Virtualization UPDATE
July 23, 2008

Breaking News:
VMware Announces Q2 '08 Earnings, Makes ESXi Hypervisor a Free Download
by Jeff James

In a conference call Tuesday, VMware executives discussed the company's Q2 2008 financials and introduced new president and CEO Paul Maritz. Then they dropped a bombshell: The VMware ESXi hypervisor will be available as a free download starting sometime next week.

VMware reported that revenues for second quarter 2008 were $456 million, an increase of 54 percent from Q2 2007. The company has more than $1.5 billion in cash reserves, and second quarter US revenues grew 43 percent over Q2 last year, to $240 million. The company had even better results on the international front, with those revenues growing 68 percent year over year, to $216 million. The combined results were slightly below what some analysts were expecting, but Maritz touted them in a statement released in advance of the conference call. "VMware had another solid quarter, proving that the quality of our products and the immediate return on investment that they yield is delivering high value to customers," he said.

After discussing the Q2 financials, Maritz briefly touched on what he sees as future opportunities for growth, including leveraging VMware's dominance in virtualization to give the company a head start in the burgeoning cloud-computing space. "\[We plan\] to extend usage of our technology to the cloud and over the Internet," Maritz said. "Our virtual infrastructure product has relevance in the cloud as well as as an on-ramp into the cloud." Maritz pointed to some VMware partners that are already using VMware's Virtual Infrastructure that way in their own products, such as SunGard Availability Services. "We are also on the threshold of a major new opportunity—as customers begin to leverage VMware as both the on-ramp to the cloud and for key elements of the cloud itself. We are well positioned to become a truly strategic platform for businesses of all sizes."

Saving the biggest news for last, Maritz announced that VMware would be making its ESXi hypervisor—currently priced at $495—completely free and available for download the week of July 27. In a follow-up call with Windows IT Pro, VMware Vice President of Products and Solutions Raghu Raghuram mentioned that the free, downloadable version of ESXi would be released after ESX 3.5 update 2, which will be available after July 28. VMware's decision to give ESXi away confirms that the company is getting ready for a long, punishing battle with Microsoft to defend its dominant share of the virtualization market. Maritz provided some insight on Microsoft during the call and suggested that as powerful as Microsoft is, it doesn't always win.

"I spent fifteen years at Microsoft...and I know that Microsoft is a formidable, but not invincible, competitor," Maritz said. "They can play a long waiting game, but when a competitor has a lead...and they invest and innovate to maintain that lead, they can be very hard to catch. We have a strong lead. Microsoft has announced Hyper-V, but Hyper-V is new and will take time to mature. They also have nothing comparable to VMware Infrastructure 3. We have a lead, and we intend to stay ahead. When competing against Microsoft, it's important to neither rest on your laurels nor get mesmerized \[by the thought of competing with Microsoft\]."

Commentary
Is the Future of VMware in the Cloud?
by Jeff James

The past few weeks have been turbulent ones for the virtualization market, with most of that turbulence being driven by news that VMware president and CEO Diane Greene had been replaced by former Microsoft executive Paul Maritz. Microsoft’s Hyper-V hypervisor-based virtualization product also hit the market a few weeks early, which lends an air of desperation to the VMware board’s decision to sack Greene. By all accounts, VMware has a significant lead in the enterprise market for virtualization, and VMware’s product offerings provide features and functionality that are still scribbled in marker pen on a whiteboard somewhere in the Hyper-V team office at Microsoft. (One can imagine live migration is at the top of that list.)

Forbes has done some excellent reporting on how tensions between Greene and EMC CEO Joe Tucci—who is also chairman of the VMware board—might have contributed to Greene’s departure\]. According to a Thomson Reuters story, Tucci replaced Greene "because the board wanted a leader with more operational experience to take the software company to the next stage of growth." The Reuters story adds that Tucci asked Greene to stay with VMware in another position, but she refused.

Someone once said that perception is everything. While that aphorism may not hold entirely true in this case, the decision to replace Greene—just days after Microsoft rolled out Hyper-V—looks like a desperate move, akin to replacing a star pitcher when Babe Ruth steps to the plate. That perception is reinforced by the selection of former Microsoft executive Paul Maritz as Greene’s replacement. Bad timing and quaking EMC executives aside, the appointment of Maritz isn’t a bad move, especially when you consider what VMware likely sees as the next key battlefield against Microsoft: cloud computing.

Paul Maritz was a well-regarded Microsoft executive, so much so that Microsoft’s own president and CEO Steve Ballmer described Maritz in glowing terms when the latter decided to retire from Microsoft nearly a decade ago. "Paul is truly a leader among leaders, and it has been a privilege to work alongside such an intelligent, wise, honest, and wonderful human being for so many years," said Ballmer. "While he will be deeply missed, I understand Paul's decision—for personal reasons and after nearly 14 years at Microsoft—to do some of the other things in his life that he'd like to do."

