How hot is the virtualization market?

VMware, which created x86 server virtualization and is the dominant player in the market, is absolutely on fire. When EMC bought the company in 2003, VMware revenues were around $100 million a year. VMware’s final numbers for 2007 aren't out yet, but the company is on pace to hit $1.5 billion.

In August, EMC engineered an IPO for 10% of VMware. It turned out to be the most successful high-tech IPO since Google, with EMC raising nearly $1 billion when 33 million shares were snapped up at an opening price of $29. The stock continued to soar, exceeding $50 a share on opening day, and soon thereafter cresting at more than $125 a share. Today, VMware is selling at close to about $80 a share, which gives the company a market capitalization of around $30 billion. That’s hot.

And the virtualization market is showing no signs of slowing down. In fact, IDC is predicting that worldwide spending on virtualization software and services is expected to jump from $6.5 billion in 2006 to more than $15 billion in 2011. (Compare server management products.)

Click to see: Chart of why companies chose to virtualize servers

No wonder Citrix shelled out $500 million in October for open source server virtualization vendor XenSource. (Add your opinion to one of our 50 greatest networking arguments: VMware vs. Xen.)

So, if you've got a room full of x86 servers running at 10% utilization, what are you waiting for? Virtualization can help you consolidate servers, run your data center more efficiently, and make it easier to allocate server resources to match business requirements.

According to a recent survey by Chadwick Martin Bailey, IT decision makers decided to implement server virtualization for the following reasons (in order of popularity): improve server utilization, lower data center operating costs, improve disaster recovery/backup capabilities, create a more effective software development and testing environment and lower IT admin costs.

Virtual servers, real issues

But before you jump into the virtualization, be aware that there are very real management and security issues that you need to address.

Adding a hypervisor layer to a server so you can run multiple instances of an operating system is a great way to get more bang for your hardware buck. But there are still plenty of things you need to think about.