To stay ahead of Microsoft, VMware will have to cut prices, bolster security, simplify management and successfully navigate the desktop and the cloud.
With 170,000 customers, including every member of the Fortune 100, you might think VMware's toughest task is stocking enough paper to print up new customer contracts. But the industry's biggest x86 virtualization vendor is facing a strong challenge from Microsoft, which is enticing IT executives with Hyper-V, an alternative that may not be quite as sophisticated as VMware but is less expensive.
2010 will be a crucial year for both VMware and Microsoft in the virtualization race. Here is a list of five things VMware and its CEO -- former Microsoft executive Paul Maritz -- have to do to stay ahead of their biggest rival.
1. Cut prices
If there's one major complaint customers and analysts have about VMware, it's that prices are too high.
"Are you going to spend five times the cost [of Microsoft]?" asks Burton Group analyst Chris Wolf. "Is it five times the features? Most folks, looking at their wallet, would say 'I don't think it is.'"
VMware has several different pricing schemes and the price each customer pays depends heavily on which version of the software they use and how many servers and workloads they have virtualized. According to a vSphere pricing document, "VMware vSphere Advanced" costs $2,245 for every processor, allowing up to 12 cores and 256GB of memory.
VMware's management software, known as vCenter Server, costs $1,500 for three hosts, or $5,000 for unlimited hosts. Numerous add-ons sold by VMware can raise a customer's bill significantly. VMware offers a free version of its hypervisor, but with limited functionality.
Microsoft offers Hyper-V, including advanced features such as live migration, as a free download. Customers planning big virtualization deployments are likely to buy management tools as well, and Microsoft's Virtual Machine Manager costs $869 per physical server.
VMware has argued that its software can be less expensive than Microsoft's on a per-workload basis, because VMware achieves higher levels of virtual machine density on each physical server. VMware also offers a small business version of its hypervisor that starts at just $166 per CPU, says Bogomil Balkansky, VMware's vice president of product marketing.
"What we've been doing over time is really stretching the range of capabilities that we offer and providing different price points," he says. "So far we think we do meet the needs of the different market segments we're trying to serve. We don't have any plans right now to adjust pricing."
Few, if any observers would claim that Microsoft's virtualization technology is better than VMware's today, but Microsoft has closed the gap significantly and for many customers that may be good enough.
That's the opinion of one customer who switched from VMware to Microsoft. Roger Johnson, technical lead for the enterprise systems group at Crutchfield, a consumer electronics retailer in Charlottesville, Va., says "cost was the biggest deciding factor."
Johnson says VMware's technology is sound, but he thinks VMware's insistence on charging significantly higher prices than the competition reflects an "egotistical mentality." Crutchfield was running VMware in 2008 but completely converted its virtualization deployment to Hyper-V, and is now running 225 Hyper-V virtual machines on 11 servers. The total Hyper-V investment came out to $10,000, but would have cost at least three times that much with VMware, he says.
Johnson is a former Microsoft employee, so he may not be the most unbiased observer. But even VMware customer Scott Lowe, CIO of Westminster College in Missouri, thinks it's time for VMware to lower the cost.
As an educational institution, Westminster College gets a discount "but it's still pretty expensive to license," Lowe says. "I think VMware is going to have to address the cost of their solution sooner rather than later to stay competitive with Microsoft."
2. Improve security
As more data centers become virtualized, hackers are sure to take a closer look at hypervisors and try to identify vulnerabilities. Hypervisors have not yet become a central point of attack but in a recent interview Forrester Research analyst James Staten says he expects them to become a big target in the next year.
"As we've seen with other technologies, the point where they're almost ubiquitous in the market is when hackers go after them," Staten says.
VMware has stripped its hypervisor down to a 32MB software package with 200,000 lines of code, presenting a relatively small attack surface to hackers. The company also announced a program two years ago to open its hypervisor to security vendors with a set of APIs making it easier to protect virtual machines, but VMware has not moved fast enough on this front in the eyes of some observers.
Some vendors say the APIs present performance problems making them difficult to use, as Network World reported in December.
"We're not using the VMware APIs today due to performance," says Richard Park, senior product manager at SourceFire.
VMsafe has been adopted by vendors including Altor Networks, Reflex, IBM ISS and Trend Micro, so the SourceFire concerns are not universal. There are security problems beyond VMsafe, however.
In vSphere, VMware released what it calls vShield Zones that let customers create zones in which security policies are enforced even when virtual machines move from one server to another. But this software doesn't integrate with VMware's Distributed Resource Scheduler, a load balancing product, Wolf notes.
"VMware's load-balancing framework does not respect security zones created with vShield Zones, and its capacity management tool (CapacityIQ) does not account for zoning," Wolf writes in a recent report.
"The left hand has to know what the right hand is doing," Wolf says in an interview.
3. Win the desktop war
Desktop virtualization is in the plans of many big companies, opening up big revenue opportunities for VMware and its competitors. Citrix, a tight partner of Microsoft, is making a strong push into this market with XenDesktop, which aims to deliver high-definition desktops to nearly any type of device.
VMware should have a built-in advantage in pursuing desktop customers, because many of them are already using VMware's hypervisor. But many companies that use VMware's server technology have opted for Citrix on the desktop. In fact, many Citrix virtual desktop customers are using VMware ESX servers to host the desktops.
