VMware faces a new wave of competition

Implications: 1. Competition is heating up in the virtualization space 2. Buyers are the big winners

Analysis: I do not agree with the author that VMware is going to be lucky to have 8% of the market in just four years.  There are a lot of technologies that are currently based on using Vmware as a base technology and there are a lot of services companies that are experienced in installing VMware.  Given the large install base and the availability of resources, I can not see VMware losing significant market share in 2008 and probably 2009.

Notice that I did not say that VMware will remain as pricey as it is today.  I think at a minimum you will begin to see price reductions in VMware's product.  This will cause an increase in volume for all of competitive products.  I also think it will take 1-2 years for Microsoft and Redhat to become established.

The biggest competitor that Vmware will face is that of Xensource because Citrix has the distribution channel and connections to the OEM's.  I think the future battle will begin to be fought at the OEM level (and therefore more price sensitive) as compared to the product being sold to the enterprize today. 

Redhat has a chance to compete in this environment, but I am concerned that Redhat is going to be busy figuring out how to deliver JBOSS to market and may not have the management bandwidth to deliver on both fronts at the same time.

At the moment I am dismissing Microsoft because of Microsoft's inability to create a killer application in their early product versions.  I am not counting them out, but 2011 seems very early for Microsoft to be a big player in this market just due to features and long product development life cycles.

I discounted the author's comments because free is not free when you include the cost of People's time.  A lot of open source software is immature and ends up costing more time when you include people time that it would cost to buy the proprietary product.  Xensource is the exception because it has the support and knowhow of Citrix behind it.