VMware, Inc. provides virtualization and cloud infrastructure solutions in the United States and internationally. Its virtualization infrastructure solutions includes a suite of products and services designed to deliver a software-defined data center(SDDC), run on industry-standard desktop computers, servers, and mobile devices; and supports a range of operating system and application environments, as well as networking and storage infrastructures. The company offers VMware vSphere, a data center platform, which enables users to deploy hypervisor, a layer of software that resides between the operating system and system hardware to enable compute virtualization; storage and availability products that provide data storage and protection options; network and security products; and management and automation products to manage and automate overarching IT processes involved in provisioning IT services and resources to users from initial infrastructure deployment to retirement. It also provides SDDC suites, including VMware vCloud suite, vSphere with Operations Management, and VMware vRealize suite for building and managing a cloud infrastructure for use with the vSphere platform. In addition, the company offers Cloud Foundation, a SDDC delivery independent platform that can be deployed on-premises or run as-a-service. Further, it provides hybrid cloud computing solutions, such as VMware vCloud Air Network and vCloud Air; and end-user computing solutions that enable customers to securely deliver access to applications and data for their end users from various devices. The company sells its products through distributors, resellers, system vendors, and systems integrators. VMware, Inc. has a strategic alliance with Amazon Web Services to build and deliver an integrated hybrid solution; and a collaboration with Trend Micro Incorporated. The company was incorporated in 1998 and is headquartered in Palo Alto, California. VMware, Inc. is a subsidiary of Dell Technologies Inc.
Business Analysis of VMWare
The Technology Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how VMWare compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by VMWare to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of VMWare with an interactive chart.
- Revenue Growth: VMWare reported a revenue growth of 7.9% year-on-year during 2016. Software Industry grew at 0.9% in the same period
- COGS share of Revenues: As a percentage of revenue, VMWare spent 14.9% of its total revenues on COGS. Software industry average (COGS share of revenue) in the same period was 34.0%
- R&D share of Revenues: As a percentage of revenue, VMWare spent 21.2% of its total revenues on R&D. Software industry average R&D spending in the same period was 14.8%
- SG&A share of Revenues: As a percentage of revenue, VMWare spent 42.9% of its total revenues on Sales, Marketing, and General Administration (SG&A). Software industry average SG&A spending in the same period was 30.8%
- Inventory share of Revenues: VMWare Inventory share of Revenues details are not available because either company does not share the data or we do not have it
- Accounts Payable share of Revenues: As a percentage of revenue, VMWare invested 1.8% of its total revenues on Accounts Payable (A/P) Software industry average Accounts Payable investment in the same period was 6.2%
- Accounts Receivable share of Revenues: As a percentage of revenue, VMWare invested 28.0% of its total revenues on Accounts Receivable (A/R). Software industry average Accounts Receivable investment in the same period was 19.4%
- PP&E share of Revenues: As a percentage of revenue, VMWare invested 14.8% of its total revenues on Property, Plants, and Equipments (PP&E). Software industry average PPE investment in the same period was 15.8%
- Intangibles share of Revenues: As a percentage of revenue, VMWare invested 64.1% of its total revenues on Intangibles. Software industry average Intangibles investment in the same period was 62.4%
- Net Margins: VMWare Net Margins in the year 2016 were 16.7%. Software industry average Net Margins in the same period were 13.6%
Sector and Industry Association of VMWare
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
VMWare is associated with Technology Sector and Software Industry.
Technology sector is comprised of the following industries: Computers Systems and Peripherals; Software; Semiconductor; IT Consulting and Outsourcing Services; Networking Equipment and Services; Internet; Other. The definitions for each of the industries is as follows:
- Computers Systems and Peripherals industry includes companies primarily engaged in manufacturing of personal computers, servers, mainframes, workstations, and other computer accessories and peripherals such as storage drives, mice, keyboards and printers. It also includes manufacturers of mobile phones and tablets.
- Software industry includes businesses providing software products such as operating systems, productivity suites, enterprise software, data and analysis software, advertising and marketing software, engineering and manufacturing software, networking software, and IT management software. It also includes companies providing industry-specific software focused on different sectors such as Financials, Automotive, Telecom, Utilities, Travel, Real Estate, Media, and Publishing.
- Semiconductor industry includes companies primarily engaged in manufacturing and distribution of semiconductor products such as microprocessors, chipsets, motherboards, flash memory, and wired and wireless connectivity products. It also includes companies that provide semiconductor equipment and services to the semiconductor industry.
- IT Consulting and Outsourcing Services industry includes companies primarily engaged in providing information technology consulting and outsourcing services to other businesses. The services include IT consulting, systems integration, application development and management, IT infrastructure management, and network operations management.
- Networking Equipment and Services industry includes companies primarily engaged in manufacturing and distribution of networking and communications equipment for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The key products include routers and switches for local and wide-area networks, cable modems, teleconferencing equipment, and wireless access points.
- Internet industry includes Internet-based businesses providing products and services such as search engines, social networking, web hosting, email, domain name registration, and eCommerce. It also includes industry information/services portals focused on different sectors such as Financials, Automotive, Travel, Health, Real Estate, Media, and Publishing.
- Other industry includes companies providing products such as photocopiers, fax machines, point of sale machines, audio/video technologies, and video games. It also includes technology companies that are not part of other six technology industries.
Industry Ranking of VMWare
With $7.1 billion revenues, VMWare ranked number 3 of all the companies in the US Software industry. There were a total of 140 public companies in the US Software industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Software industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.