VMware's move into open source

VMware's acquisition of SpringSource has big implications for cloud computing

Yesterday after market close, VMware announced the acquisition of SpringSource, a small private open source software company, for $420 million. Given that SpringSource is private, we don't know its exact sales, but some sources put it at around $20 million. This certainly makes the deal one of the highest multiples in recent years.

Borrowing a page from the JBoss playbook, the SpringSource team under Rod Johnson and Rob Beardon did an excellent job building up the value of their firm through multiple acquisitions in the last year, including Hyperic not even three months ago. SpringSource put together a pretty compelling set of infrastructure software for what it calls "lean source" applications.

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But given a multiple of this size, it's clear that VMware isn't just buying SpringSource to get into the open source business. It would take a lot of revenue growth over a lot of years to justify this kind of valuation.

The real value to VMware is in accelerating its move beyond the core virtualization business that has made them famous. Increasingly virtualization is going to become commoditized with offerings from Microsoft, Red Hat, and others being "good enough."

VMware CEO Paul Maritz and COO Tod Nielsen are both longtime Microsoft veterans, and they know they had little choice but to change the game if they were going to stay on the profitable side of the commoditization curve. Not surprisingly, VMware has announced its intent to use the SpringSource acquisition to accelerate virtualization of cloud offerings for corporate customers.

The acquisition gives VMware not only a robust suite of Java-based middleware and tools, but also a more direct connection to Java developers around the world. And as has often been said, winning the hearts and minds of developers is key to building a successful platform.

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