2010 predictions: VMware to cut prices, Citrix to dump XenServer

In our predictions for server virtualization in 2010, we wager that VMware will respond to aggressive price pressure with price reductions and Citrix will shutter XenServer development.

If 2009 was about the maturation and mainstreaming of server virtualization, 2010 will mark the beginning of the virtualization pricing wars and market consolidation. I'm no clairvoyant, but here are my predictions for server virtualization trends in 2010:

  • VMware will reduce its prices; and
  • Citrix Systems will stop developing XenServer.
Impending VMware price cuts?
For some time now, VMware has successfully resisted reducing its prices mostly because it had no meaningful competition. With the release of Microsoft's virtualization alternative, Hyper-V R2, and third-party software such as Citrix Essentials for Hyper-V and VKernel Corp.'s Capacity Analyzer, that's beginning to change. The alternatives will likely force VMware to reduce its prices in some form or another.

Potential 2010 VMware price cuts probably won't be directed at existing midmarket and enterprise customers, which have already invested heavily in VMware and have shown they are willing to pay for the advanced VMware feature set. Instead, any price cuts will be designed to lure small and medium-sized businesses (SMBs) and nonprofits, where Hyper-V has a compelling story to tell.

Or, as Gordon Haff, the principal analyst at Illuminata Inc., put it: "Hyper-V is out there, and for a lot of Windows shops, [that] will be good enough and the path of least resistance."

Rather than reduce prices outright, VMware might attract small businesses by adding greater functionality to its existing bundles. "Surely, VMware would prefer to add functionality for SMBs rather than cut prices," Haff said.

For example, VMware could create a new vSphere Essentials Plus bundle (Essentials Plus Plus?) to include VMotion, its live migration capability. As it stands, for $2,995, vSphere Essentials Plus offers VMware High Availability, VMware Data Recovery and a vCenter agent for up to three dual-processor servers, but not live migration.

Adding VMotion to the Essentials Plus bundle would constitute a huge cost savings over VMware's entry point for a VMotion-capable license. Currently, the first vSphere SKU to feature VMotion is vSphere 4 Advanced Edition, which lists for $2,245 per processor. That translates to $13,470 to cover a three-node configuration eligible for Essentials Plus. And while a VMotion-capable Essentials Plus bundle would still cost more than Hyper-V R2 ($0), surely many small businesses will be willing to pay a premium for time-tested, enterprise-grade technology.

But at least one IT manager thinks I'm overly optimistic about how low VMware will go with VMotion. Rick Vanover, the IT infrastructure manager at Alliance Data in Columbus, Ohio, doesn't believe we'll see VMotion in the Essentials bundles. "I think it's going to go one click downward [to vSphere Standard Edition], but not Essentials; that stuff is really cheap," he said.

Citrix cuts XenServer loose
In 2010, I also predict that Citrix will stop spinning its wheels with XenServer, its Xen-based server hypervisor, and release it entirely to open source. Citrix has already made moves in that direction, for example, announcing in October that it would open-source several core XenServer components but has thus far refrained from giving up on XenServer entirely.

But the writing is on the wall for XenServer. In the two-plus years since Citrix acquired XenSource, it has consistently failed to make a dent in the server virtualization market, despite being largely free. Depending on whom you believe, Citrix XenServer's market share stands somewhere in the single digits. And now, the general availability of Hyper-V R2 marginalizes XenServer even more.

Citrix's own development efforts show that XenServer is low on the totem pole of its virtualization offerings. In sales of its XenApp desktop virtualization suite, the company happily supports not only Hyper-V but also VMware ESX Server as the back-end hypervisor. And in its latest release of Citrix Essentials 5.5, it added a key feature – StorageLink Site Recovery – to the Hyper-V version months before the XenServer version is expected. Citrix has publicly committed to rolling out another major version of XenServer in 2010, complete with memory overcommit. Perhaps that, more than a lower price, will jumpstart adoption. But, in my view, the window of opportunity for XenServer has already closed, and Citrix will cut its losses sooner rather than later.

Let us know what you think about the story; email Alex Barrett, News Director at abarrett@techtarget.com.

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