This article is based on an opinion piece originally published at InvestorPlace.com by Chris Markoch on or around January 18, 2020. It has been expanded with additional technical context for a DevOps engineering audience.
The Strategic Context: Why VMware Had to Change
Heading into 2020, VMware (NYSE: VMW) was at a critical inflection point. As an enterprise company built on hypervisor-based virtualization—specifically its flagship vSphere platform—VMware was watching its traditional market erode as organisations shifted workloads to public cloud providers and adopted container-based architectures.
The broader industry had moved decisively toward Kubernetes as the de facto orchestration layer for containerised applications. For VMware, a company whose 600,000-strong vSphere customer base still ran the majority of enterprise workloads on virtual machines, this shift was both a threat and an opportunity. The question entering 2020 was whether VMware could successfully reposition itself as a hybrid cloud platform company—or whether it would cede ground to hyperscalers and cloud-native competitors.
The Acquisition Wave: Building a Kubernetes Portfolio
Rather than build Kubernetes capabilities entirely in-house, VMware embarked on an aggressive acquisition strategy. The key moves included:
- Pivotal Software ($2.7 billion): The cornerstone acquisition for VMware’s Kubernetes strategy. Pivotal brought the Cloud Foundry application platform, developer tooling, and expertise in cloud-native application development. VMware CEO Pat Gelsinger framed this as acquiring better cloud-native assets for significantly less than what IBM paid for Red Hat.
- Heptio: Founded by two of the original Kubernetes project leads from Google, Heptio gave VMware deep Kubernetes engineering expertise, community credibility, and enterprise support know-how.
- Bitnami: Known for its catalogue of pre-packaged open source applications, Bitnami brought a library of ready-to-deploy Helm charts and application packages relevant to Kubernetes environments.
- Carbon Black ($2.1 billion): A security-focused acquisition that extended VMware’s reach into endpoint detection and response (EDR), positioning the company to offer security as part of its infrastructure platform rather than as a bolt-on product.
For context, IBM’s acquisition of Red Hat—completed in 2019 for approximately $34 billion—gave IBM ownership of OpenShift, Red Hat’s enterprise Kubernetes distribution. VMware’s comparable Kubernetes story was being assembled at a fraction of that cost, though with different components and a different go-to-market approach.
VMware Tanzu: The Product Bet
The strategic output of the Pivotal and Heptio acquisitions was VMware Tanzu—a portfolio of products and services designed to help enterprises build, run, and manage Kubernetes-based applications. Tanzu was positioned to serve organisations that wanted to modernise their application stack without abandoning their existing VMware infrastructure investments.
Tanzu’s target audience is directly relevant to DevOps practitioners: platform engineering teams managing Kubernetes clusters across on-premises data centres and multiple clouds, and development teams that need a consistent application platform regardless of where workloads run.
Project Pacific: Kubernetes Inside vSphere
One of the most technically significant announcements tied to this period was Project Pacific, VMware’s initiative to embed Kubernetes directly into vSphere. The core idea was to allow vSphere administrators to provision and manage Kubernetes clusters using the same tools and workflows they already used for virtual machines—effectively making the Kubernetes control plane a native vSphere construct.
For DevOps engineers, this represented an attempt to close the gap between the VM-centric world of traditional operations and the container-centric world of modern application delivery. Instead of running Kubernetes on top of VMs in a separate management plane, Project Pacific aimed to make Kubernetes a first-class citizen within vSphere itself.
The strategic logic was clear: if VMware could get even a portion of its 600,000 vSphere customers to adopt Tanzu and Project Pacific, the potential revenue uplift was substantial.
The Delivery Challenge
Acquisitions create integration risk. Pivotal, Heptio, and Bitnami each had distinct cultures, engineering practices, and customer bases. Blending these into a coherent Tanzu product portfolio—while simultaneously maintaining the core vSphere business—was a significant engineering and organisational challenge.
Analysts tracking the stock at the time were projecting modest earnings growth for 2020 and 2021, with some suggesting that the full financial impact of the Pivotal acquisition had not yet been priced into estimates. The market, entering 2020, appeared to be in a wait-and-see posture.
The Dell Relationship: An Overhang on the Stock
A separate but important factor for investors in early 2020 was VMware’s ownership structure. VMware was majority-owned by Dell Technologies, which had returned to public markets after its acquisition of EMC (which owned a controlling stake in VMware). With Dell shares actively trading again, there was ongoing speculation about whether Dell would move to acquire VMware outright or execute a spin-off. This corporate structure uncertainty added complexity to the investment thesis independent of VMware’s operational performance.
Analyst Sentiment at the Time
According to the original InvestorPlace article, of the 24 analysts who had rated VMware at that point, 15 had issued buy ratings and eight had issued hold ratings. Investment firm Oppenheimer had reiterated an “outperform” rating with a price target of $200, citing what it described as a compelling risk/reward profile given that the market had not yet fully priced in VMware’s strategic transformation.
The stock had fallen roughly 25% from its 52-week high set in May 2019, and had declined approximately 5% in the first weeks of 2020 even as broader tech equities moved higher. Support around the $150 level was being watched as a key technical marker.
What This Meant for DevOps Practitioners
For engineers and platform teams, the business dynamics described above had concrete implications:
- Kubernetes tooling consolidation: VMware was signalling a long-term commitment to Kubernetes as a platform layer, which gave enterprise teams more confidence in betting on Tanzu for multi-year roadmaps.
- VM and container coexistence: Project Pacific’s approach rejected the binary choice between virtualisation and containers, offering a path for organisations that needed to run both.
- Vendor ecosystem complexity: With Carbon Black, Bitnami, Heptio, and Pivotal all absorbed into the VMware portfolio, practitioners needed to evaluate how these tools would integrate and whether the combined platform would deliver on its stated capabilities.
- Open source posture: VMware’s acquisitions leaned heavily on open source foundations (Kubernetes, Cloud Foundry, Helm). The company’s commitment to upstream contribution and open governance was a legitimate consideration for teams evaluating long-term platform lock-in.
Summary
VMware’s position entering 2020 was that of a well-resourced incumbent making a high-stakes bet on hybrid cloud and Kubernetes. The acquisitions of Pivotal, Heptio, Bitnami, and Carbon Black collectively outlined an ambitious portfolio strategy. Whether the company could execute the integration, win over its existing vSphere base, and compete credibly with Red Hat/OpenShift and cloud-native alternatives was the central question—one that would take several quarters to answer.
Original opinion piece by Chris Markoch, published at InvestorPlace.com. Chris Markoch disclosed that he did not hold a position in VMware or related securities at the time of writing.