat also announced a virtualization offering and committed to management tools which directly compete with VMware offerings. This area will surely spark competitive battles in user data centers, and cloud-based IT services.

The authors invite your comments and inquiries on this Research Alert.  Please contact Bruce Guptill at bruce.guptill@saugatech.com or Charlie Burns at charlie.burns@saugatech.com.  For a PDF Version of this Research Alert please Click Here (Site Registration Required).