Virtualization software market growth and funding

Over the past few months I've seen many stories that some virtualization software startups have been getting funding from some fairly prestigious venture firms. While I'm not sure that this is really news that would be of value to an IT decision-maker, the story behind these announcements is interesting. If I review the results of Kusnetzky Group research into the size and growth of each of the virtualization technology segments, the reason for this activity becomes clear.

The revenues in each of the virtualization software segments grew over 100% between 2006 and 2007. This research, by the way, included the revenues of nearly 100 suppliers of virtualization software technology. If one looks a little bit deeper, the most growth appears to be in the areas of network virtualization, security for virtualized environments and the storage virtualization not processing virtualization as one might expect based upon all of the coverage of VMware, Citrix XenSource or Virtual Iron.

Obtaining funding can certainly be exciting for the staff of the virtualization software supplier in question. It doesn't always mean, however, that they're going to be successful or even be in existance a few years from now.

What does it take for a company to be successful? From my observation companies need the following attributes (in no special order) to be successful.

• The ability to look at the issues organizations face and to think differently about how to solve them.
• A bias towards movement rather than merely analysis.
• Timing! Building the best little tool ever made may not win the day if it is 2 years late and the market has already settled on a different approach.
• The ability to clearly and simply articulate a "grand vision" in a way that causes decision-makers to see that a solution is possible and get excited about the possibilities.
• The ability to create, document and manufacture technology that implements that vision. Don't laugh about the inclusion of this one. I can't tell you how many times I've learned of a wonderful vision that, in the end, the supplier couldn't deliver.
• A management team that no only can create a good business plan but, is able to implement it to the last detail. I've seen many startups having a great plan, a wonderful vision and don't also have the team in place to make that plan a reality.

On more than one occasion, I've spoken with representatives of suppliers who are missing one or more of these key components. Seldom do these companies become industry leaders. Sometimes the technology they constructed was interesting enough that some large company acquires it to enhance its portfolio. For the most part, they quietly fail after the noise from their initial announcements dies down.

What do you think about funding announcement? Do you pay any attention?