Let’s start this analysis with a basic question. Is there any rational reason for VMware and Citrix to make peace with each other, and develop the desktop virtualization market in concert with one another instead of in competition with each other? In other words if Citrix were to add its value to the core pieces of VMware View, would this be a good thing or a bad thing?
The case for cooperation is:
- Which software company represents the single largest existential threat to VMware? Answer, Microsoft. Which software company represents the single largest existential threat to Citrix? Answer, Microsoft. The enemy of my enemy is my friend is a powerful reason for these companies to work together. Microsoft is determined to make virtualization into just a feature of the Windows OS. Microsoft also continues to erode the value of Citrix’s products (for rather inexplicable reasons), by improving Microsoft Terminal Services (now called Remote Desktop Services) and eroding the revenue stream and customer base for Citrix XenApp.
- Citrix has done a masterful job over multiple decades of managing a partnership with the dominant systems software vendor in the industry – Microsoft. There is a case to be made that VMware is going to be the dominant enterprise systems software vendor for the next decade. Citrix would therefore be well served to allay itself with VMware while VMware is on the rise, instead of after the rise has occurred.
- While there is certainly significant overlap in the technology portfolios the case can be made that they are still more complementary than competitive. VMware clearly owns the market for the back end data center virtualization platform. Citrix has all but ceded this market to VMware, and is really no longer focused on trying to sell XenServer into enterprise accounts in competition with vSphere. VMware View 4 with PCoIP is a solid desktop virtualization product, but stills lacks the years of fine tuning and focus upon scalability, performance and manageability that Citrix brings to the table with its product lineup. Yes, PCoIP and ICA/HDX are competitive, and yes they have competitive connection brokers, but if you look at the entire product line that Citrix has built up over the years (including the Citrix Access Gateway, Netscaler and Branch Repeater) there is less direct overlap than you might think.
- Citrix knows how to market, sell, support, and work with the VAR channel for a user and application centralization solution. The XenApp sales and marketing infrastructure (including the channel) is one of the most effective in the industry, and is highly specialized in addressing all of the business, political and technical issues associated with user and application centralization. VMware also has a very effective server virtualization marketing and sales effort, but is only now starting to ramp its desktop effort to the same level as exists for the server virtualization market.
- VMware has a very full plate. VMware’s strategy includes becoming the new data center operating system in the enterprise, becoming the platform for public cloud computing, successfully becoming a vendor of a management stack for virtualization and cloud computing, and finally also dominating desktop virtualization. Any one of these initiatives would be worthy challenge for a $2B company – all four at once (despite their complementary nature) may be a bridge too far. A strategic partnership in one of these areas would enhance success and allow resources to be diverted to the other three areas.
The case for competition and against cooperation is:
- Having both companies compete with each other to own this next phase of user and application centralization will result in better solutions. We have seen what happens when one vendor owns a market at has no effective competition – innovation lags. Competition is forcing both companies to continue to innovate. This is good for the market, good for the customers, and ultimately good for both companies.
- Both companies have put stakes in the ground with their investors regarding future revenue streams from the desktop virtualization market. Cooperation would make both companies dependent upon each other and put neither of them in a position where they can control their own destinies.
- Cooperating with VMware would cause Citrix to have to effectively write off its Xen acquisition as a strategic and financial mistake. This might be too difficult for Citirx management to have to explain to Citrix’s investors.
- It might just be too hard to get these two $2B companies to cooperate at the level required to pull this off.
So what would a cooperative relationship look like? Here is an example of what could occur:
- Citrix officially cedes the data center virtualization market to VMware (this has effectively already happened).
- VMware licenses vSphere for VMware View (VMware’s back end infrastructure for desktop virtualization) to Citrix. Citrix thereby becomes a customer of, and a re-marketer of VMware’s flagship product.
- Citrix agrees to support PCoIP as one of the protocols supported in XenApp and XenDesktop
- Citrix rebrands the solution to remove the Xen name so that VMware can stand behind it without effectively promoting a competing hypervisor
- The companies agree to merge their client side hypervisors and come up with common brand for the resulting product. This would probably be the most difficult technical challenge in this proposed partnership
- Citrix would be primarily responsible for the sales and marketing of the resulting combined solution. This would allow Citrix to focus on the desktop virtualization market with VMware’s backing.
- Citrix would wrap all of its communications, management and security offerings around the combined solution, allowing Citrix to bring its entire product line to bear in support of the offering. In particular this would mean that Citrix would add support for PCoIP to the Access Gateway, which would instantly provide PCoIP with remote SSL access method. Obviously having ICA/HDX as a protocol available for the new View+XenApp product would also significantly benefit the offering.
In summary if this were to occur, it would strengthen both companies with respect to their common and most serious long term threat – Microsoft. VMware would benefit by having a $2B development, marketing and sales partner on the desktop virtualization front. Citrix would benefit by having a partnership with VMware that mitigates against the continued encroachment of XenApp by Microsoft with Remote Desktop Services – ultimately freeing Citrix from the partnership with Microsoft that was always the biggest long term threat to Citrix itself.
What would be a good first step? VMware includes the back end vSphere components in the View 4.0 license. If VMware and Citrix were to strike a licensing deal, allowing Citrix to include the same components in its desktop virtualization offering this would benefit both companies. Citrix could offer the market leading back end hypervisor to its customers as a part of its desktop virtualization offering, and VMware would benefit from a $2B channel partner. Getting the money flowing would help both companies on the subsequent integration efforts.
Could it happen? Maybe – but it is not very likely.
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