VMware, virtualization rivals step into the ring at VMworld

VMware invites its competitors to show off their products at its user conference. This year, Microsoft and Citrix will finally be packing a serious virtualization punch.

VMware Inc. expects 14,000 attendees at its annual user conference in Las Vegas this week, including workers from more than 200 trade-show exhibitors. That's a 30% increase over last year's attendance — clear evidence of VMware's influence. But VMworld 2008 will also be the focal point for the gathering storm of competition that the virtualization market leader faces.

Among the companies fighting for users at the conference will be the first serious challengers to VMware's dominance of server virtualization. That includes Microsoft Corp., which released its Hyper-V virtualization hypervisor in June, and Citrix Systems Inc., which today plans to announce a new version of the XenServer software that it acquired last year.

VMware has let competitors set up booths at its shows since the first VMworld in 2004, but it still controls the conference agenda. One scheduled presenter, Simon Crosby, Citrix's chief technology officer, said his slides had "to be vetted by the censors" — a reference to VMware. He added that his talk was "carefully arranged" by VMware to take place in the afternoon on Thursday, the last day of the conference.

Indeed, VMware continues to set the agenda for the entire virtualization market. Rivals and hardware vendors alike have timed product announcements to coincide with VMworld. In addition to Citrix's scheduled rollout, Microsoft last Monday said, at a launch event in Bellevue, Wash., that it would ship a free stand-alone version of Hyper-V and an upgrade of its virtualization management tool within 30 days.

And on Wednesday, Sun Microsystems Inc. — which will also have a booth at VMworld — formally announced its first virtualization offering that supports multiple operating systems.

Also last week, Dell Inc. added two blade servers geared toward virtualization. And Hewlett-Packard Co., which announced a set of virtualization-oriented products two weeks ago, will unveil more offerings today, including a server based on a six-core Xeon processor that Intel Corp. is announcing in conjunction with VMworld.

As competition has picked up, though, VMware has lost its ability to control one important thing: pricing.

In July, VMware made its low-end ESXi hypervisor available free of charge. Then last month, it adopted a new pricing scheme for its Lab Manager tool for developers, lowering the starting price for deployments from about $16,000 to between $2,000 and $4,000.

Users are taking advantage of the new era of free hypervisors and reduced pricing for the software layered on top of them.

Kevin Sonney, IT manager at iFloor Inc., a flooring retailer in Tukwila, Wash., said if VMware's executives were standing in front of him, his message would be to "stay price-competitive" with Microsoft.

Sonney, who has virtualized his Exchange environment with VMware's software, said he "definitely" plans to test Hyper-V. Cost will play a big role in any decision to switch, although Microsoft's technology has to prove itself as well. "I don't think I would want a cheaper solution if [a server] is going to go down more often," Sonney said.

For Matt Lavellee, director of technology at MLS Property Information Network Inc. in Shrewsbury, Mass., the savings from using the version of Hyper-V built into Windows Server 2008 were an overwhelming advantage for Microsoft over VMware.

Lavellee said VMware's software would have accounted for 30% of the real estate listing service's overall IT infrastructure expenses. "Cost is such a driver that unless Hyper-V didn't work, we weren't going to look at VMware," he said.

Dangerous Times

These are dangerous times for VMware — a fact that it acknowledged in July, when it ousted CEO Diane Greene — a collegial, research-oriented leader who was one of its co-founders — and replaced her with onetime Microsoft executive Paul Maritz. In his first press conference, Maritz touted his inside knowledge of Microsoft's battle tactics and said he knew how to defeat the software giant.

Maritz announced the ESXi giveaway during that same conference call. His appointment and the subsequent pricing moves by both VMware and Microsoft suggest that the competition for virtualization users may mirror the blunt-force browser wars between Microsoft and Netscape in the late 1990s.

For now, VMware's technology still gives it an edge. Rachel Chalmers, an analyst at The 451 Group, said that tools such as VMotion, which lets users do live migrations of virtual machines from one physical server to another, put VMware "in a very strong position."

But rival products are improving. For instance, Citrix's new XenServer 5.0 includes the ability to boot and run a virtual machine on a bare-metal server without a hypervisor, potentially eliminating the performance concerns that often keep IT managers from running mission-critical applications in virtualized environments.

XenServer 5.0 can also manage virtual servers based on Hyper-V and VMware's software. Microsoft's new virtualization management tool will be able to control VMware-based servers as well, and Microsoft last week demoed a live-migration feature that's scheduled to be included in the next release of Hyper-V.

Most vendors won't allow direct rivals to exhibit at their own conferences. But Karthik Rau, vice president of marketing at VMware, said the company wants VMworld attendees to get a comprehensive view of virtualization technology. VMware is confident that users will continue to choose its products, Rau added.

Brian Trudeau, CIO at Amerex Brokers LLC in Houston, will be at VMworld this week. He remembered scratching his head a year ago over VMware's decision to allow XenServer to be displayed on the trade show floor. But he welcomed VMware's open approach and thinks that the heightened competition will help drive innovation and reduce costs.

Allowing rivals to take part in VMworld "is kind of a gutsy move on their part," Trudeau said. He added that he isn't worried about VMware's prospects, because the company has "the advantage of experience" over its competitors.

Eric Lai contributed to this story.

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Copyright © 2008 IDG Communications, Inc.

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