Microsoft Jockeying For Position In Virtualization Race

Microsoft arrived late to the virtualization market and still has some holes in its product portfolio. As it fights for market share, partners say the company's traditional strategy of pricing competitors out of the market may not be as effective in the virtualization arena as it has been in other markets.

What's clear is that Microsoft sees the rapid acceleration of the virtualization market and wants a piece of the action. The health of the market was underscored by VMware's strong $1.1 billion initial public offering and Citrix Systems' pending $500 million acquisition of open-source virtualization vendor XenSource, which is expected to close in the fourth quarter. In the wake of the latter, industry analysts have speculated that Microsoft may be considering acquiring Citrix, with which it already partners.

Microsoft currently offers a line of virtualization products that its partners say are seeing steady growth: Virtual PC and Virtual Server 2005 for desktop and entry-level server virtualization; SoftGrid for application virtualization; and terminal services for the presentation level. What Microsoft doesn't have right now is a server virtualization product to compete with popular offerings such as VMware's ESX Server. That will come with the Viridian hypervisor, which is slated to arrive in the second half of next year, six months after the release of Windows Server 2008.

The problem is, Microsoft has already delayed the beta release of Viridian, and the longer the delay runs, the more Microsoft risks losing further ground in the virtualization market, leaving its partners with no choice but to sell competitors' solutions, several sources told Solutions Inc. on condition of anonymity.

And given that VMware holds a commanding lead in server virtualization—with a 55 percent share of the market, followed by Microsoft's Windows Virtual Server with 29 percent, according to the Yankee Group—Microsoft has quite a bit of catching up to do.

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