Analyst to EMC: If You Love VMware, Set it Free

Saturday Jun 30th 2007 by Clint Boulton
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Gartner analyst Tom Bittman also says VMware could be a bigger threat to Microsoft than Google.

Sometimes bold words call for bold actions to make the words stick.

An industry analyst has done just that, proclaiming that VMware could represent a more dangerous threat to Microsoft (Quote) than even Google (Quote). He also called for VMware owner EMC (Quote) to either sell off the virtualization vendor in order to let it grow more quickly, or integrate it across its product lines in order to become a more formidable opponent.

Gartner analyst Tom Bittman made these statements and calls to action during the Gartner Infrastructure, Management and Operations show in Florida earlier this month. The inaugural show drew nearly 1,000 attendees to hear about virtualization, IT operations management, power and cooling and other critical issues.

The analyst delved into his comments in a briefing with internetnews.com after the speech, exploring pros and cons for both rivals in the market for server virtualization, where multiple operating systems are run on fewer machines to create hardware efficiencies.

"I believe VMware could represent a very serious challenge to Microsoft's hegemony. VMware creates the ability to manage below the operating system, which turns the operating system into a commodity. Citrix wasn't a threat. Netscape wasn't a threat. These were replaceable technologies. VMware has an opportunity to become irreplaceable."

Irreplaceable? Strong words about a market Microsoft and plenty of others play in; the company has systematically managed to take over and lead almost every market it set its sights on. But that's Bittman's belief and he's sticking to it until Microsoft can prove it is a viable rival in the virtualization market. There are no guarantees, of course.

"It is unbelievable how much time Microsoft has allowed VMware to grow," Bittman remarked. "I also believe if Microsoft does things right, they can eliminate the challenge," Bittman said.

Microsoft has to execute first, Bittman said, noting that the software giant has already seen some delays to the Viridian hypervisor (define) and some features, including the vital live migration utility for moving servers from one machine to another on the fly.

Bittman said he believes VMware not only needs to quadruple the amount of virtualization licenses it sells this year, but that the virtualization vendor needs to "move very, very rapidly" in creating new features none of the competition -- Microsoft, Xen, Virtual Iron and SWSoft -- yet possess.

Moreover, Bittman feels EMC's ownership and current positioning of VMware -- as a separately run company -- may not help the virtualization power defend against the impending Microsoft juggernaut.

The analyst thinks EMC is enamored of VMware's $1 billion annual run-rate on revenues but still thinks EMC must sell off VMware if VMware is to successfully weather Microsoft's challenge and grow it to its potential.

"As a part of EMC, they cannot make any acquisition that they choose to make," Bittman said. "They are running independently but [VMware President] Diane Green can't decide today to merge with Opsware; while VMware might have aspirations to acquire or merge with Opsware or BladeLogic, so does EMC and they have different goals. I believe EMC should make the money on VMware now and invest it somewhere else -- before VMware gets too big.

The other option?

"Bring them more into the fold," Bittman said. "Make VMware the center of a server infrastructure management business and add the pieces around it, build this up. They would acquire Bladelogic, and other smaller players, or maybe BMC (Quote). This is a major strategy change."

When asked if buying a server startup on which to pre-install VMware software products might be a route VMware could take, Bittman said it's one of the scenarios that may be worth pursuing.

Next page: Reaction to Bittman's points.

EMC refused to comment for this article. A company spokesperson cited the usual financial quiet period ahead of the impending IPO of VMware.

But Microsoft was willing to go on record, albeit careful to steer clear of invoking any conflict.

Asked if Microsoft's delays and VMware's dominance in server virtualization and continued innovation were too great to overcome at this point, a Microsoft spokesperson sent internetnews.com the following statement, attributed to Jim Ni, group product manager for server virtualization at Microsoft:

"Microsoft's strategy and areas of investments – from desktop and application virtualization to datacenter virtualization - can help customers businesses become more dynamic and self-managing. And Microsoft is providing customers investment protection with a clear transition from today's virtual machine technology to tomorrow's hypervisor-based virtualization technology."

"Microsoft is innovating in this space as well. We do have migration capabilities; this feature was introduced with Virtual Server 2005 R2, and will also exist in our next generation of virtualization, which will be a feature of Windows Server 2008. Furthermore, while VMware has done a good job in the market over the last seven years, latest analyst reports indicate that virtualization is only appearing on 3 to 5 percent of the new servers.

Pund-IT analyst Charles King agreed with Bittman's belief that VMware is dominant in the server virtualization space and added that the holistic value of server virtualization "has moved beyond simple server replacement toward an integrated server/IT infrastructure management value proposition."

That is, it's not just about consolidating servers, but managing the fleets of virtual machines that accumulate in a datacenter. VMware has VirtualCenter, while Microsoft is banking on System Center Virtual Machine Manager to do this.

However, while King isn't so ready to crown VMware over Microsoft yet, he's not so sure Redmond will catch up to VMware.

"For the company to overcome VMware will require Microsoft to deliver a solution set that offers at least as much functionality and as many capabilities as VMware," King said. "If VMware can continue its drive to innovate and define its market, it'll take Microsoft awhile to catch up, let alone surpass them."

King is also leery about EMC spinning off VMware, or adding a server startup to its mix. By having VMware, King argued, EMC has essentially set it up as a virtual systems vendor, where it can attach its storage to the back of any x86 server running VMware.

"It basically gives them a way to play in the systems vendor space without taking on any kind of overhead or risk or hardware sales," King said. "Hardware is only going to get faster and cheaper and it's going to be increasingly difficult to compete there."

"If I was an EMC investor, I'd love them to spin it off," he added.

Regardless of which way EMC goes with VMware -- under the vest or integrated into its product lines -- Bittman said there is a lot of potential for Microsoft and VMware, startups Virtual Iron and SWSoft and open source purveyors XenSource in the virtualization market.

After all, he said it's a market that's seen only four percent penetration to date. However, he expects 90 percent of the Fortune 1000 to be virtualizing x86 machines by the end of 2007. By 2009, more than four million virtual machines will be installed on x86 servers, which is about 20 percent of the total potential market.

"We're talking billions of dollars of revenue potential."

This article was first published on InternetNews.com.

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