VMware's Lofty Cloud Computing Goals

Former Microsoft executive Paul Maritz is now determined to turn his new employer, VMware, into a leader in cloud computing

By Aaron Ricadela

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As the No. 3 executive at Microsoft, Paul Maritz presided over the company's Windows juggernaut, turned aside threats from Netscape and Sun Microsystems (JAVA), and pressed the company to embrace the Internet. Now, the longtime software executive is looking down Microsoft's barrel from the other end, trying to help his new employer, VMware (VMW), triumph where past Microsoft competitors fell short.

In his new role, Maritz is leading VMware's charge in the mounting battle over cloud computing, the trend that's leading companies to shift computing power away from their own machines and into the hands of tech powerhouses such as Microsoft (MSFT), Google (GOOG), Amazon.com (AMZN), and Salesforce.com (CRM). VMware wants to be a player in cloud computing, too, and Maritz, CEO since July, is undertaking a major engineering project to try to get there. "That says to Microsoft, 'We're coming right after you,'" says Jayson Noland, an analyst at Robert W. Baird who has a neutral rating on VMware.

VMware needs some victories. In less than a year, it has gone from hypergrowth business success story and stock market darling to a company whose slowing growth and plummeting shares led to the ouster (BusinessWeek.com, 7/8/08) of its former CEO and co-founder Diane Greene. Shares of VMware slumped 1.22, or 5%, to 22.42 on Nov. 12.

VMware held 2007's most successful initial public offering by specializing in virtualization software that helps companies cut costs by making more efficient use of their computers. Now, VMware needs to show customers and investors that it can move beyond virtualization and remain worthy of a chunk of companies' tight tech budgets while avoiding a competitive onslaught from Microsoft. "If VMware just coasts on its past achievements and lets Microsoft catch up, it will have a problem," says a former Microsoft executive, who asked not to be identified as he maintains ties to Maritz. "But I don't think you'll see them sit still."

Making His Mark

Maritz is on the move. "In technology, if you stand still, eventually your value proposition evaporates," he says, holding forth in a sunlit conference room at the company's Palo Alto (Calif.) headquarters. On Nov. 10, VMware announced it had bought the French company Trango Virtual Processors, moving it into the market for software that powers mobile phones. In late October the company launched its first advertising campaign, featuring customer testimonials. Even competitors say Maritz is already making his mark. "He's a great hire for VMware," says Marc Benioff, CEO of Salesforce.com. "He understands where VMware should go."

Next stop: an ambitious project called the "Virtual Data Center Operating System," a complex piece of software that promises to help companies make their IT operations even more efficient by acting as a traffic cop among their hundreds of servers, disk drives, networking devices, and applications. VMware has hundreds of engineers working on the system, scheduled to make its debut next year. It's designed to position VMware as a technology "platform" for cloud computing, around which other companies could add capabilities and build their own businesses. "VMware is one of the few companies in the industry that can aspire to have a platform," Maritz says. "There will be three or four credible players in that marketplace, and we plan to be one of them."

When Maritz was the highest-ranking Microsoft executive behind Bill Gates and Steve Ballmer, he was known for an intellectual, deliberate style that helped fend off competition while mediating between warring factions at Microsoft. "Paul is not one of those Ballmer types who says, 'We're going to destroy and gut them,'" says Tod Nielsen, CEO of Borland Software (BORL), who spent 12 years at Microsoft in the '80s and '90s. "He likes to be behind the scenes."