Implications of the Airwatch/VMware deal

Wednesday morning, VMware announced a deal to buy enterprise mobility management (EMM) vendor AirWatch for $1.54 billion. VMware CEO Pat Gelsinger pitched the deal as a logical extension of the company’s management and productivity solutions that would “add a foundational element to our end-user computing portfolio that will enable our customers to turbo-charge their mobile workforce without compromising security.” AirWatch was equally enthusiastic, stating that it would “bring our leading-edge solutions to an even broader set of customers and partners to help them optimize for the mobile-cloud world.”

Beneath the marketing hype, the acquisition really was significant, for a number of reasons. It was the largest acquisition in VMware’s history and a fairly dramatic course correction. It was the largest acquisition of any EMM vendor, lending credit to the sector’s increasing importance and the necessity for traditional management vendors to get in front of the mobility management wave. It was also the most notable of an increasing number of acquisitions that will ultimately shake up the remaining independent mobility management vendors and the way we consume mobility management services.

What it means

In its simplest terms, the deal is a sign that EMM has grown up. Mobility management and mobile workspaces are integral to the modern enterprise, and traditional systems management and enterprise virtualization vendors need to be in the game right away.

The deal extends VMware’s management tools in a logical, future-facing direction, and it provides immediate feature parity with Citrix, the company’s closest competitor in the virtualization space. While many may question the enormous sum paid for AirWatch when there are dozens of smaller companies on the market, the finances may actually make sense. AirWatch provides a fully-formed EMM platform, removing the integration expense and opportunity cost of stitching together smaller point solutions. It is also brings strong channel relationships, a well-designed sales and support network, and a large, growing, and generally satisfied client base. It is also probably still sitting on a large reserve of cash from its $200 million funding round from last February.

For AirWatch, the deal offers much potential and a somewhat smaller amount of risk. The company was on a healthy, balanced growth path before the acquisition, expanding sales, marketing, development, and support in lockstep. Additional cash infusions and a push from VMware’s channel partners could accelerate that growth path. VMware also offers assistance building out or integrating related services such as identity and access management and more sophisticated virtualization

The biggest potential risk is that VMware might subsume the AirWatch product line and brand and deny it the care and feeding it deserves. Balancing integration and continued growth is always difficult, but if the company were forced to choose, VMware would do well to delay consolidation and continue to let AirWatch operate as it sees fit. AirWatch is not in need of a “fix,” and customers will gladly wait an extra six months for an integrated platform if they can sleep well knowing the system they trust has a safe future.

VMware’s January 27 analyst call should shed some further light on this topic, but early signs point to a fairly hands-off approach.  If it truly wanted to build something from scratch, VMware could have acquired all the necessary components for a fraction of the cost. By acquiring AirWatch, VMware expressed a desire to arrive in a hurry.

Whom it Affects

EMM Vendors

A deal of this magnitude signals a willingness of established IT services vendors to pay a premium for healthy, sophisticated EMM independents. For Good Technology, BoxTone, MobileIron, and other top-tier players, this is encouraging news if they decide to shop their companies to prospective buyers. If they choose to remain independent in the long term, however, they may start to feel pressure from the stepped-up marketing and channel leverage of their deep-pocketed rivals. The next 12 months should be a seller’s market, but once the remaining big buyers have completed their acquisitions, EMM specialists will compete against much more complete enterprise management packages than the ones we know today.

SIs and other channel partners

In the short term, very little should change for SIs. AirWatch and VMware have entirely different codebases, and it will take some time for VMware to prove even its joint marketing strategy, let alone a truly blended product. Still, over time, there may be some compelling reasons — first financial, then technical — for a VMware integrator to consider migrating its preferred EMM toolset to AirWatch. As more systems management vendors follow VMware’s lead, this trend will intensify.

Systems management vendors

EMM is no longer an option for systems management vendors. Oracle, Citrix, IBM, SAP, and others have all bought their way into the market in one form or another during the past few years, but VMware’s acquisition of such an expensive, full-featured EMM platform adds a new sense of urgency. Vendors such as HP that lack a broad internal EMM suite but offer strong consulting services will be particularly interested in acquiring tools.

Enterprise IT

Nothing should change this year. If you’re an existing AirWatch customer, business will almost certainly continue as usual, though you may receive some new marketing messaging. If you use an AirWatch competitor, nothing about the deal should disrupt your satisfaction. However, if you’re looking to acquire or replace an EMM system in the next 24 months, be aware of the market dynamics mentioned above.  The market shakeout will continue to favor more established brands in the form of well-known tool vendors or established, trusted SIs. Before making any buying decisions, build a clear roadmap of what features you want to support several years down the road, and discuss the matter with any service providers or integrators with whom you work.

Key Takeaways

  • AirWatch adds a full-featured toolset and instant credibility to VMware’s mobility offering.
  • If VMware can resist the temptation to meddle, AirWatch should continue to grow and prosper.
  • Traditional enterprise software and management vendors will scramble to buy established EMM brands at a premium over the next 12 months.
  • The long-term affects of industry consolidation may mean a winnowing of choices for SIs.
Relevant Analyst
Cormac Foster

Cormac Foster

Research Director Gigaom Research

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