The New Measuring Stick - Time To Legitimacy (and Stop Bitching That VMware is Now A Real Company)

25 years ago Netapp became the modern day bellwether of this metric - they acquired real paying customers at a clip heretofore unheard of. For the last 20+ years they maintained that bar.

Not anymore. Yesterday Nimble announced they reached 1000 customers in only 2.5 years.  Not free software downloading customers - paying SYSTEMS customers.

That is an astounding rate of success.

There are others. Actifio has hundreds of customers in two years of GA. There are a bunch on the horizon that will break soon - Legible, Nutanix, Whiptail, Data Robotics (50,000+ units shipped or something crazy like that), etc., just to name a few.

Five years ago it was unthinkable. A company simply couldn't acquire a thousand real customers if it was in the systems business (where stuff costs a lot, and requires a real commitment from a customer to install, learn, and use a product) no matter what size VC investment it had. Why? Because the big guys controlled the market - and the information flow.

God bless the internet and the social aspects of knowledge dissemination.

The barriers to "smart" are no longer controlled by big brother (except in China, of course) - so a little guy with a better mousetrap can bring their story to the masses - and IF that story resonates with a real life issue, customers will find you.

It's awesome to watch. I think people take it for granted but they shouldn't - it's as big a sea change business/market wise as anything to hit the systems business in, well, forever.

It forces the big guys to compete at a pace and level they have not had to deal with since they were the little guys. And they don't like it much. Why would they care about little Actifio stealing 250 customers when they have 250,000? Because an epidemic starts with 2. And their ability to contain and control as they could in the not too distant past is gone.

So now not only is it near impossible to become a big giant company that becomes the market leader in a big giant market - it's become just as hard to hold on to that position. For 50 years those who have been lucky/brilliant enough to claim a market have had the almost anointed right to maintain that status forever (even if their stuff sucks). No more.

This wave has just begun. Not only will the biggest have to contend with the other big guys to fight over share loss - they will soon have to pay very serious attention to "those on the cusp of global legitimacy" - who actually may end up a bigger threat to market supremacy than the traditional major players.

If getting to 1000 customers in just 2.5 years is the STARTING point, what happens in a few more years? Remember when the US only worried about one big threat? The Russians!!! Protect against them and we'll be safe! Throw that out the window. Now we have to protect against little packs of unrelated (seemingly) random threats/psychos. A whole different ball game.

This is kind of the business equivalent. Not that the little guys are terrorists, mind you - but they intend to steal the the money the market gives the big guys. Metaphorically it's the same principle.

And it's fascinating.

On to the next topic - stock stupidity.

VMware announced more world dominating results, has no material competition still (ya ya ya, it's coming, I see it too, but NOTHING on the competitive landscape is currently derailing VMware growth or revenue, so shut it.) - and promptly lost 20% of its market value. It (gasp!!!) told the street that it doesn't expect to keep growing at 8 billion percent a quarter.

Why? Is it over? Is VMware dead? Of course not, you silly people. All that is happening is that VMware has shifted from Wall St. Fantasy Camp to Main St. Business reality. Wall St. likes companies who have no way of being boxed into a market slot - i.e., one that can have unmeasurable growth opportunities. VMware will run car washes! VMware can be added to mayonnaise as a food additive! VMware is going to grow hair! It's stupid. It's what happens to every hyper-market stock that the street doesn't understand.

And sooner or later, that company who kicks ass all over the place, becomes "boxed." It acts responsibly, and ONLY grows at 100% and ONLY dominates the revenue of its market by keeping 96%. It's stupid.

So as an investor, you now have to make decisions, unfortunately, that are not based on Unicorns and Rainbows. You have to make them based on what is the fair P/E you are willing to pay for VMware (or anyone else) and what do you believe their earnings outlook is.

God I hate Wall. St. stupidity.

P'S. Lest you forgot, this happened to EMC, NTAP, Microsoft, Cisco, and EVERY OTHER market dominant leader ever. Stunning that people react with surprise.

This silliness is exactly why Michael should take Dell private. It's like dealing with the Ministry of Silly Walks all day long.

Topics: IT Infrastructure