Arik Hesseldahl

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Parallels Promotes Birger Steen, Former Microsoft VP, to CEO

Parallels, the virtualization software company known best for its desktop product that lets Mac owners run Windows on their machines, says it has promoted Birger Steen, its current president, to the position of CEO.

Serguei Beloussov, the company’s founder and outgoing CEO, will continue his full-time role as executive chairman of the board and chief architect.

Steen joined Parallels from Microsoft, where he was VP of Small and Medium Business and Distribution at Microsoft. Before that, he ran Microsoft’s business in Norway and in Russia.

Parallels is a privately held company that’s been around since 1999, that counts Intel Capital, Bessemer Venture Partners and Almaz Capital Partners as its investors. Its rise generally coincided with Apple’s migration to using chips from Intel on the Mac. By giving new Mac users an easy way to run Windows on their computers, it gave people accustomed to Windows, or who needed to continue to use a particular application on Windows, little excuse when the opportunity came to switch to the Mac.

But what I didn’t know is that Parallels is also a player a big player in selling software to service providers. It sells Plesk, a popular server automation tool, and it’s also a player in the server virtualization business.

I talked with Steen about all this last week.

NewEnteprise: Birger, I’m a Mac user and so of course I know about and even use Parallels once in awhile. But I had no idea Parallels was so closely involved with Web hosting and cloud providers. How big is that business?

Birger Steen: We’ve been working with service providers since 1999, and then over the last 10 years you’ll find companies like Rackspace and Media Temple and some of the biggest hosting providers are customers of ours. In most cases they run some version of our virtualization technology.

So when people think of virtualization of server, they think of VMWare. How are you different?

Partly it’s a different technology. Our technology virtualizes in a different way that’s uniquely suited to service providers that have large numbers of systems that they want to run with as much efficiency and density as possible. We have a market share of about 37 percent in that market.

And you also sell the Plesk control panel software for servers.

Control panels are very complementary to server virtualization. In the same way that control panels let you contol the computing resources on a desktop Windows machine or a Mac, you need to do the same thing on a server. If you were to rent the server from Rackspace or some other service provider, you need something to control it remotely and manage the resources. That’s the other business we’ve been in for about 10 years. As the hosting business became more complex, that product had to become more complex. A lot of our service providers sell servers to customers who then turn around and re-sell them to other end customers. So the control panel now manages resources at the reseller level, and the end-customer administrative level, and then at the end-customer user level. That’s become a very interesting business. It’s very fragmented with lots of companies reselling services from larger companies. Today we have something like 5,000 customers that are everyone from the smallest local hoster with a few servers, all the way up to some of the biggest telco companies in the world.

So what are your priorities this year?

We’re going to continue to drive hard on the Parallels desktop product, particularly on the Mac. It has a huge group of fans and we want to continue developing it. The first group of users were a lot of people who were devout Mac users where someone just had to use Windows or another OS some of the time. What we see now are a lot of users who are not switching to the Mac so much as they are adding Apple hardware. It’s a a market where people are using many different technologies and we want to continue to make that easy. We also want to continue to build out our international markets. We’re really strong in Germany, where we sell our product attached to 25 percent of the Macs sold there, whereas worldwide we’re hovering at about 5 to 6 percent. So there’s room for a lot of upside there.

So your business is profitable, and you’re growing fast. What kind of an exit do you anticipate for your investors? Will you take Parallels public?

We’re building the company to become a lot bigger, and to grow for a long period of time. We certainly aspire to have a both all the corporate processes and infrastructure that a public company would have. I’d ask our investors at Bessemer and Intel what they’re thinking. But I certainly have a long-term ambition for this.