VMware could abandon anti-OS stance with Novell buy

If VMware Inc. is on the verge of buying Novell’s SUSE Linux operating system the virtualization giant could abandon its anti-operating system crusade and compete more directly against the likes of Red Hat Inc. and Microsoft Corp.

VMware made its fame by virtualizing Windows-based servers, but has argued lately that virtualization is taking over the job of managing hardware and reducing the relevance of Windows and other operating systems. VMware is also preparing a cloud computing service aimed at displacing Windows on the desktop side.

But now comes news, from the Wall Street Journal, that VMware is in talks to purchase the SUSE Linux operating system business from Novell, which has been subject to buyout rumors since a hedge fund offered $2 billion for the company several months ago. 

If VMware becomes an operating system vendor it may be forced to acknowledge that operating systems have more relevancy than VMware has previously admitted.

But analysts say VMware’s apparent attempt to purchase SUSE Linux makes perfect sense, and will help VMware compete against Microsoft, its primary rival, and also Red Hat, which claims VMware can’t offer a full cloud computing stack because it lacks an operating system.

If Microsoft Windows retains its current dominance, VMware may not be able to compete against Microsoft in the long run, says Burton Group analyst Chris Wolf.

“Microsoft has always been able to closely tie its infrastructure software with its operating system and applications,” Wolf says. “Over time, it’s fair to say that Microsoft applications will work better on Hyper-V [than VMware].”

While Microsoft offers Hyper-V, its virtualization platform, as an add-on to Windows Server, VMware could offer a Linux operating system as an add-on to its virtualization platform, a sort of mirror-image to Microsoft’s strategy. In fact, VMware already does this through an OEM agreement with Novell through which VMware distributes and supports SUSE Linux.

Taking SUSE Linux under its wing through an acquisition is “the best chance (VMware has) over the next 15 years to remain relevant,” says Wolf, who also wrote a blog post arguing that VMware needs an operating system of its own. VMware could continue to argue that the operating system will lose relevance in the future, but purchasing SUSE Linux would be an admission that “right now it is relevant,” he says.

Pund-IT analyst Charles King offered similar remarks in an interview Friday. King says VMware CEO Paul Maritz appears to believe that “the end of the operating system is nigh,” but such a major shift would take years if not decades if it happens at all, King says.

“There’s just simply too much infrastructure, and too much investment among enterprises for them to simply abandon the enterprise data center architecture they’ve been used to for decades,” King says.

Even if Maritz is right that the operating system will continue to lose relevance over the coming years, he still has to meet customers’ needs today.

With a strong operating system, VMware “would basically have a whole stack,” says King, who believes that VMware should also purchase Novell’s Cloud Manager software, which supports multiple operating systems and hypervisors.

One dilemma that could be raised by a VMware-Novell deal involves the fate of Microsoft’s partnership with Novell, which guarantees interoperability between Windows and SUSE Linux.

“If anybody would be discomfited by VMware going after SUSE, Microsoft would probably be at the top of that list,” King says.

Second on that list could be Red Hat, which would no longer be able to argue that VMware has an inherently inferior stack because it lacks an operating system. VMware may also be more capable of cutting into Red Hat’s Linux market share than Novell was. VMware’s quarterly revenue is more than three times larger than Novell’s and that gap is growing.
A VMware spokesman declined to comment Friday.

Although offering an operating system fills out part of the VMware stack, it still has problems remaining. Windows is far more widely used than Novell’s Linux distribution, and Microsoft’s .NET Framework is more widely used than VMware’s SpringSource Java development platform.

VMware acquired SpringSource to rival Microsoft’s application platform, but “certainly .NET is huge,” Wolf says. “There’s an enormous development ecosystem around it.”

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