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
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