I received a call today from someone looking for a CEO to help start a new company to enter the virtualization market — it reminded me (again) of how challenging this market space is. There are well over 250 companies actively marketing products of various forms under the banner of Virtualization (and/or Cloud Computing), probably less than 10 (maybe less than 5) who are actually making a success of it (e.g. running a profitable and growing operation). It seems these businesses are often missing key business principals in their planning:

• Communicating a clear value statement that makes the offering compelling to consider — many leads are generated but few are lined up properly with what the company is selling. Time is wasted dragging a slow ‘no’ out of the customer versus honing in on who has the problem at hand.
• Sustainable differentiation — many companies continue to bang their heads building out ‘me too’ offerings, they get lost in the market noise and are further hampered by being too risky for enterprise adoption as a startup supplier
• Securing the correct path to market for the offering — channels versus direct is but one high level decision to make. Most companies make a choice, but are not in a position to execute well. They fail in program development, pricing models, general sales execution.
• Under investing in what is a fast-paced market opportunity. Companies of all sizes are loosing the competitive arms race — even VMware is having trouble keeping up with the broad nature of systems management, which is allowing their direct competitors to eat away at the landscape.

VMware, Citrix and Microsoft own this market space and are still mostly focused on getting the base platform deployed. It’s challenging to find prospects who are at the stage of having extra budget to deploy on the next set of business problems that derive from the adoption of Virtualization. One thing that everyone should keep in mind is that Virtualization and the main stream data center operations will combine over time allowing the overall market to return to the set of problems vendors focused on for many years — areas like High Availability and D/R,  service provisioning, asset management, security and infrastructure automation.

The market is also further complicated by the Cloud Computing movement — which is highly dependent on the deployment (and success) of Virtualization to provide the flexibility needed to offer cost-effective and functional cloud services.

There remain many opportunities to build business success in this market space, but the entrepreneur has to have laser focus on the 4 issues above (and a bit of luck).