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VMware To Put $100m in India

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VMware says it’s going to put $100 million into India in the next two years and double its local engineering staff to more than a thousand people, cultivating India as a market as well as a cheap source of talent.

Along with waiting for Microsoft to mount what will be VMware’s fiercest challenge, the virtualization leader is facing the increasing commoditization of the hypervisor – to the point the widgetry will probably be given away in a few years – and needs to pull up its stocks on the virtualization management side.

On the management side, it is believed to have lost bids to acquire Opsware to HP last year and BladeLogic to BMC just last week.

VMware currently has nearly 700 employees, including more than 500 developers working out of offices in five Indian cities – Bangalore, Pune, Chennai, Delhi and Mumbai.

The company will be opening a new 82,000-square-foot state-of-the-art development center in Bangalore, which is supposed to expand on existing R&D operations in Bangalore and Pune. The facility will include a 4,000-square-foot computer lab.

Meanwhile, it currently has roughly 300 customers and 160 channel partners in India.

As one of VMware’s fast-growing markets, with local sales doubling last year, it is expecting a surge in local business from call centers, banks and financial services, government agencies and telecom.

After growing revenues 88% last year, VMware only forecast 50% growth this year to around $2 billion, tying a can to its stock’s tail, down lately into the $40s after a glorious IPO last summer and run up to $125.

It is feared the number might fall further under the combined weight of competitors like Microsoft, Citrix and Sun. According to TheStreet.com, Caris analyst Shebly Seyrafi now thinks VMware’s growth rate will only be 36% in 2009.

Gartner is forecasting the Indian IT services market will be worth $10.7 billion by 2011, anticipating a 23.2% compound annual growth rate over the next five years.

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