Red Hat Focuses on Virtualization

Implications: Red Hat’s acquisition of Qumranet will strengthen their virtualization offerings, thus providing more competition for VMWare and Microsoft.  Qumranet’s technology will move Red Hat significantly forward, particularly on desktop virtualization.  This is starting to raise the question of whether virtualization will be able to survive long-term as an independent product.

Analysis:  VMWare’s long-time domination of the virtualization market is increasingly under attack.  Microsoft’s virtualization efforts are well publicized, although they do not yet provide the full feature set that VMWare offers.  Citrix’s XEN-based products are very close to VMWare in terms of features, and the next release of XEN suggests they will close the gap further in the next year or so.  Oracle’s efforts, also XEN-based, have received some publicity but appear somewhat lacking in substance.  Still, one can never count Oracle out!  Red Hat and Novell’s SuSE have been offering some virtualization in the later releases.  This is also XEN-based and currently somewhat limited in scope and functionality.

Red Hat’s purchase of Qumranet signals their intent to move aggressively into the overall virtualization market.  Red Hat has an impressive installed base in servers, especially when the actual number of installations is considered.  Since many of the installations of Red Hat are never licensed it’s not possible to ascertain the actual installed base, but based on the revenue figures Red Hat is showing, combined with anecdotal accounts of the relatively low percentage of Red Hat installations actually licensed, suggests strongly the actual installed base is quite significant.  If/when Red Hat can provide compelling virtualization technology as part of their standard offering, it is reasonable to expect a relatively high adoption rate.

Desktop virtualization is a technology that has received a very lukewarm reception.  While a few enterprises have successfully rolled out desktop virtualization programs, they are clearly a small minority.  Qumranet’s SolidICE technology provides an elegant way of doing desktop virtualization, and when combined with Red Hat running on servers provides a very economical way to implement desktop virtualization. 

Desktop virtualization today has many challenges.  One of this biggest is the cost.  While touted as a cost-saving program, actual costs savings can be surprisingly difficult to realize once the various costs of the servers, the virtualization software and the client platform are considered.  As the cost of the virtualization software gets lower the economics get better and the justification becomes easier.  A Red Hat platform with elegant desktop virtualization becomes a much more attractive alternative and thus could gain significant traction.

All of this starts to broach the question of whether virtualization software has a long-term future as an independent product.  As Microsoft and Red Hat offer virtualization software as part of their operating systems, the business proposition of virtualization as a standalone product starts to look shaky.  This certainly is not something that will happen quickly, since both Microsoft’s and Red Hat’s offerings still have a long way to go.  Looking 3-5 years into the future, however, one must ask whether VMWare and Citrix virtualization products will be commanding a large percentage of the market, or will they be niche players?  Will these products be relegated to high-end, specialized installations, while the vast majority of the virtualization market is controlled by the operating system vendors?  Even if this is the case, such a niche market promises to be quite large, but not perhaps what VMWare’s investors are hoping for!