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Six reasons Hyper-V will surpass VMware within five years

Clabby Analytics analyst Joe Clabby is 100% convinced that Microsoft’s Hyper-V will take over VMware in market share over the next three to five years, and makes some strong points for this in his recent report, Six Reasons Why Microsoft’s Hyper-V will Overtake VMware to Become the Major Player in the x86 Server Virtualization Marketplace.

The report came out prior to the shake-up at VMware on July 8, when the company announced that its Board of Directors replaced VMware co-founder and CEO Diane Greene was being replaced, and then lowered its revenue forecast.

VMware had the vision to see the value of virtualization and took the technology to the top unchallenged due to strategy, innovation and sales execution, but that ride is about to come to an end, Clabby said.

“With the introduction of Hyper-V by Microsoft, VMware is about to experience some very serious competition from a vendor with deep pockets, with a massive worldwide marketing and sales organization, with major market penetration across Fortune 500 and small and medium business markets, and with extensive and complementary infrastructure and management product depth,” Clabby reported.

Among the reasons Clabby believes Microsoft will crush VMware are that Microsoft already has an expansive installed base, a mammoth network of direct sales and indirect business partners, and is offering lower prices alternatives to VMware’s hypervisor and related infrastructure/management software products.

Unfortunately, I have to agree. History tends to repeat itself, and this has been Microsoft’s strategy for a very long time: see a great technology, copy it, and outprice the rest of the market.

Vanity Fair‘s July issue had a great article that illustrates this, called “How the Web was Won” that looks at the eveolution of the Internet over the past 50 years, including details of how Microsoft took over Netscape Navigator by developing Internet Explorer.

The computer programmer known for founding Netscape Communications, Lou Montulli, told Vanity Fair, “From a scientific point of view none of us really respected Microsoft. There was definitely a sense of: They’ve put out of business three or four major companies, and they did it simply by copying what they did and outpricing or outmaneuvering them in the market. This is a general feeling of computer scientists everywhere, that Microsoft doesn’t tend to innovate as much and really just enters the market late, takes it over, and then stays at the top.”

Pricing aside, Microsoft already has a massive installed base.

“It will leverage this installed base, and price its products to out-function/undercut VMware’s pricing,” Clabby wrote. “The computing industry saw this same situation arise when Citrix built a leadership base for its terminal server products — only to have Microsoft enter the market and claim significant marketshare after Citrix pioneered the terminal server marke umbrella. Almost the exact same situation is about to happen again — this time between VMware and Microsoft.”

Microsoft also has a packaging advantage with its Hyper-V hypervisor, as it can be delivered with every single version of 64-bit Windows Server 2008, and installing Hyper-V is a cake walk, according to Clabby.

“A box simply needs to be checked during installation and Hyper-V becomes active. By not requiring IT buyers to find/acquire/download additional virtualization software, the job of deploying and testing virtualization within a Windows Server 2008 is greatly simplified. VMware cannot counter this packaging advantage,” Clabby wrote.

The most damning problem for VMware, according to Clabby, is product depth.

Though VMware has the advantage of technologies like VMotion, to move live VMs, and all of the handy add-on management and infrastructure software integrated into VMware, Clabby said Microsoft’s management and infrastructure is far deeper.

Microsoft’s Systems Center product portfolio inlcludes systems management tools like Configuration Manager; Operations Manager; Data Protection Manager; Virtual Machine Manager; System Center Essentials; Capacity Planner, and the list goes on, ad nauseum.

Besides all of those points, Microsoft is a $51 billion dollar software company and VMware’s revenue is just over $1 billion.

In short, given its deep pockets, large installed base and virtualization strategy, it is safe to say Microsoft will, once again, be laughing all the way to the bank.

