I like VMware.  I like the company – but more importantly I like the company’s products.  But I can see the signs of complacency in the company.  Paul Maritz, the CEO of VMware and an ex-Microsoft executive, should know better than anyone the dangers of complacency when the person in your rear view mirror is Microsoft.  There are two dangers when using your rear view mirror to check out your competition.  The first is that objects are closer than they appear – and the second is that it’s difficult to tell the acceleration of what you’re looking at in your rear view mirror until it’s too late to do much about it.

Microsoft is attacking VMware from the bottom up – on in the parlance of virtualization vendors, from the lowest-cost hypervisor up the stack.  Sure, Microsoft will expend a ton of R&D and marketing at the top of the virtualization stack – but the win will come from the bottom-up.  And of course this is where VMware is the most vulnerable.  Because this is where VMware continues to make strategic mistakes by crippling the functionality of its free ESXi offering.

The first version of Hyper-V Server, like most initial versions of Microsoft products, in a word, sucked.  But with the latest R2 SP1 release builds upon an increasingly credible Hyper-V Server R2 release – and the relatively esoteric arguments concerning dynamic memory versus VMware’s memory overcommit is masking a more fundamental truth.  Not only is Hyper-V a more affordable solution in the upstream stack (the paid versions of the hypervisor) but it is a more affordable solution in the free stack.  And the free stack is where the attack is being made most successfully.

Does Hyper-V Server have its issues?  Of course.  The attack surface is much larger than VMware’s ESXi and has as its basis the Windows code which is the target of much of the malicious attacks on operating systems to date.  The flip side to that which is not often enough mentioned is that the incredible hardware compatibility of Hyper-V server is a big plus for Microsoft.  But this isn’t where the battle will be won or lost.

VMware is crippling free ESXi in ways reminiscent of some of the worst marketing decisions that any company has ever made.  The restrictions against using the vStorage API set that don’t allow third-party vendors to backup free ESXi and the inability to use PowerCLI in free ESXi are the prime examples.  What this does is take the “free” ESXi and put it at a distinct competitive disadvantage to the “free-er” Hyper-V server – which does not share these restrictions.

Look – is VMware technically more elegant than Hyper-V?  Absolutely – without a doubt.  But the graveyards of venture capital funded startups is littered with companies that had a better technical solution than Microsoft but discounted the company’s ability to inexorably excoriate those startups through fundamentally appealing to the value proposition of its customers.

I understand the problem of self-cannibalizing the revenue stream associated with licensed ESXi – I really do.  Recently, I had to make the decision to put at risk a significant portion of my company’s revenue stream by eliminating a “protected storage capacity” model in our backup appliances and move to an unrestricted licensing model.  Do we have to sell more units to make the same revenue?  Absolutely.  But we understood that in order to have the best chance of keeping and increasing our market share, we had to be aggressive.  Now, VMware is the market leader for hypervisors – so the situation is different.  But VMware is directly in the cross-hairs of Microsoft.  And despite Microsoft’s bumbling of many things, the lessons of Netscape should be apparent.

VMware – don’t whistle past this graveyard.  Attack the encroachment of Hyper-V Server by unchaining your free ESXi offering.  Otherwise, you’re committing corporate suicide.

Comments

  1. I agree. Objects may be closer than they appear indeed.
    Further adding to MS's advantage is the comfortability level of the average technician or Network Administrator with Windows vs. Linux. When the poo hits the fan many techs I know would rather see a BSOD than a kernel panic.

