Is VMware the real motivator behind latest Microsoft-HP deal?

Is VMware the real motivator behind latest Microsoft-HP deal?

Summary: I couldn't help feeling the timing of the unveiling of a new $250 million HP-Microsoft partnership -- coming a day after Microsoft rival VMware bought messaging vendor Zimbra from Yahoo -- wasn't purely coincidental. How much is the deal really about VMware?


The $250 million Microsoft-HP partnership, unveiled on January 13, has resulted in lots of different interpretations. It's a public cloud play. No, it's a private cloud play. Or maybe it's just a veiled attempt to lock partners and customers in by selling integrated hardware/software/services stacks (known as "Smart Bundles"). Or maybe it's all of the above....

I couldn't help feeling the timing of the announcement -- coming a day after Microsoft rival VMware bought messaging vendor Zimbra from Yahoo -- wasn't purely coincidental. There was an awful lot of emphasis by HP and Microsoft officials during the conference call today with press and analysts about the fact this deal has been in the making since April 2009. But remember, there were rumors days ago that VMWare, headed by former Microsoft big-wig Paul Maritz, was going to snap up Zimbra to supplement VMware's story around providing an end-to-end stack. I'd bet that had something (and maybe quite a bit) about the timing.

One Microsoft watcher, Paul DeGroot, an analyst with Directions on Microsoft, said, in his opinion, VMware was definitely a motivator behind the $250 million, three-year Microsoft-HP deal.

The Microsoft-HP deal "is not different from the relationship that HP already has with VMware," DeGroot said. "The tip-off was the blog notation that MS is 'a preferred provider of virtualization solutions for HP,' not 'THE preferred provider.'"

DeGroot noted that HP already sells servers running the full stack of VMware products already and already integrate's VMWare's vCenter management product with its own Insight management tools.

"Since management is where Microsoft plans to make its money in virtualization, after making most other parts of the infrastructure free, it is critical that Microsoft get System Center on there," DeGroot added.

Smart Bundles -- which are forthcoming bundles of HP hardware, Microsoft and HP infrastructure software, and various Microsoft-HP applications build on top of SQL Server and Exchange Server -- will be available to customers (especially small/mid-size businesses) and partners who want to run them on premises. For customers who want to run all/parts of these kinds of apps in the cloud. Microsoft and HP did not make any commitments as to when or if these data-warehousing, business-intelligence, online-transaction-processing and messaging apps hosted in the Azure cloud at some point.

"Microsoft gets integration and inclusion of its apps (via the new Microsoft-HP partnership), but that's not a game changer," DeGroot said "since the same apps will and do run on VMware already, and in some cases better than on (Microsoft's) Hyper-V, because of VMware's memory overcommit and other features.So that's not really new business for MS--most of it would come their way even in HP/VMware deals that don't include Hyper-V or System Center.

At the end of the day, while this is a necessary step for MS, I can't see this being big incrementally" for the company, DeGroot continued. I think HP is the winner here. HP will drive customer choices toward whatever is the best deal for HP, VMware or Microsoft (or Xen, KVM, VirtualBox, etc.), plus they get the MS sales force and partners bringing HP into their accounts."

Microsoft and VMware officials with whom I spoke today, not surprisingly, downplayed the VMware aspect of the Microsoft-HP deal. Microsoft execs noted that VMware doesn't have a public cloud operating system (or a private-cloud one, like Windows Server), unlike Microsoft.

"It's not a tit-for-tat approach," said HP Director of Marketing, Infrastructure Software and Blades Jeff Carlat. HP felt as though "Microsoft has made advances in the virtualization and management space," he said, and is "increasing its footprint in the datacenter," which opened the door for such a deal.

Topics: Hewlett-Packard, Hardware, Microsoft, Virtualization, VMware


Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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  • You make it sound as though

    they thought of this last night.

    Things like this allways take time, more then 24 hours, so they must have been working on this for some time now.
    • Timing

      Hi. No, not meaning to imply they threw this together over night.

      Today, Ballmer said that he and the HP CEO meet quarterly. They're always discussing possible deals/ventures/projects. My point is HP already had a very similar deal in place with VMware, and VMware is one of Microsoft's biggest foes right now. I think a switch can be thrown quickly as to when they wanted to announce the fruits of their discussions, however...

      THanks. MJ
      Mary Jo Foley
  • Red Hat, KVM, SPICE and everything nice

    I am inclined to believe Mary Jo that Red Hat will factor heavily this year and following more than any other player into the growing market for server consolidation using virtual machine technology.

