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Getting real results from virtual machines

Stephen Shankland CNET News.com

Published: 21 Oct 2005 14:35 BST

...just a phenomenal R&D group, and it's in the customers' interest and our partners' interest that those people stay productive and keep inventing. But, as you increase [sales] volume, you don't have to charge the same thing to pay those people. So there are some economies that are going to change as the volume goes up. We're not there yet

But this is the software business. Once you pay X amount of dollars to develop a product, you can sell it to a market over and over. It doesn't cost ten times more to produce ten times as many units.
That's exactly right. So I do believe that it's not healthy for the software industry to keep charging the same thing if you have a radical change in volume.

So as VMware is used more widely, the price will go down. But will the fundamental technology price go down to zero?
You know, I don't think there's anything at zero; you look at Red Hat, it's not zero. You have to pay to maintain things, you have to pay to support things, and you have to pay to do new things.

HP, Intel, AMD, Sun, IBM — they're all funding development of Xen in varying degrees. Do you see price pressure on that core virtualisation product?
Today, we don't see the price pressure.

Years ago, back in that early 2000s, you had hoped for an IPO .
Planned for an IPO.

Right. Why did you end up being acquired by EMC instead?
A lot of things happened. We were growing incredibly rapidly. We'd been profitable for a couple of years, so we clearly could go public. We also seemed to suddenly have a lot of suitors. We had always had offers, from when we were a year old, but all of a sudden it got kind of intense. We felt like this could work — maybe we should get proactive about this. I have to say it has worked out exceptionally well. The company has just thrived, you know, as an independent subsidiary of EMC. I consider it quite a luxury that I am really focused on growing VMware as opposed to the quarterly [results].

There are a lot of Silicon Valley start-ups that have an exit plan, which is to get acquired by Cisco or some big company, but there are also a lot of Silicon Valley start-ups that want to be independent. What did you weigh when you were going through this decision?
Independence for independence's sake was never something we were after. What we were after was bringing this technology to market and letting it realise its full potential. It's just really exciting for us to see the customer adoption of this technology and the partner cooperation and collaboration around these technologies and it's fun and that has grown and expanded since the acquisition. Had we lost that, it would have been the wrong thing to have done, but we didn't.

And you probably wouldn't be in charge of VMware?
No, probably not.

I often gauge acquisitions by what happens to the founders.
Yeah, we're all here. I thought it was pretty amazing that six years into the company, when we got acquired, we were all still there. And now it's two years after the acquisition.