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Virtualization and new business models


At Longworth, we take an active interest in virtualization, which is one of the hottest markets in systems software today. My role at Longworth is to stay on top of trends and interesting companies in systems software. I recently attended a talk by Mendel Rosenblum at MIT titled The Impact of Virtualization on Modern Computing Environments. I didn’t necessarily go there to learn anything new about virtualization, but I wanted to hear what the father of the dominant player in x86 virtualization had to say on the subject.

As expected, I didn’t learn anything new, but Prof. Rosenblum tersely and elegantly reasoned about virtualization before an audience of computer science academics. In addition to hearing him describe virtualization without industry jargon, I also came away with an interesting way to view ongoing shifts in enterprise software delivery through the lens of virtualization. 

Prof. Rosenblum detailed five distinct roles in how software is consumed today:

  • Computer Hardware Procurer
  • Application Developer
  • Application Configurator
  • Application Maintainer
  • Application User

When software is delivered as packaged software, one organization is responsible for all the above functions except the Application Developer function. This organization buys hardware, configures it, maintains an application and provides it to an internal user community. When software is delivered as a service—as in the SaaS model, by Google or Salesforce—one entity takes care of all but the Application User function by procuring hardware, developing software, configuring an application and maintaining it on an ongoing basis.

Now, Prof. Rosenblum said that these two are but two extremes of a spectrum. Other points in the space defined by these roles can be accessed via virtualization, because it decouples different layers of infrastructure. One example he advanced was Platform as a Service (PaaS), where Application Developer and Application User may be one organization whereas the grid on which the application runs belongs to another organization. Other combinations are also possible. He also raised the possibility, via the emergence of virtual appliances, that new roles may be created in the software delivery value chain, including Virtual Appliance Builder, Virtual Appliance Maintainer and Execution Platform Provider.

Desktops as a service. Picture credit: © 2009 Desktone, Inc.

Prof. Rosenblum’s explanation struck me as a particularly elegant way of partitioning the space of software delivery. Additionally, I thought it was a particularly succinct way of explaining why we at Longworth are interested in virtualization. The decoupling of different layers of infrastructure creates new opportunities for product vendors and service providers where none used to exist before. For an example, see the above graphic from desktop virtualization vendor Desktone, which enables a 3rd party service provider to deliver desktops as a service to enterprise end users. Furthermore, these vendors and service providers can take advantage of new business models born from the technological changes that virtualization enables.

We are very interested in hearing about emerging business models in infrastructure enabled by virtualization, and we believe—based on our own market opportunity estimates—that what we see out there today is just scratching the surface. Virtualization has been around since the 1960s when computers (mainframes) were rare and expensive but viewed through today’s lens, it represents a significant platform shift for commodity hardware. We believe the best is yet to come from startups and independent vendors in terms of possibilities. If you’re an entrepreneur playing around with an idea in this broad segment, we’d love to hear from you. Leave a comment or drop me a line at vishy at longworth dot com if you want to bounce an idea off me.

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