The talk of this year's VMworld conference in Las Vegas was how much of a competitive threat Microsoft, which weeks earlier announced the free release of its hypervisor product, will prove to virtualization leader VMware.
The theme behind Microsoft's push into the virtualization market, as exemplified by guerrilla marketing campaigns at the VMworld event, is that it can offer much of VMware's basic capabilities at a fraction of the price.
The software giant is giving away its Hyper-V hypervisor product to any purchasers of Windows 2003 or 2008 server editions. It's an offer that hasn't gone unnoticed by end users.
Michael Tran, chief technology officer at Digital Sense, a new data center operator, has been considering both the Microsoft and VMware paths, visiting Microsoft in Seattle six weeks ago and VMware this week in Las Vegas.
He had some positive things to say about Microsoft's entry into the market.
"Microsoft's main pitch is that anyone with Windows could have the hypervisor for free, so the net cost of the software is zero," he said. "Anything else is going to look expensive against it."
The Microsoft product "is very cost-effective for smaller organizations and very powerful," Tran told ZDNet.com.au. "It's probably not up to the same level as VMware on many aspects, but then again it has some things that are ahead. Hyper-V is, for example, extremely easy to deploy."
Is price important? VMware CEO and president Paul Maritz says he is not particularly concerned about competing with Microsoft on price. The price of software is important, he said, "but only up to a point."
"We are in a competitive market, we can't charge whatever we would like," he told ZDNet.com.au on the sidelines of VMworld. "Every software vendor has to deal with the reality of competition. It comes from direct competitors and it comes from the open source movement."
"One of the fabulous things about the open-source movement is that they are the ultimate enforcer of fair pricing. If you don't evolve, they will clone your software, and take away your value."
Such a threat, Maritz says, motivates commercial vendors to "constantly renew their value proposition" with new features.
"We have to make sure that what we offer really offers value for money, and that changes over time," he said. "VMware won't sit still. We have new functionality coming, we're going to double-down our bets, we're going to go in some places fundamentally (in the case of the virtual data center operating system) where Microsoft is uncomfortable going."
Serguei Beloussov, CEO of Parallels Software, competes in some markets with both Microsoft and VMware.
"I don't see VMware losing sales to Microsoft because Microsoft is cheaper," he told ZDNet.com.au, adding most large customers look beyond the cost of individual components when determining price.
"For them, the total cost of ownership is important, the cost of the virtualization software itself is only a small portion of all of it."
IBRS analyst Kevin McIsaac agrees. He says the price argument is "misunderstood."
"VMware has a lot of advanced functionality for optimising memory and getting more out of a processor," he said. "If the VMware software is a bit more expensive, but is more efficient and means less hardware to solve the overall problem, it in conceivable that as a total cost of ownership it might actually prove to be cheaper."
"Rather than looking at the cost of the hypervisor, you have to say, if I were to run my set of applications on VMware or run it on Microsoft, what would the total cost of all the hardware, the software and the storage be?"
Tran balks at VMware's pricing at times, but in building a large-scale data center, he believes the potential return on investment from virtualization technology cancels such costs out. … Read more