  2. Just look at what happened to Novell as Microsoft took over the NOS market. That could be VMware in 5 years time.

  3. I don't know about this. Any organization taking virtualization seriously would take the following into consideration:

    1) They would be using vSphere/VirtualCenter and thus would have a paid-for version of ESX/ESXi
    2) They would have to seriously think about future compatibility – Hyper-V is great at virtualizing Windows, but would you want to trust the future of your company on Microsoft's consistent trend of locking out other operating systems?
    3) VMware Workstation, Fusion and Player images are all importable into VMware ESX, and VMware have consistently championed the cross-vendor Virtual Appliance format.
    4) Microsoft has nothing like VMware Lab Manager (an absolute godsend to any ISV large or small)
    5) Management tools are seriously lacking in Microsoft's implementation

    I can understand that companies like Unitrends would be unhappy with VMware's decision (i.e. they'd rather customers pay for the backup solution and not have to pay for the hypervisor), but I really don't think that VMware has that much to worry about from Microsoft. Some key facts:

    1. VMware vSphere supports 65 guest operating systems versus Hyper-V R2 supporting only 17
    2. VMware vSphere supports more Microsoft operating systems than Microsoft Hyper-V R2 itself
    3. VMware vSphere supports 6 times more Linux operating systems than Hyper-V R2
    4. VMware vSphere Wins Best of Microsoft TechEd Attendee’s Pick Award (last week).

    Microsoft may be great at propaganda, but Hyper-V is really not taking off like they wanted to (especially with the Salesforce.Com, Google and Novell partnerships with VMware recently).

    Bottom line? When an enterprise wants to do virtualization seriously today (and for the foreseeable future), they call VMware. 😉

    Thanks!

    S.

  4. Scott: Hyper-V Server (which is different than Windows 2008 Server's Hyper-V role) is a free stand-alone ESXi competitor. One of the things that is going on is that there's an increasing understanding of this in the market, and that's the danger to VMware. The link to it is here: http://www.microsoft.com/hyper-v-server/en/us/d

  5. V Wolf: Thank you TREMENDOUSLY for the link to this post – I actually left a message over there which I'm going to reposition below. I think that you're right about the attack surface not being a major issue – and I think that you're right that VMware has a superior management tool stack. My point is really that Microsoft is gaining a foothold. One thing I'd note to you is that we're seeing a big uptick in SMB Hyper-V adoption – and there are studies out there showing that there's a big surge that's anticipated in the next 12 months.

    Again, I'm a big fan of VMware – think it's a superior overall solution – but I think that on their current course and speed they are heading for a good bit of market share erosion.

    In any case, here's the comment I posted at the other blog – the one you liked to…

    I think you're absolutely right in that VMware has a superior management toolset. At the same time, I've made the case in the blog post below that the danger to VMware is from the bottom-up – because of VMware's crippling of “free” ESXi and Microsoft's free Hyper-V Server 2008 R2 SP1. Blog post at

    https://blogs.unitrends.com/index.php/2010/

    The point I'd make to you isn't that you're in any way wrong – because again, I think that VMware has a superior higher-level management stack. But I think that by attacking from the bottom-up with the free version Microsoft is gaining a foothold while it continues to invest in the higher level tools – and I think that you have an increasing third-party ecosystem of management tools for both VMware and Microsoft (and Xen.)

  6. That's a great point – that Microsoft has an installed base advantage. I never thought about it that way because of the significant market share advantage that VMware has today in virtualization – but you're right – this makes it more imperative that VMware not allow Microsoft to encroach at the “free” level.

  7. [Hey – this is such a great point that I wanted to make sure to respond in both places you raise it – so sorry if this is redundant with my earlier response.]

    V Wolf: Thank you TREMENDOUSLY for the link to this post – I actually left a message over there which I'm going to reposition below. I think that you're right about the attack surface not being a major issue – and I think that you're right that VMware has a superior management tool stack. My point is really that Microsoft is gaining a foothold. One thing I'd note to you is that we're seeing a big uptick in SMB Hyper-V adoption – and there are studies out there showing that there's a big surge that's anticipated in the next 12 months.

    Again, I'm a big fan of VMware – think it's a superior overall solution – but I think that on their current course and speed they are heading for a good bit of market share erosion.

