Hypervisor bout rages on, no end in sight

The hypervisor battle rages anew and is in fact getting more heated as VMware (s vmw) tries to push vSphere — not just the free ESXi hypervisor — to customers and Microsoft (s msft) 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