In December 2006, two startups, XenSource Inc. (now owned by Citrix) and Virtual Iron Software Inc., kicked off a virtualization price war, offering virtualization for as little as one-sixth the cost of VMware. Last fall with the entrance of Oracle Corp., Novell Inc., Red Hat Inc. and others into the battle, the price competition intensified, and then this spring, rivalry flared when Citrix cut prices again and initiated flat pricing for servers with up to four sockets. Citrix's efforts have met some success as well. Now all the players have geared up for Microsoft's August 2008 launch of Hyper-V, which is extremely low cost at the price of $28 per server.
Citrix has a special mission in this new lanscape. Sandwiched in between feature-rich VMware and lower-cost Hyper-V, Citrix's Xen has the daunting task of remaining price-competitive yet fully featured enough to compete.The Citrix strategy
Citrix, the $1.4 billion application delivery firm in Ft. Lauderdale, Fla., shelled out $500 million for virtualization startup XenSource Inc., last October with the intent of making virtualization the centerpiece of its recently launched Delivery Center platform. Its vision: virtual servers, virtual applications and virtual desktops, all efficiently managed by data centers at lower cost.
Earlier this year, Citrix made a 20% price cut, Citrix's standard edition is $900 per server for up to four sockets, with support charged per incident. Palo Alto, Calif.-based VMware charges $3,624 to $3,744 for a standard license, including support for a server with two sockets. In addition, VMware requires a $5,000 VirtualCenter server, which Citrix does not. At the high end, their prices are comparable: $5,750 for VMware compared with $5,000 for Citrix (which both include support). And of course, these figures pale in comparison with Hyper-V's near-free price at $28 per server.
With these efforts, Citrix has met ample success. Despite a general downturn in software spending, for example, both VMware and Citrix have increased market share, according to an April 2008 survey of nearly 2,000 IT professionals by the Rockville, Md.-based ChangeWave. Since ChangeWave's January 2008 report, VMware has increased its market share from 58% to 70% and Citrix's has increased from 21% to 26%.
But while Citrix's XenServer comes in at a lower price point, IT managers need to see real benefits and features before defecting from VMware, said observers.
John Enck, an analyst at Stamford, Conn.-based Gartner Inc., said server virtualization contenders must be "head and shoulders above VMware" and interoperable to compete effectively against VMware and Microsoft. Citrix has such interoperability and a strong working relationship with Microsoft, Enck said. Thus Microsoft might be more likely to refer Linux-leaning prospects to Citrix than to, say, Novell's virtualization technology because of Citrix's additional features, he said.
That said, VMware is a formidable rival for any virtualization technology vendor. The challenge is that VMware has an 18-month to 24-month technological lead on the competition, plus a vast and extremely loyal customer base. But VMware is vulnerable on pricing, and its steep cost has sparked significant customer resentment and a demand for better terms, said Yankee Research analyst Laura Didio.
The current virtualization rivalry has played right into competitors' hands, with VMware rivals like Citrix offering virtualization for one-third VMware's cost, Didio said, predicting that VMware will decrease its pricing in response. Actual pricing changes have been difficult to track because they are frequent and released only through reseller channels, not to the press, she said.
Over the long term, Microsoft and VMware will dominate the server virtualization market, leaving Citrix's main opportunity on the desktop and, possibly, the small and medium-sized business market, where Citrix is strong, Enck said.Citrix's opportunity in desktop virtualization
For several additional reasons, Citrix may ultimately focus on the desktop virtualization. First, Microsoft hasn't targeted its virtualization efforts to virtual desktops, leaving an opportunity for others to gain advantage, Enck said.
Second, Xen will benefit from Citrix's strength in other desktop applications, said Didio. "Citrix has a very good story on the desktop; it's leading edge," Didio said. "And it's aggressively marketed to 200,000 customers globally."
Chris Rogers, CEO of ServerCave Inc.'s hosting service, said Citrix's XenSource virtualization has helped him reduce his company's number of servers from 80 to eight while increasing revenues and customer base. Rogers believes Citrix can survive competition with Microsoft and VMware not only because Microsoft's Hyper-V runs on the Xen engine but also because of the strength of Citrix's virtualized application management and delivery.
"Compared with VMware's cobbled-together desktop, Citrix's virtual delivery of applications to users gives it the edge," he said. "Only 9% of the servers shipped last year were virtualized. There's a whole lot more market out there, and Citrix XenServer is well positioned to take a large part of it."The XenServer feature set
XenServer's key advantage is its interoperability. XenSource's open source virtualization engine is the core of Microsoft's virtualization technology, so XenSource will run natively on top of Microsoft as if it were a Microsoft application.
Another Citrix advantage is its open storage interface that integrates innovations from storage vendors into the hypervisor with plug-in drivers. In contrast, VMware has its proprietary Virtual Machine File System interface, which restricts the ability of hardware vendors to add new features, said Simon Crosby, Citrix's chief technology officer.Citrix's XenServer also offers the following features, which it touts as competitive alternatives to other offerings:
- Lifecycle management, which is the process for assembling applications in a virtual server;
- Server provisioning, or central control and distribution of workloads across thousands of machines, virtual or physical, at a single click;
- Load balancing, which maximizes availability of server capacity by rerouting network traffic, and
- Disaster recovery, machine cloning and snapshot (a record of a system at a given point in time).
When asked how Citrix's features stack up against VMware and Hyper-V, three experts cited numerous difficulties in making comparisons, including the fact that Microsoft's Hyper-V is not yet in production. Another stumbling block is that vendors define terms differently and have different approaches to accomplishing tasks, they said."All four functions are important and becoming table stakes. You've got to have them to get in the game," said Bernard Golden, CEO of Navica Inc. "It still remains to be seen what Microsoft will deliver in full-fledged management. There's a world of difference between a technological concept and a production system." But according to John Humphreys, program vice president at the Enterprise Platform Group at Framingham, Mass.-based research firm IDC, the server provisioning feature is similar among the top three. Still, VMware has some clear leading-edge features, including its load balancing, which is more advanced than Citrix's offering because it continues to make "intelligent adjustments" after the initial workload distribution on virtual machines, he said.. Microsoft doesn't have a load balancer or a scheduler, he said. As for lifecycle management, VMware is "explicitly designed" for the task, and Citrix makes creating a virtual machine "very simple," but it's unclear which technology is better, Humphreys said. Microsoft's feature is not as advanced, he said. In disaster recovery, VMware's tools can automate the process. Citrix offers live migration and an automatic restart, leaving Microsoft with some catching up to do, he said. "VMware "definitely leads the market and continues to define how it evolves," Humphreys said. "Citrix has closed the gap over the past year, and Microsoft has basic partitioning. It's a question of how quickly they can close the gap."
Crosby said that while XenServer isn't as feature-rich as VMware, XenServer can run on top of Hyper-V -- which VMware cannot -- and adds functions that Hyper-V doesn't have, such as performance optimization, storage automation and provisioning, said. Enck said, however, that Microsoft and VMware have similar features or will add them shortly, which will edge Citrix out of its current second-place market position. Third place remains "possible" for Citrix, he said.Citrix may drop to third place, Crosby conceded, but he views that as "a sizable opportunity," he said. "We should be great on the desktop," Crosby said. "Our core expertise is application delivery through its lifecycle, that's where we will succeed."