According to the most recent IDC Worldwide Quarterly Server Virtualization Tracker, global virtualization license shipments have increased. In the second quarter of 2008, these licenses increased 53% year over year and had increased 72% year over year during the previous quarter. But the benefits of virtualization – particularly server consolidation -- have also translated into a decline in x86 server sales, eroding an already declining x86 server purchasing trend.
VMware expanded its x86 server virtualization software business 27% year over year and maintained its leadership position in the market, with 78% revenue share in the second quarter. In the area of new x86 virtualization licenses, VMware continues to hold a strong position in the x86 market with a combined market share of VMware ESX and VMware Server at 44%. But in its first quarter of general availability, Microsoft Hyper-V made a strong showing. When combined with Virtual Server 2005, Microsoft's market share is 23% of new shipments, which has cut into VMware's lead.Virtualization adoption continues to grow
With the emergence of Microsoft's Hyper-V and management and other changes at VMware, there have been some shifts in the virtualization landscape overal. "In terms of virtualization licenses, VMware's market share has decreased from 51% in Q207 to 44% in Q208," said Brett Waldman, IDC's research analyst of system software. "No. 2 is Microsoft, with the majority of that coming from Virtual Server 2005, as Hyper-V just started shipping in Q208" "Microsoft Hyper-V has the ability to cut into VMware's market share, especially since its solution costs less than VMware's."
Formerly known as SWsoft Virtuozzo, Parallels Containers trailed VMware and Microsoft at No. 3.
Specific companies tracked include AMD, Dell, HP, IBM, Intel, Microsoft, Novell, Red Hat, Sun Microsystems, Parallels, Virtual Iron, VMware, Citrix XenServer and XenSource and Virtual Iron Software. In the x86 market, IDC currently groups Oracle VM and Sun xVM into the "other" category because IDC has not yet seen large volume usage of these products in the market, Waldman said.
In the second quarter, worldwide virtualization software revenue grew 15% year over year, compared with 32% growth in the first quarter of 2008. The growth in virtualization software revenue primarily came from the x86 server market, which grew 39% year over year. EPIC virtualization software revenue also increased year over year, albeit at a slower pace of 9%.
Most appear to opt for Hewlett-Packard servers; the company showed a 34% virtualized market share and 52% year-over-year growth, based on solid performance in sales of Intel-based processors, IDC reported.
Dell is the No. 2 server vendor in terms of virtualization market share and has grown from 25% in the first quarter to 29% in the second quarter, powered by 110% year-over-year growth. Dell's strong performance was driven by solid growth of Intel-based processors and a strong performance from AMD-based systems, according to IDC. IBM remained in the third position with 16% market share, and achieved 32% year-over-year growth driven by its Power Systems servers.Virtualization's impact on hardware
That said, in the third quarter of 2008, IBM's Power Systems i and x server revenues dropped drastically which may be a side effect of virtualization or may indicate a growing preferences for toward blades rather than towers and rackmount systems, said
"System x is the best scale-up x86 box in the industry -- and also System x blades are extremely well designed," said Joe Clabby, an independent analyst at Yarmouth, Maine-based Clabby Analytics. "I'm wondering if they are seeing towered systems decline in favor of blades -- and then when people buy blades, they don't need as many because they consolidate and virtualize them."
Time will tell. "I think next quarter will tell us if it's due to consolidation/virtualization or if there's another problem, like competitors outselling IBM."servers not specifically targeted at consolidation and at new customer segments such as midsized companies.
IBM did not return an email asking for comment by press time, but over the past couple of years, IDC analysts have predicted a decline in server sales because of virtualization. The fourth quarter of 2006, for example, marked the 10th consecutive quarter of slowing overall server shipment growth as server virtualization and dual- and quad-core offerings began to spread, as IDC reported in February 2007.
Meanwhile, IDC reported that the high-volume consolidation opportunities – the low-hanging fruit in the x86 server virtualization market – have begun to dry up. "Though consolidation will continue to occur, it will be at much lower volumes," Waldman said. servers not specifically targeted at consolidation and at new customer segments such as midsized companies.
As a result, virtualization vendors will have to adapt market strategies as new growth opportunities open up around new deployment of virtualized servers not specifically targeted at consolidation and at new customer segments such as midsized companies.