Hyper-V eating VMware’s lunc -- er, snack

Microsoft’s hypervisor serving different market than VMware’s

As the VMworld 2010 conference gets underway this week in San Francisco, players in the world of virtualization will be taking another read on the impact of upstart Microsoft on the incumbent VMware in the market for virtualization hypervisors and related management software. The take from this reporter’s perspective is that Microsoft is making inroads, but in a different portion of the market from VMware.

Industry analysts, partners of both companies and evidence from the main players themselves indicate that VMware is the pricier model on the market but that enterprises who’ve used it for years believe it’s worth the premium. Meanwhile, Microsoft is the aggressive, value-priced upstart which has an advantage in serving what you might call “greenfield” virtualization prospects; businesses that are all or mostly Windows-based data centers but have done little or no virtualization. If they already run Windows, they may as well use Microsoft’s Hyper-V hypervisor to virtualize, the thinking goes.

In a reported protest of VMWorld's exhibitor restrictions, Microsoft is maintaining onlly a modest 10-by-10 foot booth on the exhibit floor of the Moscone Center at the event that runs through Thursday.

However, on its own turf, Microsoft is more than happy to show how Hyper-V, which it introduced in 2008, bests VMware’s offerings. At the annual Microsoft Financial Analyst Meeting July 29, company officials shared market share figures from IDC’s Worldwide Quarterly Server Virtualization Tracker that showed Microsoft’s hypervisor share had grown to 24.4 percent in June 2010, from 22.4 percent in June 2009, while VMware’s share slipped to 49.9 percent, from 53.5 percent a year earlier. And to make the point that VMware is too expensive, Microsoft chief operating officer Kevin Turner showed a price comparison of a Hyper-v installation costing just $10,000 alongside a VMware vSphere Enterprise Plus installation costing $58,000. VSphere is VMware’s hypervisor that works in private cloud environments.

But the price tag doesn’t tell the whole story. VMware is more expensive because it does more and it’s worth the money, says David Floyer, CTO and co-founder of Wikibon.org, a Web site at which industry analysts, vendors, customers and others share research into technology industry trends.

“If you’re looking for the latest and greatest and the most functional and the most tested, then you’re going to go with VMware. Hyper-V is a good product but it doesn’t have anywhere near the same functionality or experience in the marketplace as VMware does,” said Floyer.  “[Hyper-V] may well catch up but that’s the state at the moment.”

Microsoft can play up its price advantage because Hyper-V is free to anyone who purchases the Windows Server operating system for data centers, but critics point out that management software and the OS licenses are not free.

HyTrust, a provider of access control and policy enforcement security for virtualization environments, partners with both VMware and Microsoft and CEO Eric Chiu says both players serve important market segments.

”VMware is very much the 800-pound gorilla and has the full breadth of ... solutions to really handle the enterprise needs today,” Chiu said. “Microsoft certainly has a presence in all-Microsoft shops and so I think you’ll find small to medium sized businesses that just focus entirely on the Microsoft stack starting to adopt Hyper-V.”

There is reason to be skeptical of Microsoft’s 24.4 percent market share, adds Dave Bartoletti, senior analyst at The Taneja Group research firm, since it’s not clear how much of those Hyper-V users are also using VMware.

However, Microsoft’s best opportunity, besides SMBs and all-Microsoft shops, may be cloud service providers, Bartoletti said. If those providers can take Hyper-V and make it work to virtualize their data centers to serve their cloud clients, they would be better off with Hyper-V than VMware. “[VMware] charges the most because they’ve got the most, so people are wondering if it's going to be a viable solution for cloud providers who are so incredibly margin focused."

For enterprises who’ve come to rely on VMware, though, Microsoft may have a hard time making inroads, even in all or predominantly Microsoft shops, Bartoletti added. Keep in mind that VMware has a long head start in the virtualization market over Microsoft and IT staff at VMware shops may be skeptical of the need to switch to Microsoft just to save money. “The administrators who are VMware experts and have five years of working with this product are going to go to bat for it in these organizations."

In the end, the virtualization market is still relatively nascent, giving VMware, Microsoft and the other players opportunities to build markets for their products even if they’re coming at the market from different directions.

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Copyright © 2010 IDG Communications, Inc.