This article is based on analysis originally published on SiliconAngle, written in the context of VMworld 2019.
VMware’s Evolution: From Virtualization to Multicloud
Few enterprise technology vendors have navigated as many industry inflection points as VMware. From rescuing over-provisioned data centers in the early 2000s to building multicloud management layers today, VMware’s strategic arc is a useful lens for understanding how enterprise infrastructure has changed — and where it is going. What follows is a structured retrospective on that journey, drawn from nearly two decades of VMworld coverage.
The Rise of Server Virtualization
Server virtualization may seem unremarkable today, but its early adoption required significant education, hardware qualification work, and organizational change. The timing was fortunate: data centers in the early 2000s were plagued by server sprawl, and the post-dot-com bust had put cost reduction at the top of every IT agenda.
Physical server utilization rates were typically in the single digits. Consolidating dozens of underused physical machines onto fewer, more capable hosts using virtual machines delivered immediate cost and energy savings. In the early days, hardware compatibility was a real obstacle — an incompatible BIOS could derail a deployment and take considerable time to resolve.
VMware’s core value proposition was encapsulation: bundle an operating system and its application into a portable VM, and the underlying physical infrastructure becomes largely irrelevant. A classic early use case was Windows NT end-of-life. Rather than undertaking a costly and risky migration, organizations could encapsulate the aging OS in a VM and keep it running indefinitely, insulated from hardware refresh cycles.
The introduction of vMotion — which allowed a running VM to migrate between physical hosts with zero downtime — extended this capability further. Applications could now survive multiple generations of server hardware without service interruption. The downside was equally significant: virtualization gave organizations a convenient excuse to defer application modernization, sometimes by five years or more.
As VMware ESX (later rebranded vSphere) matured, it moved from test and development environments into production workloads, eventually supporting virtually any application that could run on bare metal. VMware built strong OEM relationships with IBM, HP, and Dell, which helped drive adoption and gave those vendors a reason to sell larger, VM-capable servers. By the time theCUBE first covered VMworld in 2010, virtualization was still growing rapidly — but cloud computing was already being flagged as a long-term threat.
It is worth noting that virtualization is an abstraction, not a simplification. By decoupling the OS from hardware, VMware introduced new complexity into how storage and networking operated — complexity that would shape the company’s next chapter.
Expanding the Stack: Fixing Networking and Storage
In 2012, Pat Gelsinger succeeded Paul Maritz as VMware’s CEO, bringing with him a long career at Intel and a prior executive role at EMC (which had acquired VMware in 2003). Gelsinger’s strategic model echoed Intel’s playbook: position VMware at the center of a broad ecosystem, balancing internal product development with the goodwill of technology partners.
Storage was the first challenge. Virtualizing compute had effectively broken the assumptions that traditional storage systems were built on. VMware spent years developing APIs and integration frameworks to make storage work reliably with VM environments. Parent company EMC’s leadership in enterprise storage made this a particularly sensitive area to navigate diplomatically.
Networking presented a similar but more disruptive challenge. Physical and virtual networking remained separate worlds, and a new wave of software-defined networking (SDN) startups was emerging to bridge them. Among these, Nicira stood out as the most technically credible — and the most threatening to VMware’s position. Cisco made a move to acquire Nicira, but VMware, with support from EMC’s venture team, won with a bid exceeding $1 billion. The acquisition became the foundation of VMware NSX, VMware’s software-defined networking platform. It also marked a turning point in VMware’s relationship with Cisco — from close partners to uneasy competitors in the data center networking space.
On the storage side, VMware released Virtual Volumes (vVols) in 2014, enabling VM-aware storage management. Around the same time, VMware developed vSAN, a software-defined storage layer that ran at the hypervisor level — fitting the broader category of hyperconverged infrastructure (HCI). VMware vSAN grew to more than 20,000 customers and became the revenue leader in HCI. Its closest competitor is Nutanix, which has a complex three-way relationship with both VMware and Dell.
Pivotal and the Application Modernization Layer
For much of VMware’s early history, the typical VM workload was a Windows application. Microsoft Hyper-V represented the most persistent competitive threat to VMware’s hypervisor dominance — Microsoft could offer Hyper-V at no incremental cost for customers already running Windows Server, and it steadily closed the feature gap.
VMware held its position, but the broader industry conversation was shifting toward application modernization and platform-as-a-service (PaaS). The idea was that modern applications should be portable across physical, virtual, and cloud environments — not locked to a particular hypervisor or OS.
A team inside VMware had developed Cloud Foundry, an open-source PaaS platform. In 2013, Cloud Foundry became a central asset in the formation of Pivotal — a new, independent company assembled from products and personnel drawn from both EMC and VMware. In 2014, the Cloud Foundry Foundation was established to provide open-source governance. The division of labor made conceptual sense: VMware focused on infrastructure (bottom of the stack), while Pivotal addressed application modernization (top of the stack).
