The State of Hypervisor Competition

Brian Wood Blog

VMware is the most popular hypervisor — which is why AIS BusinessCloud1 uses VMware vCloud Director.

But other hypervisors have their own fan base too.

The article below is from analysts Rachel Chalmers and Peter ffoulkes of 451 Research.

Emphasis in red added by me.

Brian Wood, VP Marketing


Another look at the big four (or five) hypervisors – with one surprising conclusion

The x86 server virtualization market – not the management layers on top of it, but the core function of virtualizing an x86 server – is at the point of saturation and commodification.

There’s no question that VMware owns this market. Most organizations won’t switch away from their VMware investment – at least until VMware or one of its competitors gives them a compelling reason to switch.

So why are we fielding constant incoming inquiry about the state of the hypervisor market? Why does TheInfoPro’s (a service of 451 Research) Server and Virtualization Wave show that 43% of respondents plan to follow a heterogeneous hypervisor strategy – with 63% of these saying that they were already implementing heterogeneity in 2012? When the time comes to renew VMware Enterprise License Agreements (ELAs), why do 38% of organizations say they will consider switching at least 20% of their Windows virtualization to another supplier?

The leading reason is cost. VMware’s core technology, ESXi, is free. But every management layer built upon it is expensive. What’s more, VMware’s business model – laid out in great detail by incoming CEO Pat Gelsinger in a call with investors – requires it to both maintain those relatively high prices and to coax customers from the free products to the costliest ones.

Depending on how you look at it, VMware has three or four chief rivals in the server virtualization market. To a first approximation, that is, there are three alternative technologies – Hyper-V, Xen and KVM – and four vendors – Microsoft with Hyper-V, Citrix Systems and Oracle pushing variations of Xen, and Red Hat throwing its weight behind KVM. Four hypervisors and five vendors lead to one counterintuitive conclusion.

A quick look at these vendors’ business models illustrates the dilemma faced by VMware. Microsoft’s Server and Tools Business (STB) – its management layers – accounts for a healthy quarter or so of its overall revenue. But revenue from Windows and from Business – essentially Microsoft Office and other applications – contribute even more to the bottom line. And the STB revenue isn’t wholly derived from the virtual machine management tools. Microsoft does not depend on monetizing VM management to the same extent as VMware.

The pictures for Citrix Systems, Oracle and Red Hat are, of course, very similar. Citrix makes most of its money from application delivery – in effect, from XenApp, the terminal services product that (despite its name) includes only a small contribution from Xen, per se. Oracle’s revenue from database, applications and hardware dwarfs anything it might ever earn from OracleVM. And Red Hat wins repeat business on the strength of its trusted name as a distributor and supporter of what’s essentially free open source software. None of the three need to win massive licensing deals for VM management.

VMware does, and this is the best explanation for its 2011 misstep around vRAM-based pricing, an understandable but disastrous move that succeeded in getting many loyal customers to reevaluate the competition. Microsoft was the leading vendor under consideration by 67% of respondents to TheInfoPro Wave. This trend is what’s driving interest in HotLink, a company whose technology extends VMware’s vCenter console to manage Hyper-V, XenServer and KVM.

Hyper-V was also getting vastly increased scrutiny from another key demographic – VMware’s third-party ISV ecosystem. We fielded a number of calls from longtime VMware partners who, alarmed by the vRAM pricing kerfuffle, were examining all their options – from adding Xen, KVM and especially Hyper-V support, to other business models altogether.

As their next platform, a surprising number of these decided not to support Hyper-V or any alternative hypervisor at all, but Amazon Web Services. (Among these AWS supporters? None other than heterogeneity poster child HotLink.) The future they foresee is one in which the majority of the enterprises on the server virtualization bell curve, already committed to their VMware ELA, seek to contain their licensing costs – not (or not only) by adding free hypervisors, but by incorporating the public cloud. It’s a trend that points the way toward what we call digital infrastructure, and it’s one we intend to examine in much more detail in the coming months.