    In any case, here's the comment I posted at the other blog – the one you liked to…

    I think you're absolutely right in that VMware has a superior management toolset. At the same time, I've made the case in the blog post below that the danger to VMware is from the bottom-up – because of VMware's crippling of “free” ESXi and Microsoft's free Hyper-V Server 2008 R2 SP1. Blog post at

    https://blogs.unitrends.com/index.php/2010/

    The point I'd make to you isn't that you're in any way wrong – because again, I think that VMware has a superior higher-level management stack. But I think that by attacking from the bottom-up with the free version Microsoft is gaining a foothold while it continues to invest in the higher level tools – and I think that you have an increasing third-party ecosystem of management tools for both VMware and Microsoft (and Xen.)

  8. Stewart: Yep, that's my worry. I want competition in the virtualization market and I like VMware's approach. This is EXACTLY what I don't want. I thought the recent announcement between VMware and Novell was kind of interesting for just this reason.

  9. Rom: Some really great points. And I think that largely you have a set of really valid points – that when people are willing to spend and value technology over price, then VMware wins (note: there are a series of very debatable points in your post – such as the number of guest operating systems supported and what “support” really means – but I think that rather than nit-pick it's best to concede to your overall point since that was what I was trying to express in my point.) This is EXACTLY why I start off with the fact that I like VMware – the company and its products.

    The trouble is that I see Microsoft as a company that relentlessly grinds away at a competitor's technology advantages while always appealing to the valuation argument. And at the free level, which is where people are going to start evaluating, particularly in the SMB space, I think that VMware is putting itself at risk DESPITE these wonderful technologies.

    And I think that you're correct that “companies like Unitrends” have a vested interest in wishing that VMware would make their “free ESXi” completely free rather than “partially free.” I think that there are relatively few “companies like Unitrends” – most ascribe to the VMware philosophy of charging for these types of features – whereby we make our VMware protection (like all other protection) available without additional charges.

    But the truth is that by backing up at the GOS (guest operating system) level people can have “free” backup – and truthfully, that's not what motivated me.

    What motivated me was the sheer number of SMBs that I see that are evaluating and in early stage adoption of free Hyper-V Server. In addition, I've been surprised at larger company interest in the economics of Hyper-V licensing (not just the free version, but the roles within Windows Server 2008.)

    Since you – quite rightfully and politely – questioned my motivations – let me be clear about another one. I'd rather we have an open and vibrant set of competitors at the operating system and virtualization and storage levels – Unitrends as a company has as one of its core tenants the support of heterogeneous environments. I wrote this as a wake-up call for VMware – because I think that Microsoft is in the early stages of taking a lot of share from them – and I'd like to see VMware become more competitive with Microsoft at the free levels as well as continue its dominance at the higher levels of the virtualization stack.

  10. Hyper-V is considered “free” because it's wrapped in with Microsoft's OS product. Much like Microsoft's strategy to eliminate Netscape by wrapping Explorer in with its OS product. There's a fundamental difference though with VMware; VMware helps Microsoft facilitate OS deployment through VMs, as VMware helps other x86 OS vendors ease their OS deplyments. Microsoft's strategy is to eliminate OS competition, VMware's strategy is to allow the customer to choose the best OS for their applications then make it highly available.

  11. Masw21: What worries me isn't the Hyper-V role in Windows Server 2008; what worries me is the stand-alone Hyper-V Server (particularly the more capable R2 SP1 version) and that ending up being the vehicle by which in the longer term VMware suffers. Again – I know it sounds strange – I like VMware's products and think that they are technically elegant. But being in the SMB (small and medium business) space, I see what's going on in terms of a lot of consideration being given the “really free” Hyper-V server.

  12. Hi Rom,

    I agree with a lot of what you are saying. I do have a slightly different take on it though, I think that if VMware just opens the backup API on ESXi, they'll gain additional mind-share in the free hypervisor market. What I mean by that is, that there are a lot of small businesses and even home IT geeks,exploring virtualization that can't really afford a full VMWare solution — yet. However, if you give them a free hypervisor with backup support, you'll be encouraging them to marry themselves to the VMWare brand.

    Additionally, your point about this being good for Unitrends is salient but that is also true for any third party backup vendor and these vendors are increasingly likely to help promote all of VMware's product offerings if the backup API is included in free ESXi.

