Competition looms for the virtualization frontrunner as VMworld conference kicks off
VMware enjoys Wall Street buzz and strong momentum as the virtualization company hosts its first VMworld since going public, but Microsoft and other competitors are getting into position to challenge VMware’s lead.
As VMware hosts its first VMworld conference as a public company this week in San Francisco, its star is ascending.
Since going public at $29 a share Aug. 14, the company’s stock price has not closed below $51. Industry researchers note that 80% of the businesses using virtualization to improve utilization of their x86 servers choose VMware software. Some competitors hope to catch up to VMware, but their couple hundred customers each could fit into a phone booth compared with VMware’s 20,000. Meanwhile VMware continues to innovate, bringing virtualization to the desktop, embedding VMware directly into servers and taking other steps to maintain its lead.
But every company in its IPO prospectus has to acknowledge risk factors, and some of VMware’s could manifest themselves quickly. Virtualization player Citrix announced a $500 million acquisition of XenSource Aug. 15, while XenSource narrowly beat VMware to market Sept. 5 with plans to embed its hypervisor directly into servers, too.
Not to mention the Microsoft threat. Microsoft plans to ship its hypervisor, called Windows Server Virtualization, in the latter half of next year as an add-on to the Windows Server 2008 operating system, which is due out early next year. Although Microsoft has been slow to respond to VMware’s challenge with a competitive virtualization hypervisor of its own, when it finally does it will certainly be noticed by Microsoft’s sizable server customer base. Microsoft also argues that VMware’s popularity in server virtualization does not necessarily translate into popularity in desktops, application, storage and networking virtualization.
Still, as VMware hosts an estimated 10,000 attendees at VMworld 2007 in San Francisco, it enjoys frontrunner status. The venue is also the stage for other vendors in the VMware ecosystem to announce their own related products.
“[VMware is] clearly the market leader. There’s no question,” says Mark Bowker, an analyst at Enterprise Strategy Group. “They are gaining amazing traction in the environment.”
Virtualization software is designed to make a physical server act like multiple logical servers, improving server utilization by allowing IT managers to efficiently combine numerous computing resources on a single server.
The latest product enhancements from VMware, which are being announced at VMworld, include an upgrade to its ESX virtualization package for enterprises. The ESX 3i hypervisor is embedded directly into the hardware rather than as software that has to be installed later. The small 32Mb hypervisor is only about 2% of the size of the typical operating system, such as Windows, says Bogomil Balkansky, senior director of product marketing for VMware.
The smaller footprint makes ESX 3i easier to operate and more secure than a software solution and complements virtualization-optimized processors coming from Intel and AMD, he says.
VMware also is introducing a Virtual Desktop Infrastructure product that includes what Balkansky calls a “connection broker.” It can distribute individual virtual desktops from a server to each end user on a network or deliver one desktop configuration to multiple end users. The latter works for a call center, for example, in which multiple staffers work from the same user interface.
Also being unveiled is a site recovery manager feature that allows an IT manager to replicate virtual machines at another location in the event the main data center fails. The virtual hardware and software applications are combined into a virtual disk file that can be run at the backup location, he says.
“Once you have turned everything into software you can replicate these virtual machines relatively easily between a primary and secondary site,” Balkansky says.
Microsoft, which is formulating a virtualization play of its own, naturally sees things a little differently.
Although VMware is innovating beyond server virtualization, it can’t expect the same market success as with its server products, says Mike Neil, general manager of virtualization at Microsoft.
Microsoft, citing data from IDC and Bernstein Research, claims that VMware’s share of the desktop virtualization market over the last year, based on shipments, is a fraction of VMware’s share of the server virtualization market.
VMware has gained share at the server level where the return on investment is easy for customers to see, Neil says. If server virtualization consolidates onto one server the work previously done on 10, it’s an easy sell.
“That investment as a short term one was a good return for most customers, but I don’t know that [VMware’s] necessarily the long-term investment that most customers want to make,” Neil says.
He also notes that with Microsoft’s hypervisor included in the operating system, combined with a version of Systems Center Virtual Machine Manager slated to ship in late 2008, Microsoft can manage the virtual and physical environments together while VMware can only manage the virtual, he says.
IDC Analyst Stephen Elliott agrees those are among the advantages Microsoft still enjoys in the marketplace despite VMware’s surge.
“Microsoft [has its] cash position, their channel influence, breadth and depth, and their ability to throw tremendous amounts of resources at a problem,” Elliot says. “While clearly they are behind, they are getting a lot more focused, so the opportunities across the market are large and vast.”
VMware got a head start in server virtualization, and has been able to sell to Windows shops, he says, but the virtualization market is still nascent and most of VMware’s sales have been to large enterprises undaunted by VMware’s pricey products. Virtual Infrastructure 3, for instance, lists for $5,750 per license, for a two-socket server, more than twice as much as for a hypervisor from XenSource, for example, whose software is based on the open source Xen distribution. VMware might have a tougher time selling into small or midsize businesses that may be more price-sensitive.
But Enterprise Strategy Group’s Bowker reads the market differently. He thinks it’s telling that Windows shops are choosing VMware instead of waiting for what Microsoft has to offer.
“They are disappointed with Microsoft and when they see what VMware is doing they get excited. ‘Wow I want to be able to take advantage of this,’” Bowker says.
