VMware halves price of starter virtualization kit

VMware has cut in half the price of a virtualization software package geared toward small and midsize businesses, and changed the way it prices management products to let customers avoid unnecessary charges.

Rivals Microsoft and Citrix have improved their standing in the virtualization market in part by criticizing VMware for the cost of its software, while VMware has claimed that its product’s greater ROI justifies a higher cost.

However, VMware has occasionally lowered the price of its lower-end products, and is making another such move Tuesday, the same week Microsoft hosts its Worldwide Partner Conference. VSphere Essentials, an entry-level virtualization platform, will now cost $495 for six CPUs, or $83 per processor, down from $995 for six CPUs. VMware is also changing the pricing model of its management products to charge once for every virtual machine, rather than once for every processor.

The pricing changes coincide with VMware’s unveiling version 4.1 of its vSphere platform, saying it will enable the building of bigger, faster cloud networks than the previous generation.

“The question is what took them so long [to lower prices],” says Information Technology Intelligence Corp (ITIC) analyst Laura DiDio. “The answer is they could afford to wait because they had such a big lead on everyone else in the marketplace. They were able to charge a premium, and the users weren’t grousing about it too much.”

VMware is still betting that its biggest customers won’t mind, as it has left the price of its most expensive products untouched.

Two years ago, VMware made one of its biggest pricing changes by offering the ESXi hypervisor for free, in recognition of the fact that virtualization is becoming a commodity and virtualization management is what really provides value to customers.

This week’s price drop of $995 to $495 for vSphere Essentials was precipitated by a promotion VMware has been running for the past several months. VSphere Essentials includes the hypervisor and tools such as storage thin provisioning, but not advanced features such as live migration.

“We had been test driving that price as a promotion over the past four months and we saw pretty pleasing results,” says Bogomil Balkansky, VMware’s vice president of product marketing. “It turns out that $500 is kind of this magic number where it’s below the procurement process threshold, and a majority of administrators or data center managers can just buy a tool … and not have to deal with long procurement cycles. The volume increase we have seen has been very significant, so we decided to make that promotion price permanent.”

Separately, VMware’s move to per-VM pricing for management products, such as Site Recovery Manager and AppSpeed, is in response to customer demand, Balkansky says. In the case of disaster recovery, customers were asking why they had to pay to protect every VM on a processor when only certain VMs were considered critical.

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