    So, this certainly is a long term investment but we all have seen Microsoft's ability to use the “free” model to it's long term advantage. Even when the product is severely inferior to the leading vendors product offering. Then they simply bundle it with the OS and own the mind-share.

  13. Hyper-V is considered “free” because it's wrapped in with Microsoft's OS product. Much like Microsoft's strategy to eliminate Netscape by wrapping Explorer in with its OS product. There's a fundamental difference though with VMware; VMware helps Microsoft facilitate OS deployment through VMs, as VMware helps other x86 OS vendors ease their OS deplyments. Microsoft's strategy is to eliminate OS competition, VMware's strategy is to allow the customer to choose the best OS for their applications then make it highly available.

  14. Masw21: What worries me isn't the Hyper-V role in Windows Server 2008; what worries me is the stand-alone Hyper-V Server (particularly the more capable R2 SP1 version) and that ending up being the vehicle by which in the longer term VMware suffers. Again – I know it sounds strange – I like VMware's products and think that they are technically elegant. But being in the SMB (small and medium business) space, I see what's going on in terms of a lot of consideration being given the “really free” Hyper-V server.

  15. Hi Rom,

    I agree with a lot of what you are saying. I do have a slightly different take on it though, I think that if VMware just opens the backup API on ESXi, they'll gain additional mind-share in the free hypervisor market. What I mean by that is, that there are a lot of small businesses and even home IT geeks,exploring virtualization that can't really afford a full VMWare solution — yet. However, if you give them a free hypervisor with backup support, you'll be encouraging them to marry themselves to the VMWare brand.

    Additionally, your point about this being good for Unitrends is salient but that is also true for any third party backup vendor and these vendors are increasingly likely to help promote all of VMware's product offerings if the backup API is included in free ESXi.

    So, this certainly is a long term investment but we all have seen Microsoft's ability to use the “free” model to it's long term advantage. Even when the product is severely inferior to the leading vendors product offering. Then they simply bundle it with the OS and own the mind-share.

  16. Yes, I agree with you. Ironically Microsoft sees themselves as the one to beat, but in reality THEY are they underdog in a the virtual world, and it's making Microsoft make changes.

    VM Ware has definitely started coasting… Microsoft is coming on strong, and they should not be counted out. I worry about their new CEO (post Bill Gates) being able to sustain this however, still I think Microsoft should be taken seriously.

    Another argument about the “FREE” offering is that it's FREE in that you don't pay it for as a SEPARATE piece, like adding potatoes to your meal at a restaurant, but when the check comes that steak is still 30 bucks. You can pay for it now or pay for it as part of your Enterprise umbrella, but it's definitely NOT FREE. It's just included with your yearly subscription….

    So to an administrator like me it's easier to put on the budget. Buy a server, then buy a License for VM Ware.. oh and by the way, need to include those other add-ons (HA, DRS, etc..).

    with MS it's easier to slip in the door, buy a server, MS Windows 2008 is included in the price. No other line items. If I had to put this before a board or CIO, he would skoff at the VM Ware price.. but wouldn't even look twice at the MS quote. I know I see it everyday. We have VM Ware.. but we have to fight to get more VM Licenses and servers, because sticker shock.

  17. While ESXi is somewhat crippleware, the bigger issue I’ve seen are students in higher education. Microsoft has long targeted them, offering MSDN licensing for a song to use, learn, and be taught all of Microsoft’s enterprise products. What does VMware offer? A discount on Workstation. Beyond students looking into administration at technical colleges and universities there is a big $ incentive to use Microsoft’s products. Now look into corporate where there is a significant development presence, developers writing code in Visual Studio typically have developers licensing which also allows the organization to use Hyper-V with all the bells and whistles for free (as long as it’s for the developers to develop there code on). In large environments Hyper-V is still lacking features and costs more up-front compared to VMware (in some scenarios). Development wages against running a different platform in development from production as it adds additional variables which cannot always be tested and adding in support for multiple virtualization platforms the costs add up. When organizations start to look at the TCO of Hyper-V they might find it cheaper and that is a BIG problem for VMware but as it currently stands they don’t see it.

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