Maritz in, Greene out: VMware Goes to War

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Paul Maritz is the new CEO of VMware and he comes at a critical time for that company.


While Microsoft may be having problems against Google and Nintendo, it is executing incredibly well in its servers and tools business. Unfortunately for VMware, it isn't in search or gaming, and so it is up against Microsoft's strongest unit.


Microsoft remains the most powerful software company in the market by a significant margin, yet Diane Greene, who was very capable at building VMware, seemed to think that it could take the new competition from Redmond in stride. Greene was a founder, and founders often get used to calling all the shots and not being second-guessed. But EMC owns VMware now, and her perception might have been different from reality.


Whatever the cause -- and it was likely this inability to grasp the need to protect her new boss that predicated the change -- VMware was in need of leadership that could compete effectively with Microsoft and find creative ways to use all its assets to not only survive the competition, but to win it.


Paul Maritz: The Silver Bullet?


If Microsoft were weak in servers, EMC might be better served by pulling an expert from someplace more successful so that Microsoft's mistakes wouldn't be replicated. However, Microsoft is just short of unbeatable in this space, which suggests a Microsoft resource would be the best strategy to move against Microsoft's weaknesses.


Maritz was well-regarded at Microsoft and was viewed as one of its more strategic thinkers. At one time, he was in line to run the company, and while he probably wouldn't have run Microsoft had he stayed, he likely could have done it if circumstances had been different. In fact, he was part of the five-person executive team and in charge of platform strategy and developers. This gave him what was likely the most critical role, short of the CEO, in that executive team, and perhaps the best background to develop strategy for VMware.


Most recently, he was founder and CEO of Pi Corp., which developed a competitor to Microsoft Mesh, another major strategic effort at Microsoft currently being hampered somewhat by the typical big-company politics. As a result, Apple was able to get MobileMe, a similar offering, to market first. Pi appeared better able to compete with it, suggesting Maritz can move effectively against Microsoft's weaknesses and better take advantage of opportunities that are quickly emerging -- though, in this case, not in the server market.


Personally, I can't think of a better person to lead VMware into an increasingly complex and competitive future. But can he be successful?


Assessing VMware's Chances


Essentially, this is a turnaround program for VMware. Maritz does not have a turnaround pedigree, and while he can create a plan that can beat Microsoft, the question remains whether he can lead VMware to execute such a plan. The problem for a non-founder replacing a founder is one of loyalty. Few CEOs coming in, even from inside a company, fully realize just how big a problem loyalty can be -- particularly if their predecessor didn't leave voluntarily.


Critical to Maritz's success will be building an executive team loyal to him and driving this loyalty down into the company. A turnaround manager typically does this with dramatic changes to the company that convey the message that there is a new sheriff in town. Those without this pedigree often think that keeping things the same as long as possible is the better path, and they just as typically discover this is not the case. First-time turnaround executives also don't seem to get the problem with entitlements. They create execution problems by trying to save incremental costs while not realizing the massive impacts associated with eliminating entitlements.


Finally, and perhaps most critical, will be drilling through the management layers to create an intelligence-based command and control structure. As a company grows, it tends to create isolation layers around the top executives that prevent critical information from getting through. This drives decisions that might be in the best personal interest of individuals, but not in the best interest of the company. Even the best executives will fail if their internal and external intelligence is compromised, and ensuring that doesn't happen will be a part of ensuring VMware prospers.


Wrapping Up


I can think of no better person to run VMware than Maritz. However, he is not a turnaround manager and will need to execute much as Mark Hurd has executed at HP to be successful. He could also learn from EMC's own customer-retention-based quality efforts to improve his access to critical internal and external intelligence and assure customer loyalty. Finally, he may want to take a page from Steve Jobs' book to make employees aware of the reality of the leadership change and simplify the organizational structure of the company, bringing in people in senior positions who are loyal to him.


With the right changes, VMware can compete with Microsoft, but when you realize that few make these critical changes, some risk emerges. In the end, I think this is a good move that should be positive for VMware overall. But its full potential won't be realized until -- and unless -- Maritz can bring his full intellect to the problem and drive the company to execute his successful strategy.


We should have a good idea of how this will go by year end 2008. It should be an interesting ride, regardless.