Virtually Speaking: Courting Small Businesses

Whether you’re talking virtualization, CRM or any other IT topic, small and mid-sized businesses are no less demanding than large enterprises. But make no mistake, they are different, and in some ways the stakes are higher, since SMBs don’t have the time or money to not get it right the first time.
VMware this week announced a virtualization infrastructure management suite aimed at small and mid-sized business users of VMware Server. But will it appeal to the hard-to-please SMB market?

For that reason, SMBs tend to have little patience with vendors who don’t understand their needs. And that means more than having a product that you want to sell them.

Enterprise software vendors learned this lesson the hard way, as their half-hearted approaches to sell to SMBs opened the door to Salesforce, NetSuite and other players who built SMB solutions from the ground up.

While virtualization has been the buzz in enterprise data centers, it’s been quietly making inroads into SMBs, too. Ben Matheson, director of product management at VMware, said that of the 1.2 million downloads of VMware Server, which became available in July, 70 percent have been by SMBs.

So clearly, there’s a need, or at least an interest. With VMware Server in the hands of almost a million SMBs, VMware earlier this week introduced VirtualCenter for VMware Server, a bundle designed to give SMBs using the free VMware Server a way to manage their virtual infrastructures.

The VirtualCenter package has been available for the enterprise-class ESX Server product. But now SMBs can control all of their virtual machines from a single console. They can better optimize server capacity and make better decisions about which servers to virtualize, Matheson said. Small businesses can also set up e-mail alerts to notify them when their virtual servers hit thresholds such as CPU utilization. And the price of $1,500 for the management and agents for three dual-core servers is SMB-friendly.

In addition to centralizing provisioning and monitoring of VMs, VirtualCenter for VMware Server also includes VMware Converter, which is designed to automate the task of migrating Windows servers into VMware’s virtual VM format.

Another potential hit feature with time- and resources-strapped SMBs is what Matheson described as a library of templates that make it faster to deploy new e-mail, Web server and database servers.

The VirtualCenter announcement, of course, begs the question: Do SMBs really need virtualization solutions, or have they just been experimenting with free software?

VMware insists the need is real and VirtualCenter for VMware is a natural for SMBs. “Server sprawl is a problem,” Matheson said, “two, three or four servers have become 15, 20 or 30 servers.”

VMware Server’s popularity with small businesses doesn’t surprise Jean Bozman, senior vice president Worldwide Server Group at IDC. “Most people tend to think that virtualization means larger enterprise,” she said, “but when you go to conferences like VMworld, and when you look more closely, there are a lot small businesses.”

Free products such as VMware Server and VMware Converter help SMBs move their physical servers to a virtual infrastructure, but, Bozman said, “then you need some type of dashboard to manage it.” She added that as SMBs start to use VMware Server to create virtual environments, “they are asking themselves, ‘Do I have the skills to manage that?’ and VMware is saying, ‘We know that you don’t.’ And that’s where VirtualCenter for VMware comes in.

“There’s lots of automation [in VirtualCenter for VMware] and it addresses long-standing problems. We still see NT out there, and you can roll them up [on the virtual machines].”

Charles King, principal analyst with PundIT, agrees that the new management suite is well-suited to SMBs who don’t have the resources to hire an IT person to handle a virtual infrastructure. “It’s a good solution for businesses that don’t have that kind of expertise on hand. It doesn’t make sense to save $50,000 to $100,000 [by moving to a virtual environment] and then spend $50,000 – $80,000 too hire someone to manage it.”

King adds that VMware is well-positioned for the SMB market. “2007 will be an interesting year for VMware,” King said. “There are lots of x86 products with robust commercial offerings from Microsoft, XEN Server and Virtual Iron,” he said. “But what VMware has that those companies don’t is experience. It has the products and the presence in the market. The number of [VMware Server] downloads going to small businesses is good news for VMware.” But he also warns vendors that “the SMB market is complex and it’s almost a mistake to think of it as a single market.”

VMware can’t conquer the illusive SMB market by itself. “Many shops will turn to VARs,” IDC’s Bozman said. How those VARs approach SMBs could be the difference between VMware owning the SMB market and allowing another vendor to swoop in with another SMB-tailored solution.

If resellers see Virtual Center for VMware as simply an up-sell opportunity or if they try to bypass Virtual Center to shoehorn a more costly option in the server room, an opportunity for a Salesforce.com of virtualization could emerge.

Earlier this week, CRN, a reseller trade magazine, quoted a solution provider who had no intention of selling VirtualCenter for Vmware Server to SMBs, opting instead to push the more advanced VMware server that runs on bare metal:

“We only sell ESX server, so [VMware Server is] not of interest to us. We sell plenty of ESX to the SMB market. I’m sure they will have a big sell to small business, but we want the full value.”

ESX may, in fact, be better for some SMBs, but VirtualCenter for VMware Server looks to be a pretty good (and affordable) play as well. We hope VMware and its channel partners don’t use this new product as just an attempt to get a foot in the door. If they do, you can be sure the next Salesforce.com-like success story is out there waiting to unfold.

Dan Muse is executive editor of internet.com’s Small Business Channel, EarthWeb’s Networking Channel and ServerWatch.