Playing vendors off each other to get better deals is nothing new, but with the lack of a serious challenger in...
the server virtualization market, VMware was relatively immune to the practice -- until recently.
You say 'Microsoft,' and [VMware's] price magically goes down.
Now, VMware customers can use Microsoft Hyper-V and virtualization products from other competitors to get VMware to lower its prices. The tactic is more common now that Windows Server 2012 Hyper-V is available, according to IT pros, solution providers and others interviewed for this article.
VMware still holds to its current pricing and typical negotiated discounts in some cases, but in others, customers don't even have to threaten to leave to get a better deal. Simply mentioning a Hyper-V evaluation can be enough to get the vendor to capitulate, said an executive with a VMware premier partner.
"You say 'Microsoft,' and the price magically goes down," the partner said.
Hyper-V vs. VMware pricing: A long and winding road
Microsoft has attacked VMware on pricing since it released the first version of Hyper-V, even launching a website, VMwareCostsWayTooMuch.com, during VMworld 2008. But in the early years of Hyper-V, a lower price alone was not enough to lure customers. The product lacked features that have become table stakes in the market, such as live migration and advanced memory allocation.
"It just didn't scale, from either a VM [virtual machine] perspective or a host perspective," said David Kinsman, national technical solutions architect at World Wide Technology Inc., a VMware premier partner and Microsoft Gold Certified partner based in St. Louis. "It couldn't stand up to vSphere."
With the release of the latest version of Hyper-V, however, the hypervisor can do enough of what VMware ESXi can do that IT departments are taking another look -- especially those fed up with VMware's pricing and licensing model.
An executive with a large, global company that uses VMware said he has not seen a willingness on VMware's part to offer more significant price cuts, and that his organization will adopt more Hyper-V and other hypervisors unless that changes.
"Although we believe we have very good discounts off of list and for maintenance, there is no doubt that VMware is an expensive product," he said.
This company plans to keep VMware for its tier-one applications, which require the high performance and availability that VMware's advanced management capabilities can provide, but will use other hypervisors for lower-tier applications.
"Such an approach should realize significant cost savings in license and maintenance fees, while still ensuring we meet uptime and performance needs," the executive said.
Meanwhile, Microsoft's Enterprise Agreement licenses incent organizations to use Hyper-V. Because these agreements give customers the rights to a bundle of Microsoft software, it can be hard to tell if Hyper-V is actually less expensive than VMware. But Enterprise Agreement customers don't have to pay any additional capital expenses to activate Hyper-V, which is appealing.
"We have to consider Hyper-V," said Scott Elliott, a network and systems supervisor with Christie Digital Systems Canada, a VMware customer based in Kitchener, Ont.
"There's price. There's also the fact that we are a rather Microsoft-centric shop," he said. "It makes sense [to investigate Hyper-V] since we already have an Enterprise Agreement."
Moving to a heterogeneous virtualization environment, however, can add significant operating expenses associated with managing multiple platforms, Kinsman warned.
Shopping around for better VMware pricing
Hyper-V isn't the only competitor VMware has to worry about, however. Other hypervisors, such as Citrix Systems' XenServer, open source Xen, KVM and even Oracle VM, have also reached the "good enough" level for many organizations -- especially small businesses -- said Francis Poeta, president and CEO of P and M Computers, a solution provider in Cliffside Park, N.J.
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Are Hyper-V's savings worth it?
"It's a gambit," Poeta said. "You can pick whatever you want. They all work. The question is, which best fits your environment?"
That's good news for those customers who can now shop around for the best deal and see if VMware will match.
Once a customer begins to move to a new platform -- in VMware's case, to either another hypervisor or to the public cloud -- there's often no going back, Poeta said.
About a year and a half ago, one of his customers moved one of its workloads from its on-premises VMware infrastructure to Amazon Web Services. It now runs eight Amazon workloads.
"Every time I go there, the guy's asking me about moving something else," Poeta said. "You can see the writing on the wall. It will be 90% eventually, and then they'll go from having six [VMware] licenses down to one."
It is in VMware's best interests to prevent this from happening, because so much of its business relies on vSphere and its associated server virtualization products. Even if competitors don't make a huge dent in VMware's market share, competing in a price war could still hurt the company's ability to make money off its core business.
VMware did not respond to a request for comment as of press time.
Colin Steele asks:
Have you used Hyper-V's emergence to get better VMware pricing?
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