Virtually Speaking: VMware Gives It Away

If you can’t beat ’em join ’em. And VMware certainly is. ESX, the underpinnings of its enterprise offerings, is now free.

With ESX now free, is the hypervisor a commodity?

The news itself is no surprise. Two weeks ago, new VMware CEO Paul Maritz revealed that the next version of the ESXi hypervisorwould be free. The only surprise, therefore, was in the timing.

On Monday, the company unveiled the latest version of its ESXi 3.5 hypervisor, Version 2.5. It is available for immediate download.

Ironically, details on what exactly is new about the release are murky. Apparently, the “free” overshadows everything.

Is VMware running scared from Microsoft? Perhaps. This decision does come on the heels of the removal of a CEO and indications that life in Palo Alto isn’t all IPO-fueled all wine and roses. It’s also a far cry from last week’s proclamation that Microsoft is toast.

Clearly Hyper-V is not in competition only with VMware Server, as John Gilmartin, senior manager, product marketing, told ServerWatch in an interview shortly after Hyper-V’s release. At the time, he described Microsoft’s product as “just a hypervisor.”

Now, VMware is essentially giving it away, expecting customers to flock back and pay for the management services necessary to make their virtual environments viable. VMware anticipates this will turn into a surging revenue stream. Or at least one whose current is strong enough to wipe out the revenue ESX previously brought in. Variations on this model are, of course, in play among all the virtualization vendors.

What makes VMware’s move so significant is that up until now it was able to write its ticket, and few enterprises thought twice about paying it.

With all of the major hypervisors now essentially free, a larger question looms: Is the hypervisor now a commodity item?

Gartner Vice President Distinguished Analyst Tom Bittman believes so. In a publicly released statement from VMware he stated, “The hypervisor itself is really just a foundation. The business model and real value in virtualization is evolving toward a virtualized infrastructure and the management and automation tools leveraging the hypervisor.”

Interestingly enough, and admittedly the correlation is dubious, both VMWare and Citrix announced hiring “slowdowns” last week. Perhaps virtualization isn’t the recession-proof fantasy the vendors believed it to be. Or maybe it’s simply a case of reality catching up.

If indeed the Goldman Sachs report referenced in the article is to be believed, virtual machines may end up spending more time in dev than initially intended, but they will ultimately find their way into production, as the survey “also indicated that virtualization and server consolidation would be the top two priorities of IT managers.”

While this paints a cheery picture for virtualization in general, it makes things a bit dicey for VMware. The longer enterprises sit on the fence, the greater the likelihood they’ll have deployed Windows Server 2008 by the time they decide to virtualize. Their indecision could well lead to Hyper-V’s success.

By sacrificing the revenue gain up front, VMware can at least get a foot in the door and create the possibility of a gushing revenue stream down the line. Whether the rivers flow in the right direction remains to be seen.

Amy Newman is the managing editor of ServerWatch. She has been following the virtualization space since 2001.