The talk of this year's VMworld conference in Las Vegas
was how much of a competitive threat Microsoft, which weeks earlier
announced the free release of its hypervisor product, will prove to
virtualisation leader VMware.
The theme behind Microsoft's push into the virtualisation
market, as exemplified by guerrilla marketing campaigns at the
VMworld event, is that it can offer much of VMware's basic
capabilities at a fraction of the price.
The software giant is giving away its Hyper-V hypervisor product
to any purchasers of Windows 2003 or 2008 server editions. It's an offer that hasn't gone unnoticed by end users.
Michael Tran, chief technology officer at Digital Sense, a new
datacentre operator set to launch in Brisbane, has been
considering both the Microsoft and VMware paths, visiting
Microsoft in Seattle six weeks ago and VMware this week in Las
He had some positive things to say about Microsoft's entry into
the market. "Microsoft's main pitch is that anyone with Windows
could have the hypervisor for free, so the net cost of the software
is zero," he says. "Anything else is going to look expensive
The Microsoft product "is very cost-effective for smaller
organisations and very powerful," Tran tells ZDNet.com.au. "It's probably
not up to the same level as VMware on many aspects, but then again
it has some things that are ahead. Hyper-V is, for example,
extremely easy to deploy."
Is price important?
VMware CEO and president Paul Maritz says he
is not particularly concerned about competing with Microsoft on
price. The price of software is important, he said, "but only up to
"We are in a competitive market, we can't charge whatever we
would like," he tells ZDNet.com.au on the sidelines of VMworld. "Every software vendor has to deal with
the reality of competition. It comes from direct competitors and it
comes from the open source movement."
"One of the fabulous things
about the open source movement is that they are the ultimate
enforcer of fair pricing. If you don't evolve, they will clone your
software, and take away your value."
Such a threat, Maritz says, motivates commercial vendors to
"constantly renew their value proposition" with new features.
"We have to make sure that what we offer really offers value for
money, and that changes over time," he says. "VMware won't sit
still. We have new functionality coming, we're going to double-down
our bets, we're going to go in some places fundamentally [in the
case of the virtual datacentre operating system] where Microsoft is
Serguei Beloussov, CEO of Parallels Software, competes in some
markets with both Microsoft and VMware.
"I don't see VMware losing sales to Microsoft because Microsoft
is cheaper," he tells ZDNet.com.au, adding most large customers look beyond the
cost of individual components when determining price.
"For them, the total cost of ownership is important, the cost of
the virtualisation software itself is only a small portion of all
IBRS analyst Kevin McIsaac agrees. He says the price
argument is "misunderstood".
"VMware has a lot of advanced functionality for optimising
memory and getting more out of a processor," he says. "If the
VMware software is a bit more expensive, but is more efficient and
means less hardware to solve the overall problem, it in conceivable
that as a total cost of ownership it might actually prove to be
"Rather than looking at the cost of the hypervisor, you have to
say, if I were to run my set of applications on VMware or run it on
Microsoft, what would the total cost of all the hardware, the
software and the storage be?"
Tran baulks at VMware's pricing at
times, but in building a large-scale datacentre, he believes that
the potential return on investment from virtualisation technology
cancels such costs out.
Bogomil Balkansky, senior director of product marketing at
VMware says most VMware customers see a return on investment within
six to nine months. "Our experience so far has been that customers
are generating so much value for customers that price is not a
major objection in our sales cycle," he says.
Two distinct markets
McIsaac says on a feature-function basis, Microsoft's hypervisor
"does not compare" with the market leaders.
"It's not as proven to be robust, not as proven to be as
scalable, it doesn't have live migration," he says. For that reason, he expects VMware to continue to appeal to the
upper end of the market: service providers and large businesses,
while Microsoft's price proposition will appeal to smaller
"The two will have an interesting battle space," agrees Tran.
"For a lot of smaller players, VMware will be out of their reach,
whereas Microsoft Hyper-V will be in reach. Hyper-V will have its uses in smaller organisations that can't
afford enterprise-class storage systems and blade servers and the
like," he continues.
"But for enterprise clients, clients that are looking for the
best level of support, redundancy and maintenance, VMware have
definitely got it. At that level of enterprise-class
infrastructure, when you're talking blade servers and fibre channel
storage arrays and iSCSI products, really the [virtualisation]
software is not that expensive."
Beloussov expects Microsoft to gain ground on VMware
over time. "Microsoft will have a full platform for
virtualisation," he says. "Maybe it will take two years, maybe five
years. But it's going to happen."
But McIsaac still has his bets on
"VMware will still win out," he says. "There will be some very
Microsoft-orientated shops that will say, we like the Microsoft
vision, we want to go down that track. But for most organisations
today, VMware's is the right strategy to pursue."
Maritz meanwhile, is trying his best to sound unconcerned.
"If you look at what Microsoft announced last week, what they
have basically said is that VMware has exactly the right list of
features, we're going to knock 'em off one by one, we're gonna sell
them to you at half the price, and we'll have them ready for you in
two years time," he says.
"If we [as VMware] can't make hay with that, we don't deserve to
be in business."