The PaaS category eventually gave way to containers and Kubernetes. Docker brought Linux containers into mainstream awareness, and Kubernetes — originally developed at Google to manage containers at scale — emerged as the de facto container orchestration standard. Pivotal embraced this shift, moving toward full Kubernetes support, following a path Red Hat OpenShift had pioneered.
Dell’s $67 billion acquisition of EMC in 2016 brought VMware and Pivotal under the same corporate umbrella (with Pivotal subsequently going public in 2018 before being re-acquired). In 2017, VMware acquired Heptio, a Kubernetes-focused startup founded by members of the original Kubernetes team at Google. VMware also acquired Bitnami. Both moves signalled that VMware was serious about owning not just the infrastructure layer but also cloud-native tooling.
By 2019, Pivotal was reacquired by VMware, bringing the application modernization and infrastructure layers back together. The integration creates an opportunity — and an obligation — to deliver a coherent cloud-native platform that spans both infrastructure and application concerns.
Clouds Roll In: From vCloud Air to Multicloud
The early narrative around cloud computing followed a pattern familiar to anyone who watched virtualization emerge: limited initial deployments, dismissal as a niche solution for startups, then rapid enterprise adoption that caught incumbents off guard. AWS was initially disparaged by enterprise IT as a consumer-grade offering from a bookseller. That skepticism did not age well.
VMware’s initial response was to build its own public cloud offering, vCloud Air. After years of modest customer uptake, VMware made the pragmatic decision to exit the cloud provider business: it sold vCloud Air to OVH and pivoted to a partnership-first cloud strategy.
The most consequential of these partnerships has been with AWS. Although VMware’s first major cloud partnership announcement at VMworld 2017 was with IBM Cloud, the AWS partnership that followed has defined VMware’s cloud strategy ever since. Deep engineering integration between the two companies produced VMware Cloud on AWS, which allows customers to run VMware’s software stack in AWS infrastructure zones using the same tools, APIs, and operational processes they use in their own data centers.
Further extending the hybrid story, AWS Outposts and VMware Project Dimension (announced around 2019) offered the ability to run AWS or VMware software stacks on hardware deployed in customer data centers — creating tightly integrated hybrid cloud configurations managed through a consistent control plane.
VMware has also developed hybrid cloud integrations with Microsoft Azure and Google Cloud, the latter leveraging CloudSimple. The pattern is consistent: VMware positions itself as a management and portability layer that sits above any individual cloud, giving customers a familiar operational model regardless of which infrastructure they choose.
With a customer base exceeding 600,000 organizations at the time of writing, VMware has significant leverage to act as a bridge between the on-premises environments customers already operate and the cloud-native architectures they are moving toward. The open question is how long that bridge remains necessary — and whether customers will continue to rely on VMware as their cloud skills and confidence mature.
The Strategic Tension: Bridge or Destination?
VMware’s multicloud positioning carries an inherent tension. Its value proposition has always depended on the complexity and fragmentation of the underlying infrastructure. As public cloud providers mature, they increasingly offer integrated management, security, and networking tooling of their own. If customers grow comfortable operating natively in AWS, Azure, or Google Cloud, the case for an independent management layer weakens.
VMware’s acquisitions — Nicira, Heptio, Bitnami, and the re-acquisition of Pivotal — collectively signal that the company recognizes this risk. By adding Kubernetes-native tooling, modern networking, and application platform capabilities to its portfolio, VMware is attempting to remain relevant not just as a hypervisor vendor but as a cloud-era infrastructure company.
Hybrid cloud realities — regulatory requirements, latency constraints, existing application architectures, sunk infrastructure investment — mean that most large enterprises will not migrate entirely to public cloud in the near term. That gives VMware a meaningful window. But the pace of its transformation into a cloud-native platform company will determine whether it leads that transition or gets disintermediated by it.
Action Item for IT Leaders
The lesson from VMware’s history — and from the enterprise IT landscape more broadly — is that infrastructure decisions have long tails. Choices made today about hypervisors, cloud providers, container platforms, and networking vendors will constrain and enable options for years.
- Prioritize portability. Evaluate platforms not only on their current feature set but on how easily you can move workloads if your requirements or the market shifts.
- Modernize applications, not just platforms. Migrating a legacy application to the cloud without re-architecting it delivers limited benefit. Application modernization is the long pole in the tent.
- Treat vendor relationships as portfolios. VMware’s history shows that a vendor can simultaneously be a partner and a competitor in adjacent spaces. Build relationships with multiple providers and maintain negotiating leverage.
- Plan for hybrid permanence. Most large enterprises will operate across on-premises and multiple cloud environments for the foreseeable future. Choose management tooling that works across all of them, not just one.
The pace of change in infrastructure has not slowed. The organizations best positioned for the next wave are those that have kept their application portfolios current, their teams skilled in cloud-native practices, and their infrastructure flexible enough to adopt new solutions without forklift replacements.