The 10 Biggest Virtualization Stories Of 2015

2015: The Impact Of Virtualization

Although server virtualization is still an important business for VMware and Microsoft, this year brought many examples of how virtualization technology is impacting other parts of the enterprise technology business.

The rise of hyper-converged infrastructure, and heavily funded startups like Nutanix and SimpliVity, stems in large part from storage virtualization technology these companies have developed. And then there's data virtualization, an emerging yet fast-growing area that speeds development and deployment of all sorts of applications.

If there's one lesson to be learned this year, it's that virtualization is now old enough for the early players to face disruption from startups touting new ways of achieving data center and cloud efficiencies. Some of these old-school enterprise players will adjust, and it's likely that others won't be able to do so fast enough.

CRN here presents our picks for the 10 biggest virtualization stories of 2015.

10. VMware's Stock Hits A Wall After Dell-EMC Deal Unveiled

VMware shares, as of mid-December, are down more than 29 percent since the Dell-EMC deal was announced Oct. 12, and the virtualization vendor has shed more than $9 billion of market capitalization during that period.

VMware shares nose-dived the day after Dell unveiled its $67.1 billion bid to acquire EMC. Wall Street analysts said VMware investors are wary of the fact that EMC shareholders would get a "tracking stock" in VMware if the Dell-EMC gets approved by regulators. This could lead to more VMware shares hitting the open market as opposed to be controlled by EMC, they said.

VMware shares plummeted again on Oct. 20, the day after VMWare and EMC announced plans to form a cloud joint venture with assets from their respective portfolios.

VMware CEO Pat Gelsinger said the cloud joint venture would fuel future growth, but acknowledged that this has been a "volatile" time for investors. VMware then reversed course in mid-December and said it won't be taking part in the joint venture.

In the meantime, many VMware analysts and partners believe any further decline in the vendor's stock price could put the Dell-EMC deal in serious jeopardy.

9. Microsoft Beefs Up Virtualization In Windows Server 2016, Changes Licensing

Microsoft, in its forthcoming release of Windows Server 2016, is adding two types of container offerings: a lightweight version called Windows Server Containers, and a more technologically sophisticated one called Hyper-V containers.

Hyper-V containers, released as a public preview in November, are designed for customers that require stronger security as well as "scenarios requiring a higher level of isolation," Mike Neil, corporate vice president of Microsoft's Cloud and Enterprise group, said in a blog post in November.

Windows Server 2016 handles this with technology called nested virtualization, with allows a server hypervisor to run inside a virtual machine. "Nested virtualization can be used in dev and test scenarios and is a key enabling technology for Hyper-V Containers," Neil said in the blog post.

However, this extra firepower will cost more for some customers. Microsoft is switching to per-core licensing in Windows Server 2016, and some customers will have to upgrade to the premium Windows Sever 2016 Datacenter edition to do what they're doing today with the Standard version.

8. VMware Unveils First Major Update To vSphere In Four Years

VMware, in its first major update to vSphere since 2011, added a number of features aimed at making it easier for customers to move workloads back and forth between private and public clouds.

VSphere 6, unveiled in February, includes several storage-focused features, including Virtual Volumes, a technology that pools storage from third-party storage arrays and makes it available to virtual machines.

VMware signed up 29 vendors to support Virtual Volumes at the launch of vSphere 6, and CEO Pat Gelsinger said in February that "essentially all of the storage industry" would be shipping products this year that support the technology.

VSphere 6 also features Long Distance Live Migration, a technology that makes it possible to move running VMs and workloads between hosts across geographic regions. At VMworld, VMware gave a preview of still-in-development technology that does the same with vCloud Air.

7. Hyper-Converged Startups Nutanix, SimpliVity Take Fight To Larger Foes

Nutanix and SimpliVity are the clear top dogs in the hyper-converged infrastructure market, having landed well in excess of half a billion dollars in venture funding between them. While their technological approaches are different, both have shown a proclivity for making bold claims and tangling with larger enterprise vendors.

In June, Nutanix and VMware engaged in a public war of words after Chuck Hollis, VMware's former top storage executive, called out the startup over its technology performance and support for customers. Nutanix responded by noting that VMware's hyper-converged play, EVO:RAIL, wasn't doing so hot in the marketplace.

In early December, SimpliVity CEO Doron Kempel said his company's flagship OmniCube product -- used to build private clouds -- is more financially viable than the Amazon Web Services public cloud.

"If you're an end user and you're considering what goes to AWS and what stays on-site, we're going to make an argument that … it's cheaper for you, from a [total cost of ownership] perspective, to keep workloads on-site," Kempel said at the Raymond James Technology Investors Conference in New York City.

6. Data Virtualization Startups Attract Big-Time Funding

While server virtualization is a largely mature market, the so-called data virtualization space is now heating up. Many startups in this space are touting technology that lets apps access virtual copies of data, as opposed to physical ones.

This approach, they claim, can dramatically speed application development and deployment, while also cutting storage costs. Over time, data virtualization is expected to eliminate storage bottlenecks and yield greater efficiencies in areas like cloud computing and big data analytics.