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Joe Clabby may be right in the end about Microsoft, but with regards to the "Microsoft’s Systems Center product portfolio", we own/use *none* of those products and they are not all free, either. You can't have it both ways - saying that Hyper-V is free, but then say that Microsoft can manage heterogeneous environments, when the managing software costs money, is still in beta, etc. Microsoft reminds me of the guy (think Microsoft) who has cheated on his wife (think of our experience with Virtual Server 2005 R2) and then expects to be welcomed back with open arms as if *nothing* had happened. Anyone who dealt with Microsoft on tech support issues for VS 2005 R2 knows what I'm talking about.
Sigh, everyone is so quick to write-off VMware and declare them dead. History doesn't always repeat itself, in fact history provides us with learning opportunities to ensure that it does not repeat itself. Smart companies study history so they don't make the same mistakes that other now defunct companies have made. True Microsoft is a huge company with lots of money but VMware is already making changes as evidenced by their CEO change. There have also been hints of VMware being sold off, what if a another huge company like IBM bought them up. Then VMware would have some pretty deep pockets themselves to draw from. I guess we'll wait and see what happens.
Just on the so-called packaging advantage. VMware has a product called ESX3i that comes built into the server hardware. It takes about 10 mins to install and configure. Windows server 2008 wouldn't have even finished its file copy. And its so simple anyone can do it. Microsoft is way behind.
All of this speculation about the fate of the VM market seems rather justified, considering that Microsoft has no real competitors in a market once they decide to enter. Still, I find it chcukle-inducing that this new revenue source really sprouted from the fact of Windows domination on most PCs over the last 20 years.
So you're saying that Microsoft will crush VMWare as it has done with Citrix? How can you say that MS has dominated Citrix? Citrix has continued to innovate and works happily on top of MS Terminal Server. Citrix has many products that most Fortune 1000 companies use in conjuction with Microsoft. MS Terminal Server doesn't come close to the functionality of Citrix and yet both have a place.
Bridget, I have take issue with a number of your assertions here: Just because Microsoft has a large installed base and deep pockets does not mean they will succeed in a given market. Just look at the Zune vs. Ipod. Microsoft has much deeper pockets, an army of developers, and a fairly good product. But as much as I don't like Apple, the Ipod is still kicking Zune's butt. I also don't think that Microsoft's Terminal Server strategy has overtaken anything from Citrix, because Citrix offers a lot of features that Microsoft doesn't have (they're adding more in TS 2008, but it's still not the same). People are willing to pay more for VMware and other offerings because they do more or have something Microsoft doesn't. Things like Vmotion, ESX Host Clustering, Site Recovery manager, etc. are features that my company is willing to pay extra for. Not that Microsoft won't develop solutions for these in the next few years, but from what I've tested, the VMware solutions are much better implemented that Microsoft's. So long as VMware can stay ahead, I don't think they'll fall victim to the Microsoft machine. I also take issue with your "Ease of Install" assertion on Hyper-V, as from the articles I've read and the couple of times I played with it in our lab, it (the RC version), was nowhere as easy to work with as VMware. Granted I was trying to install it on Server Core, similar to ESX's service console, but it was just a lot of little gotchas. I've also played with Virtual Server 2005, and we had that deployed for a while, but it just wasn't as reliable as VMware, and when we're talking about hosting dozens of machines on one piece of hardware, we need it to be ROCK SOLID, and I don't think Microsoft's track record there is very good. I do think Microsoft will make a dent in the market, and I'm hoping they'll drive VMware's pricing down a bit, but as a Server Admin, I'm not rushing out to rip and replace my VMware environment just yet...
It's always easy as a journalist (I use the term loosely) to bet on MS. However, if you look at the MS product, it might be great for SMB that have little or no real DC requirements but it won't work in real Data Centers. It's missing simple stuff, like, NIC-teaming. It's Quick Motion is a joke. They do have one thing that VMware does not have, loads of journalists who don't have the courage to do real journalism and report on the fact that the ONLY thing MS had going for it is deep pockets and shady business practices. Shame on you.
Nobody has a crystal ball. There are enough IT veterans around now that know Microsoft's tactics too well. It'll be interesting to dig up this article in 5 - 10 years time. The fact that Hyper-V is based on Microsoft's purchase of Connectix Virtual PC which was originally a product for PowerPC Macintosh is deliciously ironic.
Hi Bob, and others attempting to shoot the messenger, This blog is based on analyst reports and Microsoft's history of copying other people's technologies and then outpricing them in the market to bully their way to the top. Despite VMware's board of director's decision to replace co-founder Diane Greene last week, I would love to see VMware hold on to its leadership position against the beast that is Microsoft. Unfortunately, there is a good possibility that VMware will be devoured by Microsoft like so many innovative companies before them. As Netscape Communications founder Lou Montulli told Vanity Fair, “From a scientific point of view none of us really respected Microsoft. There was definitely a sense of: They’ve put out of business three or four major companies, and they did it simply by copying what they did and outpricing or outmaneuvering them in the market. This is a general feeling of computer scientists everywhere, that Microsoft doesn’t tend to innovate as much and really just enters the market late, takes it over, and then stays at the top.”
Two problems with this hair-brained theory: 1) the guy who predicted Netscape's death is now the head honcho at VMware, and 2) VMware is owned by EMC. Worst-case scenario, VMware gets cornered in the enterprise market, or shrinks to become an EMC product line. One true thing however is VMware's technocratic arrogance and lack of respect for competition...however the source of that problem has been removed by the board of directors.
ESXi is free now, why to pay for Microsoft Hyper-v? Do we have to buy windows server 2008 to run Hyper-V (28 $)? then how much is windows server 2008? I heard of people buying virtualization product to run operating systems, who will buy operating system to run virtualization??? how logical is that? there is big problem with microsoft's this strategy dont wonder if microsoft comes with offer "12 Underwears free with windows 2010 server!!!" and next day "Jockey" feels the competition!!! because microsoft's reach is more :D
I am not sure why everyone was so upset with the article. Simple facts were stated. Every tech guy working on their next MCSE (or whatever they call it now) will make use of Hyper-V. They may pine for VMware but will not have easy access to it due to hardware limitations. This will of course broaden the MS base. Second, many CIOs think getting on a single platform is the way to go and that platform like it or not tends to be MS. Is is fair, not really but the business world never is. For that matter all the whining I see of MS running a competitor out of business is kind of funny. Intel, Cisco, Google, Apple all actively try to do this daily. Get over it. Finally ... MS may not innovate in a kewl way like Apple .. oh LOL ... thats right they copy too as does Cisco, Intel and all other bloated huge companies. It is easier to aquire than to create.