    Keep in mind that every copy of the Linux kernel now includes Kernel Virtual Machine for free.

    KVM is a Type 1 hypervisor and has performance characteristics as good as or better than VMware ESX.

    Couple that to Red Hat's open sourcing <a href="">SPICE</a> and you can readily see they have positioned themselves to meet the demand for server consolidation, particularly in a recession when the pressure is on IT to find any way possible to curb or even better 'reduce' software and capital equipment expenditure.

    One only need watch the video benchmarks <a href="">here</a> that compare Citrix ICA, RDP, and SPICE to get a feel for the level of competition coming from open source for Virtual Machine/Thin Client software.

    That said, 2010 will be another GREAT year for Red Hat.
    D T Schmitz
  • It looks like MS and HP are pushing ...

    ... private clouds, while VMWare and Zimbra are about public cloud hosting. I think private clouds are going to win out over public clouds in the enterprise over privacy and security concerns (at least in the US). Also I wouldn't be surprised if a sizeable portion of public data from companies, becomes hosted in private (vs. public) clouds.

    I think the euphoria over public clouds is dangerous, and I hope cooler heads prevail as people consider the severe privacy and security implications of public clouds.
    P. Douglas
  • RE: Is VMware the real motivator behind latest Microsoft-HP deal?

    How on earth is Windows Server a cloud operating
    system. Can I log in a portal for remote administration
    and in 5 minutes click that I want 5 Windows Servers
    virtualized and ready to be used remotely? and change
    their properties real-time?

    I don't know even if you can call an OS a cloud
    operating system. Even if we can, I think that the only
    'operating systems' there would be Ulteo and eyeOS.

    And my final thought for those two cents. Microsoft and
    HP jumped the Cloud train very late. Very very late.
    VMware, Citrix, SUN, IBM, etc.. saw the trend at the
    start, and are running the game.
  • Any comments...

    @Mary Jo Foley
    Any comments about this?

    Google rules search in December
    Microsoft's Bing, which garnered 986 million queries, captured 9.9 percent market share....

    Google's lead over the competition grew in December from November. The company's November market share was 65.4 percent, while Yahoo's search share in November was 15.3 percent. It's also worth noting that Bing dropped significantly in December from its 10.7 percent market share in November.
    Marco nn
  • RE: Is VMware the real motivator behind latest Microsoft-HP deal?

    MS needs to set aside its greed long enough to see what's happening all around it. Otherwise I see MS going the way of GM, down, down, down...
    I was astonished when I discovered that MS provided no virtual machine in Vista Home Premium, same with Win 7 home premium. But VMWare does. My company runs a VMWare VM for Win XP and Ubuntu in Vista Home Premium.
    • Well

      [b]MS needs to set aside its greed long enough to see what's happening all around it.[/b]

      Agreed. Their greed is clouding their mind regarding a lot of things.

      [b] Otherwise I see MS going the way of GM, down, down, down...[/b]

      I don't think so but its profit would certainly strongly go down if its keeps being so greedy.

      [b]I was astonished when I discovered that MS provided no virtual machine in Vista Home Premium, ame with Win 7 home premium. [/b]

      Well that is indeed stupid that Windows 7 Home Premium doesn't have at least the equivalent of XP Mode for Home Premium. However Home Premium is not exactly aimed at people requiring virtualization.Moreover XP Mode is not what i would called an easy and really transparent way to achieve backward compatibility.
  • RE: Is VMware the real motivator behind latest Microsoft-HP deal?

    Way to go Microsoft - you just validated that cloud computing is the way of the future, and you are exactly right. VMware is the leader in this space and will continue to lead the charge to the cloud. I don't think MS is going away, and guess what, I still say the same thing about mainframes, but we all consider mainframes old technology. It's time that a new vendor leads the way.
  • Absolutely not

    The motivator behind the deal is Oracle.
    Since Oracle buy SUN and stop its partnership with HP, it litteraly removed HP from a potentially very interesting market a.k.a the alike of the exadata appliance market.
    Thus HP had to find a way to keep a feet in this very promising market.
    Such appliances could also become a threat for Microsoft as they offer vertical optimized solutions which could be much more cost effective and appealing for customers.
    Hence the deal of HP and Microsoft make a lot of sense to compete in this market.
    It is ironic as i was thinking in a close past that Microsoft should consider building, with a partner like HP, and selling such appliances.