One of those other things Maritz ended up doing was to found Pi Corporation, a firm that specializes in developing cloud computing-related technology. Pi was acquired by EMC in February 2008, and Maritz was named president and general manager of EMC's Cloud Computing division. With Maritz now in charge at VMware, perhaps VMware will make a big move into cloud computing in the near future.

As cloud computing begins to move from concept to reality, it’s becoming apparent that virtualization will be a key component in making the move a success. In an interview with Windows IT Pro conducted just weeks before her departure from VMware, Greene explained how virtualization and cloud computing could combine to revolutionize business IT.

"We see a fifth phase \[of virtualization technology\] that has to do with cloud computing, what we call the liberate phase," said Greene. "That’s where you can, within your data centers, have multiple data centers and treat them like a cloud because the VMs can move around. You can also have external data centers, hosting providers, and cloud providers that you can use. You can also secure and monitor your VMs both on-premise and off premise."

More About Cloud Computing: ITTV.net’s Cloud Computing Roundtable

Companies that have effectively competed against Microsoft have realized that keeping one step ahead of the Redmond-based software giant is a vital survival skill. With Microsoft now bundling Hyper-V with certain versions of Windows Server 2008, it’s inevitable that Microsoft will begin to eat into VMware’s market share, especially in the small-to-midsized business space. With many estimates putting the number of virtualized servers at around 10 percent of those deployed, it’s obvious that Microsoft will capture a significant portion of that growth. VMware will undoubtedly hold onto to its position as the virtualization provider of choice for larger enterprises into the foreseeable future, but what about three years from now? Or five?

Microsoft has mastered the art of relentless product iteration and isn’t modest about investing in product categories for the long term, proving time and time again that it's willing to spend billions (and decades) to win wars of attrition with less dedicated and less-well-financed competitors. Maritz knows how Microsoft operates, so keeping ahead of Microsoft by taking the lead in the cloud computing space might be more than a smart move for VMware. In the long run, it might be what keeps VMware from joining the ranks of Netscape, Lotus, Digital Research, and WordPerfect as the gooey bits stuck between the treads of Microsoft’s relentless drive to dominate all aspects of business IT.

Virtualization News
by Jeff James

Ceedo Unveils Application Virtualization Product
Application virtualization solution provider Ceedo Technologies has announced Ceedo Enterprise, a new virtualization product that allows IT administrators to deploy and manage virtual desktop workspaces. Ceedo’s virtualization products have been available in the consumer market for the past few years and have been deployed on more than four million devices. Ceedo Enterprise doesn’t require administrators to package applications before deployment, and it gives users the ability to customize their own workspaces without involving IT staff. Ceedo environments can be deployed to any PC that runs Windows Vista, Windows Server 2003, Windows XP, or Windows Server 2000. Ceedo Enterprise clients are available now for $89 per seat perpetual license, with volume discounts available. For more information about Ceedo Enterprise, go to www.ceedo.com.

Windows Support Added to FastScale Composer Suite
FastScale Technology has unveiled the latest version of its FastScale Composer Suite, a virtualization management solution that lets IT administrators build, manage, and deploy physical and virtual server environments. The new release adds support for Windows Server 2003 to the existing Linux server support. FastScale Composer Suite also offers application provisioning, improved scalability, a revamped UI, and configuration options that the developer claims will simplify virtual infrastructure management for large enterprises. FastScale Composer Suite is available now; pricing begins at $30,000. For more information about FastScale Composer Suite, go to www.fastscale.com.

Cisco Introduces Virtualized Data Center Products
Giving IT pros the ability to more effectively manage their data centers is the focus of several new product announcements from Cisco, all of which fall into Cisco’s Data Center 3.0 initiative. These products include Cisco Application Control Engine (ACE) 3.1 for the ACE 4710 application switch, which now offers 2Gbps compression capability, 4Gbps throughput, and support for multimedia on virtualized platforms; Cisco Wide Area Application Services (WAAS) 4.1, which now offers application virtualization hosting services; Cisco VFrame Data Center 1.2, which now supports provisioning with Cisco ACE and VMware ESX Server; and new Cisco Data Center 3.0 services and support that help IT administrators with their data center deployments. For more information about these Cisco products and services, go to www.cisco.com.

Virtualization Tips & Tricks:
Upgrading to Hyper-V RTM
by Michael Otey

If you’ve been trying out Microsoft’s beta or Release Candidate (RC) code for Hyper-V, you’ll certainly be interested to know that the release-to-manufacturing (RTM) Hyper-V code is available for download from Microsoft's website. You can download the Hyper-V RTM code here.

In a call with Jeff Woolsey, senior program manager for virtualization at Microsoft, Jeff told us that the CPU overhead for running in a Hyper-V RTM was only about 5 to 6 percent and that Microsoft has been using Hyper-V technology to run its live TechNet and MSDN sites for some time. The Hyper-V release code has a number of significant performance improvements over the prerelease code. If you’ve been using the prerelease code, you’ll definitely want to migrate to the new RTM code.

For the rest of this article, click here.