The potential impact of
Microsoft’s entry into the x86 server virtualisation space has generated mixed reactions from both industry watchers and the channel.
The new offering, Hyper-V (previously codenamed Viridian), comprises hypervisor technology, which runs on the 64bit version of Windows Server 2008.
Although originally due to be launched in February this year as a key component of the operating system, delays resulted in it being released as a standalone product, which now takes the form of a free download from Microsoft’s website.
The initial intention of attaching a price tag of $28 per seat to Hyper-V was abandoned following market leader VMware’s defensive move in July to provide the basic version of its own ESXi hypervisor for free.
As to where the much-hyped x86 server virtualisation segment is in adoption terms, however, the consensus is that the market is still immature. According to Christopher Voce, an analyst at Forrester Research, estimates show that as few as 10% of all servers worldwide have been virtualised to date, which means “we are still really only at the beginning of the hockey stick”.
Clive Longbottom, a service director at analyst firm Quocirca, agrees. “The main part of the standard commercial market is still in ‘advanced pilot’ mode. Virtualisation has been looked at and is in use in development and test areas, but it is not as widely used in runtime environments as the headlines would have us all think,” he says.
Although uptake is robust among telcos, hosting providers, banks,
oil and gas, automotive and “other large number-crunching environments”, the same is not true elsewhere, particularly in the small-to-medium business space, due to a range of factors.
These include relatively expensive software licences and the fact that a good number of ISVs still fail to provide support for their applications in a virtualised world. Virtualisation is also only rarely deployed to run transaction-intensive applications such as high-end databases because of the high performance overhead generated, which makes such a move too risky.

The issue with older servers
Another issue, however, says
Yuri Pasea, director of virtualisation at value-added distributor DNS Arrow, is that the CPUs in many older servers are simply not capable of being virtualised, which means that such a transition is unlikely to occur until the time comes for a
technology refresh.
Nonetheless, he believes that about 50% of x86 servers will end up being virtualised over the next two to three years so the market will continue to be a buoyant one.
“It is very easy to explain the benefits of virtualisation, but much more complex to implement, which is good for the channel as there’s money to be made around providing services,” he says. DNS currently distributes both VMware and Citrix’s virtualisation offerings.
Peter Stroud, managing director of IT services provider, Panacea Services, which also has expertise in VMware and Citrix, is even more bullish about the sector’s growth prospects, however. He believes that the market will double in value next year and grow at between 50% and 70% the following one, leading to nearly 70% of x86 servers existing in virtualised form by 2012.
“Only six months ago, people were saying that ‘it is new technology and we do not want to be bleeding edge’, but we are not hearing that now. People also said they would maybe try it out on development servers, but now they are saying they will deploy it on production machines. So the market is starting to move as customers see it maturing and they are increasingly being forced into it as the board demands that they cut costs,” Stroud explains.
But he does not believe that the adoption of virtualisation technology will be limited to x86 servers, particularly as recentralisation trends gather pace, which means that in future “the datacentre will be king”.
“Everything is going to go down the virtualisation route and it will be here to stay. It is not going to disappear and it is not a fad,” Stroud attests. “People are doing applications and storage already, but networks and desktops will also become more virtualised as it is a more intelligent way of computing. And that is why Microsoft wants in.”
The point here is that because software is abstracted from the hardware layer to create pools of compute resources, what the underlying operating system happens to be becomes increasingly irrelevant – a situation that is inevitably worrying for vendors such as Microsoft.
Forrester’s Voce explains, “Virtualisation is critical for Microsoft. We are talking about an important point of control of the infrastructure as the world moves increasingly this way and it does not want someone else controlling its accounts. So it does not just want to be along for the ride as it is in danger of being obviated.”
This is not least because, although x86 machines make up as much as 60% of large datacentre server estates, as many as 90% of such accounts already have some form of x86 virtualisation in place in order to increase efficiency by boosting low resource utilisation rates, says Carl Greiner, senior vice-president of infrastructure at Ovum.
And the market leader by far in this space is third-party provider, VMware. Estimates suggest that it currently owns as much as 80% of the existing installed base, helped by the fact that it was both first to market and worked hard at making a lot of noise about the technology.
Another advantage that VMware has in the enterprise space, however, is the fact that it is vendor-agnostic – unlike Hyper-V, which is targeted primarily at the Windows world, although it does support Linux virtual machines too.
“VMware is pretty much agnostic, but Microsoft is becoming more so and will become a viable alternative. But that said, it is going to come down to management as, from a datacentre perspective, that is critical. Microsoft is going to evolve there, but it has not got it all done yet,” says Greiner at Ovum.
While Microsoft-centric shops and small-to-medium sized businesses (SMB) are likely to go with the vendor anyway as they already have suitable skills in place and will be prepared to wait for its technology to mature, the same is not necessarily true of more complex, heterogenous environments. They are more likely to stick with VMware, not least because it currently has more advanced tools in such mission-critical areas as clustering, resilience, backup and disaster recovery.

