Citrix + XenSource: Microsoft's worst nightmare or dream-come-true?

Two Microsoft partners, Citrix and XenSource, have tied the knot. Microsoft should be ecstatic...or should it?

Microsoft and Citrix have had a long and winding relationship, since 1997, when Citrix licensed its Multiple Windows technology to Microsoft. Citrix, for its part, got rights to the Windows Server source code and a joint-product deployment agreement -- plus an estimated $185 million. In the ensuing years, there was talk that Microsoft would end up competitng with and killing off Citrix, interspersed with talk of secret payments made by Microsoft to keep Citrix afloat (which Citrix has denied, by the way).

Microsoft and XenSource are newer partners. The two signed a pact in July 2006 to cooperate on technology that would provide interoperability between Linux systems running the Xen hypervisor and Microsoft's forthcoming Windows Server Virtualization hypervisor (codenamed "Viridian").

But the marriage of its two buddies isn't sitting well with Microsoft, according to Citrix and terminal-services expert Brian Madden.

"(E)verything that I've heard is that Microsoft is not happy about this. Again, now Citrix is going head-to-head with Microsoft in this market," Madden blogged.

A week ago, Madden blogged about the likelihood of Citrix buying XenSource. He noted that it would make a lot of sense for Citrix to own a hypervisor, given the growing likelihood that delivering users' desktops virtually will become the order of the day in the not-too-distant future.

"Citrix sees the value of delivering desktops. They have / will have this great ICA / Presentation Server-based product for doing so called 'Desktop Server.' They have a way to manage images with Ardence. They can track performance with EdgeSight. They can stream applications into the desktop with the application streaming capabilities of Presentation Server. Citrix has a complete solution except for one thing: a hypervisor," Madden noted on August 9.

And with Microsoft poised to add its own hypervisor (even in its less ambitious form) to Windows Server 180 days after Windows Server 2008 ships, its partner XenSource was set to become more of a head-to-head competitor.

"Even though Microsoft and XenSource are friends now, what do you think will happen as soon as Viridian is released? All of these 'partner' hypervisors will becoming 'competing' hypervisors overnight," Madden added. "It will be 'kill, or be killed." (After all, this is not the same thing as Citrix Presentation Server adding value to an obscure Windows Server feature. This will be about citrix replacing a key strategic Windows Server feature.)"

Now Citrix will be the one taking the brunt of the head-on Microsoft competition, Madden observed.

An open-source expert who requested anonymity, noted that while the XenSource buy makes a lot of sense for Citrix -- in terms of giving the company a solution that offers some of what virtualization market-leader VMWare does not -- it won't be a slam-dunk success for Citrix.

"If they (Citrix) merged the Citrix server with XenEnterprise, you would have something VMware does not. It's certainly a deal which I never considered, but now that I am thinking about it, it might be very good for Citrix and XenSource," he said.

However, he noted, "Citrix will need to come to speed on the workings of the open source community very quickly, and obviously, their (Citrix's) very close relationship with Microsoft will fall under scrutiny." That said, "they may be the player which is able to broker relationships with open source companies and Microsoft."

What's your take on what the Citrix purchase of XenSource will mean to Microsoft and its customers? Is this good news for the Redmondians, or nothing for the Softies to celebrate?