While VMware is still the undisputed leader in enterprise data center virtualization, it is also very obvious that Microsoft has made (and continues to make) significant inroads into both the broader data center virtualization market and into VMware’s own enterprise customer base. The general perception is that Microsoft Hyper-V is now “good enough” to run most production workloads, that it is close enough (or at parity) in functionality and performance to vSphere for customers to be able to move workloads from vSphere to Hyper-V, and that vSphere is “expensive” and Hyper-V is “free”. So how will VMware win against Microsoft?
The Data Center Virtualization Landscape Today
VMware gets and deserves all of the credit for pioneering the data center virtualization market and, frankly, ushering in a revolution in the cost and agility with which IT operations can be executed and managed. The remarkable progress that VMware has made in getting enterprises to benefit from the virtualization of server-based workloads is shown in the graph below. Notice the accelerating rate of progress with business-critical workloads like Oracle database servers and SAP. This is a truly remarkable accomplishment given how difficult it is to get enterprises to make changes to the infrastructure supporting these kinds of application systems.
Challenges Facing VMware
Despite VMware’s dominant position in data center virtualization today, VMware faces some significant challenges:
- Virtualization of CPU and memory (server virtualization) has become a level playing field at the hypervisor level. Microsoft Hyper-V and Red Hat KVM are viewed by many people to have attained functional and performance parity with VMware vSphere.
- Microsoft continues to be relentless about defending its Windows franchise and commoditizing anything and everything that threatens this franchise. It generally takes Microsoft three releases to catch up with a disruptive innovation like vSphere, but those three releases are behind us, and Microsoft is at the party with a vengeance.
- vSphere is significantly more expensive than Microsoft Hyper-V, which is effectively free to Microsoft customers who have the correct support and maintenance agreements in place with Microsoft (as all large Microsoft customers do).
- Customers looking to grow their virtualized environments are increasing choosing to tier their virtualization environments just as they tier storage. Many customers are taking the simple approach of moving the tactical workloads that were the first to get virtualized years ago (long before vSphere attained its current level of maturity) off of vSphere and onto either Hyper-V or KVM.
- OpenStack is gaining ground as a true virtualization platform that fills in most of the pieces in between the hypervisor and the operations and cloud management software layers. This is detailed in our recent post about OpenStack and the SDDC.
- The management ecosystem has actively embraced the multi-hypervisor world, giving customers a huge range of choice for managing across hypervisors with one set of management products. For example:
- Hotlink allows customers to manage Hyper-V. XenServer and KVM from within vCenter, allows customers to migrate VM’s between environments, and even lets customers use vSphere templates and snapshots across all three environments
- Veeam supports multiple hypervisors in its backup solutions and allows customers to monitor VMware environments from within SCOM via its MP plugins to SCOM.
- Every operations management vendor (including VMware with vCenter Operations) now supports at least vSphere and Hyper-V. That list includes Cirba, HP, ManageEngine, Splunk, Dell/Quest, VMTurbo, and Zenoss.
- Every cloud management vendor (including VMware with vCAC) now supports at least vSphere and Hyper-V. That list includes CloudBolt Software, Embotics, FluidOps, and VirtuStream.
- IBM, HP, BMC, and CA are all (albeit slowly) modifying their management products to address virtualization in order to compete with VMware at the management software layer. HP has been particularly aggressive in this regard by building entirely new products sold in the modern way (download it and try it) with HP Virtual Performance Viewer.
How Could VMware Win Against Microsoft?
Before engaging in the analysis below, it is important to state one thing. The analysis below is based upon strategic extrapolations of the public statements of VMware, Microsoft, and other vendors. No confidential or NDA information was used in the preparation of the analysis below. So here is what VMware might do:
- Turn the economic and pricing tables on Microsoft. Right now Microsoft is benefiting from the perception that Hyper-V is free and that vSphere is “expensive”. All VMware has to do is draw a line across its vCloud Suite and make something much more the “free ESXi” available for free or nearly so.
- In conjunction with the preceding item, start charging a lot less for the hypervisor and a lot more for vCenter. Microsoft gives Hyper-V away for free, but charges quite a bit for SCOM and SCVMM. VMware can play this game too.
- Compete at the operations management level. vCenter Operations Manager is a much better, more modern, and more mature operations management solution for vSphere than SCOM/SCVMM are for Hyper-V. As VMware brings its support for Hyper-V in vCenter Operations Manager up to the same level as that for vSphere, operations management will become a formidable differentiator for VMware.
- Capitalize on the cross-virtualization platform support in vCloud Automation Center. DynamicOps did a great job of supporting Hyper-V before VMware acquired the company and turned the product into vCloud Automation Center. Microsoft offers nothing comparable to vCAC on the cloud management front.
- Leverage network virtualization. When VMware announced NSX, it said that it was combining the previous VXLAN technology in vCloud Director with the new Nicira network virtualization technology into “one network virtualization platform”. What VMware did not say is how this one network virtualization platform would be packaged, priced, and brought to market. VMware has the option of giving away CPU and memory virtualization while creating an extremely valuable networking and storage virtualization (see next bullet) platform that works across hypervisors. Consider the possibility that NSX becomes “the” product, that it includes vSphere (for free) and then also supports Hyper-V and possibly KVM as well.
- Leverage storage virtualization. Both VMware and Microsoft are in a race to commoditize storage. Some people think that having EMC own a majority of VMware will cause EMC to stop VMware from being too aggressive on this front. This is highly unlikely to be the case, as EMC profits when VMware commoditizes its storage business by trading off low margin hardware revenue for higher margin software revenue. We are highly likely to see significant announcements on this front from VMware at VMworld this fall.
- Focus upon the software defined data center. While Microsoft may well have a competitive hypervisor, Microsoft has nothing approaching a credible software defined data center strategy. If VMware combines its network virtualization, storage virtualization, operations management, and cloud management offerings into a cohesive and credible SDDC offering (as it has announced that it will), then VMware will have re-established for itself a position of significant competitive advantage with respect to Microsoft. That day may come as soon as the announcements and deliveries that one would expect to occur around the two VMworld conferences this year.
- The secret weapon. The fact that Microsoft was going to commoditize the basic CPU and memory virtualization functions of the hypervisor has been known by all levels of VMware management for years (both past and current executives). The senior management team at VMware is a highly experienced and thoughtful set of people who are unlikely to let an existential threat to their core business go unaddressed. Does VMware have a trick or two up its sleeve that we do not know about? Might be a really good idea to attend VMworld this fall to find out.
A VMware win against Microsoft simply requires VMware to turn the pricing tables on Microsoft and to leverage its highly differentiating functionality in its software defined data center strategy. VMware could re-establish technical dominance in the data center virtualization space as early as the end of this year by leveraging its software defined networking, software defined storage, and management software assets.