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The Challenges of Moving Across the Entire Stack

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VMware (s vmw) has been on a roll recently, moving from its virtualization roots to acquire software as a service (SaaS) solutions such as SlideRocket and Zimbra, and even going so far as to launch an open-source platform as a service (PaaS) offering, CloudFoundry. This week’s announcement of Horizon App Manager, a dashboard to control enterprise access to third-party SaaS applications, is the latest addition to VMware’s increasingly rich portfolio, and led cloud analyst Ben Kepes to remark that “[VMware does] the entire [cloud] stack now.” To a certain extent, Horizon meets an enterprise need to control and gain visibility over SaaS products deployed throughout the organization, a topic I recently explored for GigaOM Pro (subscription required).

VMware isn’t alone in seeking to strengthen its market position by expanding far beyond the company’s original offering. With its platform, for example, Salesforce (s crm) has created an environment upon which a growing number of developers build their applications. Those applications certainly extend and enrich the company’s core CRM product, but also meet customer needs in areas far beyond CRM.

The Leading Edge Forum’s Simon Wardley describes parts of the approach adopted by both Salesforce and VMware as a classic example of a “tower and moat” defense, in which the “principle here is to defend a revenue stream (the tower) by creating a moat devoid of differential value with high barriers to entry around it.” In other words, they prevent the competition from developing viable challengers to revenue-generating CRM products by filling the space with open-source or low-revenue products. There is no easy way for potential competitors to get close, especially when those competitors are companies like Oracle and Microsoft, which are more accustomed to the very different revenue models associated with on-premise installed software.

As companies like Salesforce, VMware and Amazon (s amzn), which underpin the cloud, continue to grow, the range of products they offer will necessarily expand. Some of those products are intended to provide new revenue-creating opportunities, while others are simply there to squeeze the competition. But as they become more important as platforms upon which others build and depend, can any of these companies successfully continue to pursue their original product-based strategies? Whether they must inevitably become one or the other remains to be seen.

But as these companies make the transition to become platforms, they must steer a careful course that balances the growing utility of being a platform upon which others can build — and compete — with a continued desire to add features to the core product. The risk of internal conflict between teams wanting to add features to a core product and teams wanting to enable others by adding those features to the platform is, perhaps, very real.

For more on the challenges facing companies that try to dominate the cloud computing stack, see my latest Weekly Update for GigaOM Pro (subscription required).

Image courtesy of flickr user mrs.tom