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Hyper-V won't sail past VMware on price alone, users say

Microsoft's Hyper-V is priced aggressively, but VMware users that have invested money and time in the software won't switch without proven performance results.

When Microsoft's hypervisor-based virtualization product Hyper-V hits the market in August 2008, it will cost only $28 per physical host. But users and analysts say that even at that price, Microsoft's product will have to be superior to VMware for widespread adoption to take place.

For more on pricing and virtual technologies:
Citrix simplifies XenServer pricing model; VMware to follow?

VMware pricing draws large enterprises' ire

VMware stock plummets, but the company won't ease pricing in 2008

Users that have invested in VMware infrastructure in recent years and reaped the benefits of virtualization -- such as lower power cost and better server utilization -- say they won't switch to Microsoft for anything less than superior performance. To boot, there is speculation that Palo Alto, Calif.-based VMware Inc. will reduce prices.

"When companies invest significant time and money in adopting a given technology, they generally stick with it," said Charles King, an analyst at Hayward, Calif.-based Pund-IT Inc. "Since VMware provides excellent value and performance, displacing the company from satisfied customers will require Hyper-V to deliver a real sea-change experience." So while price may not prompt substantial defection from VMware, better features, better value and better performance might.

Performance, performance, performance
But Hyper-V may create competition for VMware among new adopters and smaller companies. "I believe that one real area of opportunity for Hyper-V is in bringing small businesses into the world of virtualization.," King said. "Commercial solutions are not cost-effective for many smaller companies, so Hyper-V could be a particularly attractive option for them."

Since VMware provides excellent value and performance, displacing the company from satisfied customers will require Hyper-V to deliver a real sea-change experience.
Charles King,
analystPund-IT Inc.

Jeremy Page , a senior systems administrator at a fueling and retail management systems company, said that large data centers and companies that require nonstop uptime will probably stay loyal to tried-and-true VMware products. "If I had five smallish servers all with direct attached storage, I'd use Hyper-V in a heartbeat. [But if you have] 300-plus servers with 50-plus TB of data and a 24/7 uptime requirement? ESX all the way."

And the numerous features VMware offers, like VMotion -- which allows users to move virtual machines (VMs) to new hardware without shutting down systems -- and Site Recovery Manager for disaster recovery make VMware worth the premium, Page said.

But VMware shouldn't rest on its laurels; even users who believe that VMware is the best gig in town want a choice, and companies like Microsoft and Citrix Systems Inc. have begun to offer that choice. "I want Microsoft to kick butt in this realm," Page said. "But right now ESX is almost a one-man show for large, heterogeneous data centers and I'd like to have options and leverage when negotiating prices."

"If Hyper-V is even close to VMware's ESX performance," Andrew S. Baker, the vice president of IT operations at application service provider Automated Resources Group Inc., wrote in a blog, "then it will be an easier entry point [into virtualization] for predominantly Windows shops -- especially when you consider the licensing implications of the VMs running on the host. That is where the real cost savings are," Baker wrote. "Also, the management platform of System Center Virtual Machine Manager is priced better than VirtualCenter from VMware. But Hyper-V will have to be good enough to be considered."

Tom Anderson, a senior systems engineer at Keene, N.H.-based insurance company, Main Street America Group, said when Hyper-V becomes available, he will compare it with VMware, but echoed the sentiment that it would take some magic for a complete conversion from VMware to Microsoft.

"I suspect companies who are heavily invested in VMware technology would not switch for a lower-cost product just for the sake of cost," Anderson said. "Microsoft will need to produce a product that is equivalent, if not better. Will this be another Netscape-vs.-Internet-Explorer-type war? I think you will find each product will find a niche with small, medium and larger corporations."

Virtualization pricing pressure heats up
VMware's pricing model is a per-processor structure, which the company defines as a single physical chip that contains no more than four processor cores. The company's pricing has been the source of user complaints and a major reason for user defection to competitors like Virtual Iron Software Inc. of Lowell, Mass., and Citrix Systems' XenServer.

Recently, Citrix Systems simplified its pricing model for XenServer to make the product more desirable, especially with Hyper-V's release at the gates.

Chris Wolf, a senior analyst at Midvale, Utah-based Burton Group said that as competition increases VMware will likely lower its prices.

"Until this year, [VMware] didn't have any real competition, especially in the enterprise," Wolf said. "By the second half of this year, VMware is going to have competition on a number of fronts. I think price reductions [are] a good possibility, but I also expect VMware to work to defend their existing pricing model. The VMware folks feel that even at a higher cost per license, elements of their architecture … can lead to greater consolidation densities per physical host, so the cost per VM may actually be less in a VMware ESX environment than comparable lower-priced platforms."

Ben Matheson, senior director of alliance marketing and global campaigns at VMware, said the management features of Virtual Infrastructure offered by VMware and other tools, like Stage Manager and High Availability, make it worth the premium. He said company has no "immediate" plans to change its pricing for its estimated 100,000 customers.

"Ultimately, it is up to the customers to determine which technology they want to deploy," Matheson said. "We feel we are in a good position to win customer love. Our customers tell us our tools help them save money immediately and long term in maintenance costs."

Let us know what you think about the story; email Bridget Botelho, News Writer. And check out the Server Virtualization blog.

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