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The last few weeks have been incredible for virtualization buzz, from the Cloud Computing Meme upsurge, to the launch of Hyper-V and then the shocking Greene departure at VMware. It is only a matter of time before we hear speculation about ESX price cuts in response to Microsoft’s aggressive Hyper-V pricing; much of the virtualization world will therefore be listening carefully to VMware in coming months or perhaps weeks.

Let’s face it, if Microsoft catches up with VMware in terms of product features and functionality VMware will have a very difficult time maintaining their ESX price points. Their history of innovation may serve them even more now that they face a formidable competitor.

VMware has two high potential strategies at this juncture: they can continue to innovate in ways that make data center deployments even more compelling (getting beyond Virtualization-Lite) and/or they can find new ways to monetize and differentiate existing partner ecosystem technologies.

If the hypervisor becomes a commodity then VMware will have a strong economic incentive to monetize premium functionality and capabilities as efficiently as possible. Addressing virtsec, I/O constraints that weaken VMotion as well as change management and compliance considerations more aggressively could help accelerate data center adoption; yet monetizing those capabilities could also help the company become less dependent on hypervisor revenues.

Across the long term I think VMware should consider a two-step attack against Microsoft: 1) move inward from the Virtualization-Lite beach head as quickly as possible (to broaden production deployments) in order to shrink Microsoft’s addressable market in the data center; and 2) quickly and efficiently monetize the unique ESX features and capabilities as soon as Microsoft attacks the data center, perhaps sooner.

The VMware partner eco-system (including the brilliant VMsafe initiative) was a sizable differentiator against Xen/Citrix; now with Microsoft entering the market it may become a double-edged sword. VMware needs unique, production-ready innovation in virtualization security now more than ever. They cannot wait for virtsec partner Godot or freeze the market with partner slide ware.

If they can increase the rate of data center virtualization, innovate and monetize unique features they can beat Microsoft in the data center, even if the Redmond team continues with the loss leader gorilla extension strategy.

Marketing should now play an even more strategic role at VMware.

Related reading: How Hyper-V could beat VMware - July 8 2008

My disclosure is available at: About Archimedius

I just read Mitchell Ashley’s Network World blog from last Friday. He cautions that feature limitations won’t slow Hyper-V in its march to the data center. He also predicts that VMware will be quick to point out feature deficiencies.

I agree with Mitchell that Microsoft is poised to make inroads despite having a lighter feature set. Yet I think VMware would be remiss to focus on Microsoft shortcomings. Instead they should get more aggressive from a vision and feature standpoint; articulating what they will do even better in the near future.

As I blogged yesterday, the new battlefield between Microsoft and VMware is taking shape. VMware needs to focus on accelerating its presence in the data center and not on trying to slow Microsoft down. The machine is coming with fewer features and a much lower price, obviously initially aimed at smaller deployments. VMware can win by making new features strategic to the data center and articulating even more for the days ahead.

Tackling I/O, virtualization security and other data center relevant issues will create more opportunity than a vain effort to slow Microsoft’s Server 2008 bundling and extension strategy.

Microsoft ops guys have a blog at this address and they are announcing that now Microsoft.com web site is powered by Hyper-V.

They say on their blog.. One of our more challenging systems from a server subsystem utilization perspective is www.microsoft.com. The site handles 15,000 requests per second, 1.2 billion page views per month, and 280M worldwide unique users per month as well as supporting ~5000 content contributors from within the company. This site has close to 300GB of content consisting of some seven million individual files on each server. Due to this scale and the variety of applications hosted, the site heavily exercises all of the major subsystems - memory, CPU, network, and file I/O – on each server. Based on the load characteristics and the fact that this site is a testing ground for early adoption of Microsoft technology, we expected the production load of www.microsoft.com to provide a great test for Hyper-V.

To me this is great marketing unlike Microsoft lame attempt into head faking the market with what’s that service … Live Mess or Live Mesh. Live Mesh was being touted as the next best thing but the word was it was vapor. And like that vapor it was - story gone.

I blogged about Hyper-V yesterday and so did Alex. Now they come out and showcase their best site that has the most pressure on it. That’s what I call bring out the ’steak’.

