This week I happened to be at an industry analysts conference, attended by several CIOs and IT executives.
One of the hottest topics there is virtualization - everyone agrees that VMW is the clear market leader. However couple of interesting observations:
1. MSFT is releasing a beta version of Hyper-V, late December. 70% + of the attendees at the show said they are going to test the beta version.
2. 60% + attendees there said they would most likely diversify their choice of virtual platforms, with several going to Xen, Oracle or Microsoft platforms.
3. The industry analysts expect VMW market share to diminish by late 2008 and early 2009 - they expect MSFT to gain most of this away from VMW.
I can understand why a Citi analyst would upgrade VMW based on what they know today, however, the reality is that the growth for VMW will be very hard to come by in 2008 and 2009.
I think I am going to buy some put options on Monday.
Nearly every (if not EVERY) large data center that has integrated or implemented virtualization is leveraging VMW. MSFT or others simply don't have a chance, not in the near future anyway.
VMW is used by some of the largest corporations in the world with a huge amount of time and money behind each implementation. There is no reason (NOT A SINGLE ONE) to "diversify" or have a choice. Why fix something that's not broken.
I am responsible for nearly 2000 VM instances, our metrics for measuring the success (availablity, speed/performance, security, savings...) of the implementation is above and beyond all expectations.
Yes, there will be more competition out there, yes they will take some market share. BUT, VMW will be in the industry leader for a very long time.
There isn't a CTO or CIO in the world that could possibly make a solid and sound argument to "switch", THERE IS NO REASON TO SWITCH.
VMW will continue to dominate the industry.....
Upfront price is supposed to be the motivation for using Xen or MSFT, who will be giving the software away for free, certainly. But upfront price is not how IT directors and CIO's make purchasing decisions. They calculate TCO, or Total Cost of Ownership. This means support, complexity, skill levels of employees required to manage the systems, cost of aquiring new servers versus ease of deployment of VMs, etc.
This is why all those who think that free software _must_ certainly beat out for-cost software are deluded. These people usually look at purchases from the perspective of a bargain hunter. They don't look at the long view.
If the market for virtualization was saturated I would expect that competitors to VMW would cause VMW to lose market share. But the market is barely touched at this point. The highest estimate I've heard so far is 15%. Rather than _lose_ market share, VMW would pick up market share while competitors do the same.
I am most interested in the comment about "diversifying their choice of virtual platforms." Really? Why? Are they also going to diversify their choice of database software, using Oracle, MSSQL and MySQL? How about their choice of hardware vendors? Diversification may be great at a party but in the data center homogeneity lowers costs.
Just because people say their going to do it doesn't mean they will.
1. Choice is a good thing - you don't want to lock yourself with one vendor - that vendor will hold you hostage when it comes to renewals, pricing.
2. Homogeneity is not a reality, when companies are doing M&A activities.
3. Best suited platform for the need - if Hyper-V turns out to be the best choice for Windows platforms, IT will use it, while using VMW to run Linux.
4. Leverage against VMW - keep in mind that right now, VMW is 4 times more expensive than its nearest competitor - Customers are very unhappy with VMW pricing, but can not do anything about it.
5. Competition is a good thing from customer perspective.
Different tools for needs/performance.
I'm sure your mom and pop shops can get by with MS or Xen. Hell, even VMware Sever is free to download.
Don't forget Vaparwares are far off from advanced features found in VMware. We're comparing Ferrari vs Kia.