A Big Week for Virtualization: VMware Goes Public, Citrix Grabs XenSource

By all accounts, this week has been a big one for virtualization related news. The biggest was undoubtedly VMware's wildly successful, Google-sized IPO, but the Citrix Acquisition of virtualization-provider XenSource for $500 million was another. Even more virtualization news bits managed to land this week, ranging from Intel's announcement of their new virtualization-friendly quad-core Xeon X5365 and L5335 processors to Virtual Iron joining Microsoft's Interop Vendor Alliance.

With such a flurry of IPOs, mergers and announcements, it's clear that virtualization has made the leap from a somewhat obscure new technology lauded by IT admins to the latest "it" technology on Wall Street. "There's no doubt that virtualization is hot...VMWare's success underscores that point," said Dennis Moreau, CTO of virtualization management solution vendor Configuresoft, in a recent email interview. "We are seeing a considerable amount of movement towards virtualization in our customer base. I expect consolidation across the virtualization technology stack (e.g. storage, server, application and network virtualization) and across the virtual configuration management lifecycle (provisioning, management, and assessment) to continue."

While VMware's flashy IPO gives beleaguered investors something to cheer about after a punishing quarter filled with news of lackluster sub-prime mortgages and anemic earnings reports, it underscores the emergence of virtualization as a vital and growing part of the IT infrastructure. According to Citrix VP of Corporate Marketing Wes Wasson, that promise is one of the key reasons that Citrix acquired XenSource.

"We firmly believe that virtualization will live up to those heady numbers," Wasson says. "The virtualization market could quickly add up to a 7-8 billion dollar market in very short order. \[Virtualization\] has clearly matured from solely being a technology-centric solution to having top-level business strategy implications, involving mission-critical applications like disaster recovery and business continuity...the VMware IPO underscores that virtualization has grown from the server level to the CIO level."

Wasson hints that Citrix/Xen will work closely with Microsoft, positioning the newly merged company as a potential partner rather than as a direct competitor to Redmond. "We think the underlying virtualization hypervisor should rely in the OS...there are lots of opportunities for us to add value on top of that. In our view, there isn't any money to be made in developing our own hypervisor...we're looking to add value on top of that." Wasson notes that VMware is taking a different approach, attempting to essentially build a virtualization OS that competes more directly with Microsoft.

With Citrix acquiring XenSource, the market currently has three large providers of server virtualization solutions: Microsoft (Microsoft Virtual Server), Citrix/XenSource (Xen) and VMware (ESX Server). While VMware is clearly positioning itself as direct competitor to Microsoft, the new Citrix/XenSource entity poses a number of questions. Citrix has worked closely with Microsoft for decades. If Citrix does move to align itself with Microsoft's virtualization strategy, is this the precursor to an eventual acquisition of Citrix by Microsoft? If Citrix does move to work more closely with Microsoft, what would that mean for Xen's Linux and open source efforts?

The answer to those questions has ramifications for all the other companies in the virtualization space, including Virtual Iron, which bases their virtualization platform on the open source Xen hypervisor. Virtual Iron has carved out a profitable niche by offering a low-cost alternative to VMware, and some news reports have speculated that Virtual Iron was also being considered for acquisition by Citrix. That could bode well for Virtual Iron, which could be a target for acquisition itself. Low cost and ease of use have been competitive advantages for the company, a strategy that Virtual Iron will likely continue to pursue. "We provide a \[solution\] that is easy to use, easy to install, and that has a enjoyable user experience," explains Virtual Iron CEO Bob Thibault. "It literally takes 30 minutes for users to install and get up and running with our product."

Regarding the recent Citrix/Xen news, Thibault suggests that Microsoft's real perception of the Citrix/Xen deal may not be as positive as some reports suggest. "Microsoft has targeted the whole server virtualization market as a key strategic battleground for them," argues Thibault. "Citrix has emerged as a new competitor, and I don't know if Microsoft views that as a great thing...I'm not sure that they're jumping with joy over the news. What this acquisition does do is open the door for other companies to work more closely with Microsoft on their virtualization efforts."

According to Larry Orecklin, Microsoft's general manager of System Center and Virtualization, Microsoft and Xensource have worked closely together on a number of common issues facing virtualization--such as with drive management standards, promoting a common virtual hard drive (VHD) format for virtual machines and establishing interoperability between Linux and Windows.

Microsoft's strategy in the virtualization space is an aggressive one, and it clearly views VMware as a direct competitor. "While VMware’s IPO increases awareness for the topic of virtualization, Microsoft plans to accelerate the market and bring virtualization to mainstream customers with an approach that goes beyond just the server virtualization solutions offered by VMware," says Orecklin.

From a solution perspective, Orecklin explains that Microsoft's virtualization strategy is based around three things: First, Microsoft believes virtualization should be a key feature of the OS. They're also thinking of virtualization from "the desktop to the data center" and investing resources in virtualization to address customer needs in those areas. Finally, Orecklin stresses that virtualization management becomes critical. "Microsoft’s unique approach is to enable the management of both virtual and physical assets from a single platform--Microsoft System Center."

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