Great conversations on Techmeme

http://www.techmeme.com/080626/p60#a080626p60

Alex Lewis points out on his Network World blog, that he expects Microsoft’s Hyper-V technology to dominate VMWare. Well let’s look at that, Alex.

We know survival moves are already being made by VMWare. According to Diane Greene, president, CEO, and co-founder of VMWare, VMWare’s revenue model has been shifted to account for Microsoft’s entrance into the market. VMWare is clearly the market leader and has a wealth of experience delivering an excellent product.

I have been a big VMWare fan for years now, having implemented it for clients and in numerous environments. It is stable and technologically advanced and is trusted in production environments the world over. A number of my colleagues are in the Xen camp or Virtual Iron followers. Let’s face it, those are great products, but they are niche offerings. VMWare is the current leader and you would be foolish to think Microsoft would fail on a castastrophic scale. I will come out and say right now that Microsoft will in fact dominate this market. Lewis and Vaughan-Nichols bring up some great points and I am in total agreement.

Beyond the talk of free beer and shifting sales offerings, there is the undeniable factor of Microsoft’s presence. Most organizations have readily available skilled personnel available in Windows technology. Many organizations will definitely prefer the “all-in-one” approach and be attracted to the Microsoft offerings. When value, hardware support, cost, usability, licensing, support and ROI are considered with the multitude of other factors, there is no doubt that VMWare has to deal with a very legitimate contender. At the very least, VMWare’s percentage will shrink. Significantly. This will be the fight of their lives.

Now I don’t think they will ever go away, this is a great product and company. The juggernaut that is Microsoft will make its presence felt right away however and in fact, smother VMWare. So most certainly look for a fight, brief as it may be.

On that note, look for more press thunder as Microsoft shifts in the wake of the departure of Mr. William Henry Gates III. This is a company eager to erase the problems that the Vista launch has caused. Windows 7 already has a slated date of release in January 2010. The Hyper-V release will certainly be accompanied by waves of press. The hype is just beginning and this is where I start believing it.

My colleague Alex Lewis posted some interesting thoughts on Microsoft’s upcoming Hyper-V release in comparison to VMWare, the current market leader.

Market leader is a bit of an understatement at 85%. Everyone I know uses VMWare in some capacity. What makes Hyper-V a giant killer? It’s free. That carries a lot of weight in perceived uncertain economic times. It’s also a familiar interface and experience for for IT departments looking like any other Microsoft MMC or console.

Expect Microsoft to release decent code but they will innovate fast on next rev (that’s their playbook). Classic embrace and extend and in today’s market free software is the model. Nice move.

Alex writes the following.. “Microsoft’s Hyper-V (still in public beta/RC1) has some issues. The NetworkWorld Microsoft Subnet folks posted their thoughts yesterday. The most glaring is the inability to move VMs while active between hosts. Depending on your needs that may or may not be a deal breaker for you. Regardless I’m confident it’s something that will be addressed in a future release. Microsoft knows they need to equal/exceed VMWare’s offering to dominate the market. That said, Hyper-V is a LOT more friendly for Windows admins and it doesn’t require any of the core Linux skills that installing and tuning an ESX server does. The combination of easy to use and free has been Google’s trademark strategy. Microsoft may have taken a page from their book on this one and I think it’s very likely to succeed.”

Alex brings up a great point about MSFT killing Netscape in the browser market and IBM in email, however Microsoft hasn’t been perfect. Look at the mess they’ve made of Search. VMWare has such a head start they won’t just rollover at the sabre-rattling of Redmond.

A battle’s coming and we’ve got front row seats. VMWare what say you?

Update: Cnet is now just getting this story up. Ian Fried who wrote the Cnet post has good quotes from Microsoft.

Microsoft Corporate Vice President Bill Laing told me that he understands his company faces an uphill battle in trying to win over customers that have been using VMware and Xen, in some cases for many years.

“I think we’ll do best initially in ‘green field’ opportunities,” Laing said. “Small business, I think, is a completely green field. In the enterprise, where customers haven’t deployed (another virtualization technology), I think we’ll do well.”

Over time, Laing said he wants Microsoft find its way into data centers that already use VMware.

“I think it will take longer to rip and replace, but that’s certainly our ambition,” Laing said