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A preliminary competitive analysis of Airwatch

By David Solomon Hadi - Chief Strategist Financial Services, Rock Star Consulting Group,
www.rockstarconsultinggroup.com

SWOT of Air-Watch by Air-Watchs Own Analysts (Published in 2013) Strengths

AirWatch is a large early player in the Mobile Device Management (MDM) space, with the ammunition to slug it out in a highly competitive market and is backed up by a sizeable R&D team to keep it on the cutting edge of EMM.

Weaknesses
There is price pressure on AirWatchs MDM solution, which is its primary product, and this may spread to services like mobile app management due to more competitors bringing their own services online.

Opportunities
AirWatch has the staying power, which only a few players have, to become one of two or three go-to vendors in what will be a very large market as EMM's reach expands into the enterprise.

Threats
There are some even larger players that are turning their eyes to mobile, which could extend this shakeout period for the EMM market.

Repeating the same analysis in language of economics: + (positives) - (negatives)

1. AirWatch is large player. (Benefit: Possibility of 1. Airwatch faces a price war in competition. monopoly prices.) (Loss: lower profit, higher costs.)

2. Airwatch is first mover in market. (Benefit: 2. Airwatch has more cost because of Large R&D.

More experience and learning to compete.) 3. Airwatch has large financial resources

(Loss: cannot lower cost easily in case of price competition)

[Partially from its 400% sales increase and 3. Other potential entrants (incumbents) are partially from significant capital investments]. larger. (Loss: more pressure on price and cost)

(Benefit: Power to meet additional needs as 4. Large profits induce incumbents to enter the they arise.) 4. Airwatch has large R&D team. (Benefit: market. (Loss: The possibility that entrants would indeed enter rises)

Innovate and perhaps monopolize the market. 5. The Burn Rate is high. This could mean once Warn new entrants.) 5. No or only few potential entrant expected. (Benefit: can keep monopoly prices. Even if they enter market is expected to remain monopolistic competition.) more that cost is high. (Loss: Reduce capacity to beat the new incumbent, competition and any new contingencies)

Logical Implications: AirWatch has large development and ongoing costs but prices for MDM technology are supposed to be low. Therefore, AirWatch cannot raise profits to a level which it might target or need. AirWatch has few very powerful potential incumbents in its market who have very large incentives (400% increase in sales) to enter market. Faced with large MDM development costs it may not be able to keep them out of market due to the lucrative nature of the MDM sector. In case of AirWatch the firm Vmware acquired it on 24 Feb 2014. Reasons for Acquisition: The high cost (especially the burn rate) left Airwatch with least amout of operating funds. (estimated time to survive was less than 06 months) [See forrestor.com]. The MDM technology, highest increasing in sales and other positives of Airwatch were an incentive to Vmware which needed to add MDM technology/solution in its portfolio to compete IBM and Citrix (that already have MDM solutions). [See CNN website]

Since organizations are rapidly deploying MDM technology (It is also expected that organizations replace tactical MDM with enterprise-class suites), huge instant opportunities of profit for VMware through Airwatch are now available. [IDC website] The Economic Analysis of Acquisition Price paid today should be greater than or equal to the inflow of profit (after discounting for inflation etc) that occurs in coming days. Vmware competes against Citrix and IBM who have or acquired MDM technologies. To compete with them Vmware has bought Airwatch. Going back to the idea that $1.5b USD today should be less than or equal to whatever profit comes tomorrow and thinking of competition with Citrix means following: Either VM forecasted a loss of $1.5 Billion if it does not acquire MDM OR VM forecasts a gain of $1.5 Billion once it acquires MDM. This implies, under strict conditions of rationality1, that Vmware would keep the machinery of Airwatch for years in which it can cover at least 1.5b USD. Once we may calculate this time, we would know how long Airwatch is going enjoy VM benefits. After that, what happens cannot be known at the present time. To remain competent Airwatch would need to use its own strength and cover weaknesses/threats of VM. This, if done properly, would give incentive to the VM and to keep Airwatch may enjoy its existence in long run too. Some + for Airwatch (from IDC website) 1. AirWatch licenses are usually limited (about a hundred). Therefore, clients have to test out its enterprise mobility solution either in a pilot or in proof of concept. a. With VMware's expanding sales and services capabilities, AirWatch could start seeing more pilots and POCs becoming production deployments.

When each cent is used for net profit.

2. AirWatch operates in both channel and direct models and has a limited amount of education and marketing AirWatch can deliver to potential customer and partners. This results in smaller implementation and limited access to customers. a. VMware operates in a pure channel model. Its channel network is extensive. As a part of VMware AirWatch will be able to solve above mentioned limitation. 3. Large parts of AirWatch revenue come from its basic MDM solutions. As AirWatch tries to increase the depth of its product offering, it will face stronger competition, such as PC management. a. As a part of VMware, AirWatch can effectively increase the depth of its solutions without investing heavily into building solutions that compete with established players. Adjustments to previous SWOT Strengths Weaknesses

Airwatch can now enjoy (fore mentioned) benefits It may lose its complete autonomy in decision from Vmware. making. It would have (might have) lowered decision making powers. Opportunities The clients of Vmware are potential clients now. Threats It may lose its momentum as mobile market big

Possibility to increase depth and power to player over time (needs to be calculated). compete with new powerful rivals effectively.

Repeating the same analysis in language of economics: + (positives) 1. AirWatch is part of large player. - (negatives) 1. Airwatch faces diseconomies.

(Benefit: Diversification of risk. Now if Vmware (Loss: lower power in decision making.) faces risk, Airwatch can cover and if Airwatch face 2. Airwatch and Vmware may face agency risk .) problem.

2. Airwatch large R&D team now co-operates (Loss: what if Vmware looses interest in its new with Vmware team. (Benefit: More Innovation, and synergies.) 3. Potential entrants are warned. (Benefit: lower threats.) aquisition Airwatch and Airwatch is expecting otherwise. What if Vmwares future depends on actions that are not good for Airwatchs)

Limits of this analysis and further analysis: This analysis is based on freely available News and blog posts. No formal scientific report was consulted. No data was used if it was not available in the public domain. This analysis is also conducted at time when acquisition was being made leaving the author with problem of seeing Airwatch as an independent firm (which is needed for SWOT or any other competitive analysis). Further analysis of strengths, weaknesses, opportunities and threats etc. of Airwatch as a part of Vmware would require empirical work measuring how long Airwatch can maintain its momentum in the market (given the assumption of 1.5 Billion USD cash injection). Empirical evaluation of Airwatch as part of Vmware would be required to correctly identify the strengths and weaknesses, forecasts of next month to identify opportunities and threats in near future, empirical evaluation of previous strategies in order to know how to cope with threats and exploit opportunities and develop strength. This would require access to internal company reports, 3rd party data conducted by external organizations. Estimated time needed would be not more than 2-3 months for all a full report to be generated (if all data and previous scientific reports are readily available).

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