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Summary:

Surprise! The hypervisor battle rages anew and is in fact getting more heated as VMware tries to push vSphere (not just the free ESXi hypervisor) to customers and Microsoft vies to win market share and credibility for Hyper-V.

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The hypervisor battle rages anew and is in fact getting more heated as VMware tries to push vSphere — not just the free ESXi hypervisor — to customers and Microsoft vies to win market share and credibility for Hyper-V.

For some time, the hypervisor has been seen as a commodity, basically a freebie for any company wanting to virtualize its servers. That was because virtualization kingpin VMware was busy moving up the stack to higher-level orchestration and management tools (not to mention cultivating a Microsoft-like array of development tools and frameworks via its SpringSource acquisition and its Cloud Foundry Platform-as-a-Service offering).

But new data backed up by anecdotal reports indicate that if you thought the first hypervisor skirmish was bad, you had better buckle up for round two.

New research by RW Baird found more than 25 percent of resellers surveyed expect the hypervisor category to be the scene of the most aggressive price pressure of any IT category this year.

Baird said Microsoft is bringing the hypervisor battle to VMware’s door by giving away Hyper-V with volume Enterprise Agreements covering its other products, a tried-and-true Microsoft strategy that played out well with SharePoint, for example. The RW Baird Q4 Enterprise VAR Survey represents a relatively small sample with 49 VARs responding, but the findings jibed with other sources.

Since Hyper-V is free as a stand-alone product and comes bundled with Windows Server anyway, Microsoft can’t really cut the price per se. But Microsoft is steeply discounting its Windows management and other products to keep VMware out of Windows shops, said a Boston-area enterprise VAR with a big virtualization practice. “They’re giving SCMM away if they have to,” he said, referring to Windows System Center Configuration Manager.

In the face of these giveaways, VMware is not helping its case, which was already hurt by pricing and licensing changes launched with the vSphere 5 last summer. Users cried foul over what they called drastic price hikes, and bad feelings still rankle, even though VMware quickly backed off on some of the changes.

“VMware customers are sick of VMware coming in and acting like Oracle or Microsoft,” said RW Baird senior analyst Jayson Noland. “I don’t see VMware getting displaced by enterprises for strategic loads, but there will be an impact on non-strategic loads,” he said. Customers will also pay close attention to new Microsoft management products due out later this year, he said. (Microsoft will talk about SCMM and its private cloud effort on Tuesday.)

The RW Baird report quoted an unnamed VAR who said VMware reps tried to charge one customer “a very large memory tax” because that customer wanted to run Citrix XenDesktop instead of VMware View for desktop virtualization. Now VMware might actually lose the server virtualization portion in that account as well, he said.

Another VAR said that customers across the board will at least try Hyper-V. “If an enterprise can avoid a VMware license renewal, it will. You can’t mix and match different hypervisors in a data center but you can certainly use both in different divisions, branches or data centers. VMware’s licensing approach has become very confusing,” this VAR said.

Bernd Harzog, a principal analyst with The Virtualization Practice, said nearly every VMware shop runs at least some Hyper-V and makes that patently clear to visiting VMware reps. These customers want some leverage over VMware on pricing and support, he said.

When Microsoft is not the market leader, it is famous for just plugging along, improving products over time, cutting prices and eventually achieving critical mass. VMware’s crucial mistake with last summer’s pricing snafu was giving its customers reason to look at competitive virtualization offerings. And guess what? Both Microsoft and Citrix have done very well.

“Microsoft is eating VMware from below, just as it ate Oracle from below with SQL Server. Who’s the revenue leader in databases? Oracle. But who’s the unit leader in databases? Microsoft,” said Harzog. It would be reasonable to expect the virtualization market to shake out the same way, especially in light of “VMware’s Oracle-like pricing practices,” he said.

So, stay tuned for more skirmishes to come.

Image courtesy of Flickr user nickdigital

  1. No mention of Red Hat and its RHEV offerings? Or is this article only for Windows users?

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  2. the research focused pretty much on Msft and VMware which compete a lot. when I asked the VARs an analysts about red hat’s kvm-based virtualization, they don’t see it much but that may be because yes, they are Windows oriented. They said Red Hat’s kvm-based virtualization is out there but in more Red Hat Linux-oriented shops that they don’t deal with much. Stay tuned more on that battle! thanks for the comment.

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  3. VMWare dropped some market share last week, btw.

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  4. Jeramiah Dooley Monday, January 16, 2012

    I’m curious about the data backing this quote:

    “Bernd Harzog, a principal analyst with The Virtualization Practice, said nearly every VMware shop runs at least some Hyper-V and makes that patently clear to visiting VMware reps.”

    In my experience as a VMware and Microsoft service provider partner/reseller/customer since 2004 I know the number of companies using multiple hypervisors in production is very small, so I’m not sure I agree with the assertion. Also, saying “nearly every” VMware customer does something, when there are well over 120,000 VMware customers, means you should have a fairly hefty survey with a large sample size to back it up. Is there a survey or data out there that supports this point? Without proof, that quote in particular comes off as a bit over-the-top.

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    1. Would like to see this as well. As a Principal at a large VMware VAR, and the largest in a couple states, I can count on half of one hand how many of our VMware customers also have Hyper-V…and half of those are moving off of it and going pure VMware.

      I think you also need to correct that quote around “memory tax” for a XenDesktop environment on VMware. That is the sole purpose for vSphere for VDI.

      Some shops will absolutely put in Hyper-V for dev/testing/etc since Microsoft is just giving it away…but that really says a lot about the product when it’s a “throw in” option with other licensing. Intelligent organizations will actually work out the cost model for their virtual infrastructure. License is a very minor part of that. It’s about cost per virtual application, not cost per socket license.

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      1. jason, we’ve spoken in the past and i would love to speak again i’ll call you.

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    2. actually, berndt’s comment echoes similar sentiments from other analysts (an IT people). Large shops like to let vendors know they have options — and so it helps to have pockets of the competition running somewhere — even if it’s for show. It’s all about negotiations down the road.

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