Delphix, a seven-year-old startup that uses data virtualization to speed the process of setting up new databases, landed a $75 million Series D round of funding in July led by Fidelity Management and Research Co., and has raised nearly $120 million so far.

While the low-hanging fruit in the virtualization market has mostly been picked, Delphix and other startups in this space look well-positioned to help customers squeeze even more costs from their infrastructure.

5. Google Taps VMware Co-Founder Diane Greene To Lead Cloud Business

Entrepreneur Diane Greene, who co-founded VMware in 2008 along with her husband Mendel Rosenblum, was one of the early leaders in the virtualization space. Greene was CEO when EMC acquired VMware for $600 million in 2004, as well as for its wildly successful 2007 IPO, in which shares soared 74 percent on the first day of trading. Then she was ousted in 2008 and replaced by EMC executive Paul Maritz.

Now, one of the best-known executives in virtualization is tackling a new challenge. In November, Google appointed Greene -- a member of its board of directors since 2012 -- to lead its cloud computing business. That'll be no mean feat considering that Google is trailing Amazon Web Services and Microsoft in the public cloud space, but it would be tough to bet against Greene, one of the most respected technologists in Silicon Valley.

Considering that VMware still hasn't figured out public cloud, it would be ironic if Greene ends up leading Google's to previously unforeseen heights.

4. VMware's Enterprise Licensing Agreements Face Scrutiny

Enterprise licensing agreements are supposed to save money for customers by buying software in bulk and making it easy for large organizations to quickly fulfill software needs. But these days, some VMware customers seem to be questioning whether these deals are as good as they appear.

The U.S. Army has seen higher-than-expected costs from an ELA it signed with VMware in September 2013, and sources told CRN some of the issues stem from VMware constructing the agreement so that Army commands would have to buy the whole vCloud Suite just to get vSphere. The Army National Guard ended up placing a moratorium on VMware purchases as a result of the financial impact of the ELA.

In October, sources told CRN that Apple had decided to cancel a planned $20 million ELA extension with VMware and would be switching more of its infrastructure to OpenStack and KVM virtualization.

While it's not clear what prompted Apple's decision, the loss of such a high-profile customer suggests others might be taking a closer look at their VMware ELAs.

3. Network Virtualization Space Continues To Heat Up

Network virtualization technology continued to attract attention this year, with VMware and Cisco touting the growth of their respective software-defined networking offerings, and large vendors placing bets in the emerging market of network functions virtualization.

Hewlett-Packard in May acquired ConteXtream, which sells carrier-grade software-defined networking technology based on the OpenDaylight open-source SDN project. In October, AT&T partnered with Juniper Networks to bring software-defined networking to the carrier's AT&T Integrated Cloud (AIC) offering.

VMware said in September that NSX, its software-defined networking technology, had more than 100 customers using it in production environments, and 700 paying customers overall. Security has become the No. 1 selling point VMware is using for NSX, and partners said this approach seems to be working.

Cisco said in September that it now has more than 1,000 customers for its version of SDN, called Application Centric Infrastructure (ACI). In November, Cisco said its data center switching portfolio, which consists of the Nexus 3000, Nexus 9000 and ACI, is on a $2 billion annualized run rate.

2. Citrix Systems' Year Of Turmoil

To say it has been a tough year for Citrix Systems would be an understatement. The vendor shook up its sales leadership in January, revealing that 15-year veteran Al Monserrat would be leaving. His was the first of a steady stream of top executive departures this year, which included 26-year veteran Brad Pedersen, who was employee No. 7 at Citrix.

In April, after Citrix issued a profit warning, sources told CRN the vendor was considering selling or spinning off its Online Services division, home to the GoTo line of SaaS apps.

Things came to a head in June when activist investor Elliott Management Group revealed it had taken a 7.1 percent stake in Citrix and began pushing for it to make major changes to its business. Citrix in July unveiled a "cooperation" agreement with Elliott Management and announced that CEO Mark Templeton would be stepping down.

As Citrix heads into 2016 still searching for a new CEO, there are still more questions than answers about the company's future.

1. KVM Server Virtualization Gains Serious Momentum

For years, KVM virtualization has been an interesting potential threat to VMware's server virtualization business, but this year, that challenge became more than theoretical.

Nutanix unveiled its long rumored KVM-based open-source hypervisor in June, along with technology that automatically migrates VMware-based workloads to KVM and Microsoft Hyper-V. It's all part of Acropolis, a new Nutanix product line that combines compute, storage and virtualization to run any sort of application.

Nutanix said at the time it already had some customers running KVM, and Citrix, Dell, Docker and Microsoft were among the initial wave of vendors to certify their apps to run on Acropolis.

In October, sources told CRN that Apple had backed out of a planned enterprise licensing agreement extension, which it used to run its corporate IT. The sources said Apple -- already in the midst of a concerted push to use more open-source technology -- would be switching more of its internal IT to KVM and OpenStack.

We'll have to see whether other VMware customers follow Apple's cue. But open source is the lingua franca of the cloud, and it's already shaken up other parts of the enterprise IT stack, so it's likely KVM virtualization will continue to find new adherents.