Microsoft Seals VMWare’s Fate?

Implications: Microsoft’s latest virtualization announcements are another nail in VMWare’s coffin  The key fact is not so much that Microsoft is offering this capability, since everyone knew it was coming.  The key fact is how soon and how cheaply it is available.   “Free” is always a compelling price!  The migration capability was not generally expected for several more months.

Analysis: When it became known that Microsoft was planning to move aggressively into the virtualization space VMWare and others wrote them off.  VMWare had too much of a head start in technology and installed base.  When Microsoft's Hyper-V was introduced and turned out to be a solid product, available at little or no cost, VMWare and others pointed out the areas where it lacked features and capability.  Microsoft is now plugging most of those holes, and has done so much sooner than many expected.

VMWare’s products are arguably still more technically advanced, and their installed base of virtualization software is far larger.  On the other hand, their prices are still far higher than Microsoft’s and their brand, while strong, is not remotely in the same league with the Microsoft name.  Microsoft has immense technical resources, which many people tend to forget when looking at things like Vista.  Those technical resources, focused properly, could allow Microsoft to surpass VMWare technically in a surprisingly short time.

Microsoft’s speed in plugging the major holes in Hyper-V is surprising, particularly to people accustomed to their slow Windows release cycle.  That speed should be a concern for VMWare (and VMWare investors).  If Microsoft moved this quickly to plug these holes, how long will it be until they release a product equal or better than VMWare’s best?  Most people today say never, but that may be changing quickly.

The quote from Bob Kelly, the Microsoft marketing VP mentioned in the article, "At a lower cost than other data center virtualization solutions, Microsoft software meets customers' needs from the desktop to the data center in an integrated offering on the platform they know," is key.  This statement thoroughly describes Microsoft’s winning strategy.  “Meets the customers’ needs” and “integrated offering” are the key elements, along with “lower cost”.  Microsoft does not need to provide the best technical solution.  They need to “meet the customers’ needs”.  Once they reach that goal they’re done.  Even if VMWare can still claim technical superiority, it won’t matter.  The “lower cost” and “integrated offering” will win the day for Microsoft.

The scariest part of this is that VMWare needs to worry now, not in 2-3 years.  Most people have believed that VMWare had another 2-3 years to address the Microsoft threat.  Microsoft started many years behind VMWare, they always move slowly, so another 2-3 years is a safe bet.  Maybe not!  At the speed Microsoft is moving, perhaps another 6 months is safe?  Perhaps it’s already too late?  Combine this with the growing threat from open source (Citrix and Red Hat) and it’s hard to feel optimistic about VMWare’s future.