Microsoft Plays Catch-Up In Server Virtualization

Microsoft arrived late to the virtualization market and still has holes in its product portfolio. As it fights for market share, partners say Microsoft's traditional strategy of pricing competitors out of the market will be tested like never before.

The rapid acceleration of the virtualization market was recently underscored by VMware's strong $1.1 billion initial public offering and Citrix Systems' pending $500 million acquisition of open source virtualization vendor XenSource, expected to close in the fourth quarter.

Microsoft, which partners with Citrix, currently offers 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 product, the Viridian hypervisor, is slated to arrive in the second half of next year, although Microsoft has already delayed the beta release.

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This delay means that Microsoft is losing further ground in the virtualization market and leaving partners with no choice but to sell competitors' solutions, several sources told CRN.

Microsoft is behind in the mission critical virtualization market because it's missing key features found in competitors' offerings, says Cor Knijnenburg, CEO of Core Consulting, Plano, Texas.

For example, VMware's VMotion product, which makes it possible to move running virtual machines from one physical server to another, has no equivalent in the Microsoft virtualization portfolio. "If you have a mission critical application in a virtual environment, that's a useful tool," said Knijnenburg.

Microsoft plans to spark widespread adoption of its virtualization products through competitive pricing, says Larry Orecklin, general manager of Microsoft's System Center and Virtualization group.

"Virtualization is an important feature of the operating system and shouldn't be a technology that organizations have to pay more in order to utilize," said Orecklin.

But cost isn't neccesarily a primary motivator for companies looking to add virtualization, says Chris Ward, senior solutions architect at Greenpages, a solution provider in Kittery, Me.

While some VMware competitors market products similar to ESX Server at a lower price, VMware is perceived as the most mature product on the market, and customers are willing to pay a significant amount more to go this route, Ward says.

"Customers don't necessarily take price into consideration when it comes to virtualization, probably because they're not as concerned due to ROI of virtualization and the amount of money they save from not having to buy new hardware," said Ward.

NEXT: Microsoft Fights Back

However, Rand Morimoto, president of Convergent Computing, an Oakland, Calif.-based solution provider, insists that pricing is one of the main benefits of going with Microsoft virtualization.

"The point where licensing costs come to play is that Microsoft Virtual Server is a free download, whereas VMware ESX Server is not free," said Morimoto. "And if an organization plans to cluster their servers, which is pretty common these days for high availability environments, Windows clustering services comes with Windows Server R2 Enterprise and Datacenter at no additional charge."

When Viridian does arrive, Microsoft may find that organizations that have already chosen a virtualization vendor aren't willing to switch just because Microsoft has a cheaper product, according to one East Coast Microsoft Gold partner.

"Microsoft's opportunity will be with those that haven't yet made substantial virtualization investments. They're not going to go into organizations with VMware and convince them to change at this point," said the source, who requested anonymity.

Another challenge Microsoft faces is that nearly every other virtualization engine on the market is based on Linux in some shape or form, says Ward. "And you can be pretty sure that there's no way that Microsoft will have any Linux embedded in Viridian when it comes out," he said.

In terms of benefits, the bare metal footprint and the ability to customize the kernel are the key reasons why many organizations prefer Linux based virtualization, says Ward. With so-called hosted virtualization, the virtual layer runs on top of an operating system, but with bare metal virtualization, the hypervisor runs on the hardware itself.

"In a virtualized environment, you don't want the kernel to eat up resources and CPU cycles, and it's easy with Linux to customize the kernel and only put in what you need to get the virtual environment up and running," Ward said.

Orecklin says because Microsoft's virtualization portfolio will extend from the desktop all the way to the data center, there will be opportunities for the vendor and its partners to build applications in between.

Microsoft holds a trump card of sorts with its System Center portfolio, which provides management for both physical and virtual assets, and monitors the health of virtual machines and applications, Orecklin said. "The more you virtualize, the more that management of the environment becomes important," he said.

One of the main areas of value that partners provide in virtualization are the strong customer relationships they have with customers, according to Orecklin. "As enterprises look at taking advantage of new technologies, they're going to look to trusted partners," he said.

Solution providers with skin in the virtualization game say they're making money from the integration and configuration services for virtual servers that are necessary for optimal performance, says Knijnenburg.

"We also make money on integrating Virtual Server into a SAN environment, which is one area where the product works very well. The physical host doesn't have to have a lot of disc space, just memory and processing power tied back to a SAN," Knijnenburg said.