One of VMware's latest moves on the desktop front was to upgrade VMware View with the PC-over-IP protocol (PCoIP), a server-centric system designed to provide great-looking desktops even to users suffering from low bandwidth.
But Citrix delivers desktops in high definition with its HDX technology, and VMware is struggling to convince customers that its own PCoIP is a better alternative.
Lowe of Westminster College is planning a VMware View desktop deployment but is concerned about VMware's ability to deliver multimedia, including Flash applications. "They need to make sure the desktop experience closely mimics a physical desktop experience," Lowe says.
Balkansky says PCoIP is "a big step forward" but stops short of saying that it does the job as well as Citrix. In desktop virtualization, he says, "there is always this tendency to try to boil things down to a single feature and a single silver bullet, and the truth is that there is no single bullet or single feature that is make-or-break."
VMware still has work to do to integrate PCoIP with WAN accelerators like Riverbed's appliance, Wolf says, and give users more options for connecting to desktops. For example, some government users want the ability to connect to a desktop with just a Web browser, without having to install software on a local machine, but have run into roadblocks with VMware on that front, he says.
4. Simplify management
Network director John Turner of Brandeis University in Massachusetts loves virtualization -- but he's puzzled by some of its quirks.
Recently, users on virtual machines experienced a major slowdown, and at first Turner's network team couldn't figure out what was going on. It turned out all of the Windows systems running in VMware virtual machines were set to receive updates at the same time, but VMware's management tools didn't provide notice that this was going to occur or that it might cause strain on storage and other systems.
The problem, he says, is that VMware makes it very easy to deploy virtual machines in large quantities -- an issue often referred to as "VM sprawl" -- but it's not easy to diagnose potential performance problems before they occur.
"From a performance or tuning perspective, as folks grow their VMware installations they're running into issues," Turner says. It's not that VMware doesn't provide diagnostics tools, it's just that they're only good if you're an expert in using them, he says.
"Either VMware needs to prevent you from growing to the point of that kind of installation, or they need to provide very simple diagnostic tools to help you understand what's going on," Turner says.
"Virtualization management is really crucial," says Laura DiDio, lead analyst with Information Technology Intelligence. "Simplifying things with respect to management and interoperability is going to be important."
If Microsoft and Citrix grow significantly in popularity, VMware may also be forced to manage multiple hypervisors. So far, VMware has insisted Microsoft and Citrix aren't used by enough customers to justify the expense of adapting VMware's management tools to multi-hypervisor environments.
Microsoft's System Center Virtual Machine Manager is capable of managing virtual machines created both with Microsoft's Hyper-V platform and VMware's ESX hypervisor, and Citrix provides management capabilities for both Citrix XenServer and Hyper-V.
Analysts say many data center pros are installing multiple hypervisors, rather than VMware only. If this trend continues, the willingness of Microsoft and Citrix to manage multiple types of virtualization platforms may give them a leg up.
VMware has built up a long list of partners to enhance its own technology, but so has Microsoft, Wolf says. Switching workloads from Citrix to Hyper-V is also easier than switching workloads from VMware to a competing platform, he says. That's because VMware is the only vendor using the Virtual Machine Disk Format, rather than Microsoft's Virtual Hard Disk format, according to Wolf.
"In the big picture, Microsoft is going after VMware with a -- dare I say it -- more open platform," he says.
According to Balkansky, the disk format and multi-hypervisor management issues are low on the list of customer concerns.
Balkansky says he recently spent a week meeting with customers and "those questions didn't come up a single time in a week of customer visits. … What does come up is, as customers deepen and extend the virtualization footprint, there is a need to manage that extensive virtual footprint in a more scalable, automated and disciplined fashion."
5. Don't overhype the cloud
Nearly every IT vendor is hopping on the "cloud computing" bandwagon, attaching the word cloud to any product that might remotely be related to cloud computing. VMware has made some not-so-subtle shifts in this direction, calling its main virtualization platform a "cloud operating system." And while VMware used to refer to itself as "the global leader in virtualization solutions from the desktop to the data center," the company now calls itself "the global leader in virtualization solutions from the desktop through the datacenter and to the cloud." The expansive title appears in the first sentence of every press release VMware issues these days.
VMware's marketing also focuses heavily on its "vCloud" program, which seeks to build a lineup of partners that offer cloud computing services based on the VMware hypervisor.
By pushing public cloud services -- that is, on-demand computing services delivered to customers from remote data centers -- VMware risks losing sight of its core goal of helping customers build out their internal data centers, Wolf says.
"They've spent a lot of time harping on the public cloud, but the typical organization today is building out a private cloud and looking at IT automation internally, as opposed to putting corporate assets on the Internet," Wolf says.
DiDio adds that "I don't think there will be this stampede to the cloud. However, there are a lot of organizations looking at implementing private clouds. Clearly, cloud computing and virtualization go hand in hand. Anything VMware can do to help train customers and send out an explicit message helps."
Balkansky says VMware is trying to help customers build internal cloud networks that connect seamlessly to public clouds, but says VMware is still making the private data center its main focus.
"We haven't taken our eye off the ball by any means," Balkansky says. "First and foremost, our goal is to help customers build a private cloud."
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