Shake-up in the market
But says Forrester’s Voce, “Some customers are waiting to see what Microsoft will do. They may be entrenched VMware customers, but when a vendor like Microsoft enters the market, they know it will shake it up in the future, if not now.”
Panacea’s Stroud, for one, believes that in the short-term at least the move may slow the completion of some deals or be used by customers as a bargaining chip when negotiating over price, although this will be no more than “just a temporary stutter”.
But VMware is not unaware of the threat posed by Microsoft and has been working hard over the past year to sign up as many professional and hardware OEM partners as possible. It has also released a low-end product to try to boost its appeal in the SMB community, which is where the big battleground with Microsoft is likely to be.
Pasea says, “The fact that there is a great ecosystem of technology makes it worthwhile for distributors and resellers. So you do not just sell virtualisation, but also backup, planning and high availability software. It also takes a fair bit of consultancy and services so the payback is significant.”
But Voce warns that although there has been “tremendous uptake and interest” in VMware among the partner community, “one of the overlooked aspects of this is one of Microsoft’s biggest advantages – that it has a tremendous channel with skilled and certified people to disperse a lot of know-how and feed the industry in order to help jump-start adoption”.
Another advantage for Microsoft is that its System Center Virtual Machine Manager 2008, which is due to ship at the end of September, can not only manage VMware deployments, but also provides a “single pane of glass experience to manage both physical and virtual environments”, while VMware’s tools currently only support virtual ones.
“Some System Centre customers maybe will not need VMware’s virtualisation capabilities just yet, but if they have pockets of services that require more advanced features, they wi–ll be supported,” says Voce.
“So Microsoft may not have the most feature-rich, advanced solution out there, but for the broad requirements of some organisations, if you balance existing investments, future plans and current skills, it might just be good enough.”
Moreover, he indicates that Microsoft appears to be adopting the same strategy as it did in Windows NT versus Unix wars of the mid-1990s by attacking the market from the bottom up rather than focusing from the outset on the high end.
“When Windows NT was first launched, it was lacking in many areas but, for many organisations, it was inexpensive and good enough and Microsoft developed it over time to become enterprise-class.
“So this appeal to the broader masses has benefited Microsoft in the past and it will probably do so again,” Voce says.

Danger for VMware
The danger for VMware in this scenario, however, is that it will be pushed up into the high end as was Unix – a situation that would be “the worst possible outcome for it” and one that would require “a delicate partner dance” to prevent it from occurring, Voce adds.
Quocirca’s Longbottom believes this is a foregone conclusion. “VMware will have to look at how it responds – does it continue to play the high-value card or will it have to compete on price, which will scare Wall Street?
“If Microsoft has the impact it believes it will – and I tend to be in general agreement with it – virtualisation will be accepted as a built-in part of the operating system within a couple of years,” he says.
This means VMware will have to major on its advanced management capabilities and heterogeneous platform support to generate sales, but “when placed against a well-integrated solution, priced at virtually nothing and with a growing list of capabilities, including managing any existing VMware investments, Hyper-V plus Microsoft tooling looks pretty strong to me”, Longbottom adds.
But Ovum’s Greiner is not so sure that Microsoft will have things all its own way. “Do I think that VMware will sit down and take this quietly? No way. VMware will continue to dominate at the high end due to the alliances and functionality that it has and it will always be the preferred solution for a high availability, performance-based situation,” he says.

Is there enough space?
Moreover, because the market is still only in its infancy, there is more than enough space for two and probably three vendors, including Citrix, to make a good living out of it.
“The market is big enough not to have to ask who is going to win and lose. So will anyone win everything? No. Microsoft will try and garner 90% of the market, but it got there too late. So in volume terms, it may be likely to win out, but in revenue terms, VMware will be well positioned as it is the big datacentre guys that spend most of the money,” Greiner says.
But how the market does eventually pan out will also be decided by whether VMware can continue to stay focused by making its offerings more cost-effective and easier to use and whether Microsoft can deliver more advanced functionality “in a fairly timely way”.
Panacea’s Stroud agrees that price falls are probably an inevitable outcome of the struggle and indeed indicates that although list prices may be remaining static, customer pricing is already dropping. But he believes that Microsoft’s arrival onto the market may not be as threatening as many think because “the major implementers of virtualisation will stay with VMware, not least because it is established”.
Whichever way the market plays out, however, it is likely that customers will gain.
As Greiner concludes, “VMware and Microsoft will fight tooth and nail, but it will be a nice fight and there is room for both to win.
“The market is huge, but increased competition can only benefit the market in terms of both functionality and pricing.” ●