Real Virtualization Battle Looms
By BEN CHARNY and DON CLARK
Wall Street Journal
February 26, 2008; Page B4
A technology called virtualization has become a big hit lately. But use of the software could soon kick into an even higher gear, because of new competition and technology changes that could widen its appeal.
The biggest development is a forthcoming offering from giant Microsoft Corp. called Hyper-V, which poses what could be the most serious competition yet to market leader VMware Inc. Microsoft released a test version of the software in February, and some analysts expect Hyper-V to be equal to VMware's products when it comes to doing some tasks.
"Microsoft looks promising; what they have puts them into a stronger position," says Nick van der Zweep, director of virtualization for Hewlett-Packard Co., which sells servers and other networking hardware. H-P, which helps customers install VMware software, expects to add support for Microsoft's software, too.
Travis Grubbs, vice president of Dallas-based software products reseller ePartners Inc., says his company has deployed VMware's software to use its server systems more efficiently. He still considers himself a big fan of VMware, but also plans to put the Microsoft product through some tests. "Of course we're taking a look at Hyper-V," Mr. Grubbs said.
VMWare isn't standing still. Today it announced agreements with server vendors Hewlett-Packard, Dell Inc., International Business Machines Corp. and Fujitsu Siemens Computers to install free versions of its Hypervisor on their servers, so customers can start running VMware virtualization minutes after they boot up a new system. Diane Greene, President of VMware, said in an interview that having the basic hypervisor on the system will make it easy for customers to buy additional software from VMware.
Virtualization is a concept from the 1960s that VMware helped popularize on the widely used class of servers that use chips from Intel Corp. and Advanced Micro Devices Inc. Companies initially used those systems to run one application program each; as a result, many systems often ran at 15% or less of their capacity.
With virtualization, a layer of software called a hypervisor emulates the underlying hardware of a server, allowing a system to run multiple operating systems and their associated application programs. As a result, one server may do work that once took eight or more machines, reducing not only hardware spending but other costs such as electrical and technicians to maintain multiple systems.
VMware, Palo Alto, Calif., dominates the market, which market-researcher Gartner Inc. expects to more than double from $6.5 billion to $11 billion by 2010. Microsoft's Hyper-V, due out in June, is the Redmond, Wash., company's second major product in the field, after an offering in 2004 that didn't offer a hypervisor and didn't gain much acceptance.
VMware customers aren't ready to say they will switch, but seem to welcome the competition. One is Mike Carvalho, chief technology officer of the Benecia, Calif., auto radiator retailer Radiator Express Warehouse Inc. He says Hyper-V may eventually help reduce his company's utilization of servers and could also pressure VMware to lower prices of their premium products.
Mr. Carvalho plans to check out Hyper-V when it is released, but says he likely won't commit to broad testing until Microsoft comes out with a second or third iteration, which could take another year or more.
Larry Orecklin, Microsoft's general manager for server infrastructure, said thousands of businesses already are evaluating the Hyper-V product. "We expect very broad adoption; it's certainly priced to assure broad adoption," he said. "For those customers already implementing VMware, they can maintain their current workloads on VMware, and as they expand, they can leverage Microsoft and migrate over time."
At VMware, developers have been asked to make a new VMware release around late September, in order to outperform Microsoft, says Cowen & Co. analyst Walter Pritchard. A VMware spokesman declined to comment on a new release, but VMware officials say they believe the company will prevail over Microsoft given its nearly 10-year technology development lead.
"We certainly get questions about it [Hyper-V], but Microsoft doesn't have a product yet," says Steve Herrod, VMware's chief technology officer. "We're confident our 10 years of work will be most important."
VMware's first virtualization products were introduced in 1998. Competition didn't really surface until 2006, when two open-source versions of the software were introduced, one distributed by XenSource, which has since been acquired by Citrix Systems Inc., and Virtual Iron Software Inc. of Lowell, Mass.
Despite the rapid spread of the technology, many companies haven't been able to benefit much from virtualization. That is largely because of a communications bottleneck between server systems that has made it impractical to use virtualization for some of the most demanding applications, such as large databases and video-storage software.
A start-up called Neterion Inc. this week is discussing technology to address the problem, and some analysts are expecting it to have a noticeable impact.
"This will enable corporate users to virtualize a whole new class of applications in their data centers," said Jeff Byrne, a senior analyst at the market-research firm Taneja Group, in an e-mail exchange.
Some programs have particularly heavy needs to fetch data from storage systems and other servers. With current technology, multiple copies of those programs can end up waiting their turn for information to be delivered over devices called network adapters.
Neterion, a closely held company in Cupertino, Calif., already has the largest market share among makers of high-end adapters that transfer 10 gigabits of data per second, said Bob Wheeler, senior analyst at Linley Group, a market-research firm. Now it has developed a new chip that breaks that capacity into 17 separate channels for fetching data.
Individual programs can be effectively assured their own data channel, meaning that they won't vie for the same pathway to retrieve information and won't wait long for it, said Dave Zabrowski, Neterion's chief executive. One of the company's customers had already used virtualization to reduce the number of servers it needed for a set of programs from 32 to nine; with the new technology, it expects to use one server for all 32 programs, he said.
Neterion's new adapter, labeled the X3100, is expected to be available in the second half of the year at price of $900 to $1,000 -- the same cost as its existing adapters that don't have the new benefits. The company will sell the adapters separately, but expects computer makers also to sell the hardware along with their servers.
Nik Simpson, an analyst at the Burton Group, said Neterion is the first to take advantage of a new set of technical standards to help design such adapters. Mr. Zabrowski said he expects that competitors, which include giant Intel, will follow suit with similar products. But he added, "We will have a time-to-market advantage."
--William M. Bulkeley contributed to this article.
Write to Ben Charny at ben.charny@dowjones.com and Don Clark at don.clark@wsj.com
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