VMware’s free virtualization offering

It didn’t take long for new CEO Paul Maritz to put his stamp on VMware (NYSE: VMW). Yesterday during an earnings conference call, Maritz, the former Microsoft executive who replaced VMware founder Diane Greene, said the vendor’s ESX virtualization software will be available free of charge.

The reason Maritz gave for the move was that the vast bulk of VMware revenues come from its virtualization infrastructure software, and that income would support the free product. Also, ESX has a small footprint and can easily be deployed, enabling more people to benefit from the technology.

“The more out there the better it is for us, as it creates new sockets to sell our virtualization infrastructure,” Maritz said.

This move, however, follows Microsoft’s release of Hyper-V and its own aggressive pricing, where Windows Server 2008 with Hyper-V starts at $999.

Bob Kelly, corporate vice-president, server and tools group at Microsoft, said during the <a href="http://www.itbusiness.ca/it/client/en/Home/News.asp?id=49164" target="_blank" recently concluded Worldwide Partner Conference that Microsoft’s virtualization solution was a third of the price of VMware.

“We are on the front foot. We are no longer on the back foot. We’re telling our story. We had a great launch. We have the most comprehensive view left to right in the industry, management of physical and virtual; oh and by the way, a third of the price of VMware,” Kelly said.

Tom Bittman, vice-president and distinguished analyst with Gartner, said VMware’s move is indeed significant. It will allow VMware to compete more effectively with Microsoft (NASDAQ: MSFT), which is bundling its Hyper-V virtualization software with high-end editions of Windows Server. “This takes the price argument away,” Bittman said.

Most companies now are buying other VMware products along with the hypervisor, which is why the company can afford to give it away, he said. VMware should have made ESXi free from the start, he added. “That was a mistake, and they are correcting it now,” he said. ESXi is currently priced at US$495.

“It makes sense for us to seed the market with a free product and expose a broader set of customers to VMware, being confident that they will take the next step and upgrade to our Virtual Infrastructure product,” Balkansky said.

VMware is facing some of its toughest competition yet as Microsoft and other companies seek to commoditize the core virtualization technology on which VMware’s business was built by offering it as part of the OS.

Maritz added that he intends to take VMware beyond the hypervisor to become an enabler of virtualization infrastructure.

“This is what the customers are paying us for anyways,” he said.

Currently, VMware has 20 products in its suite of virtualization solutions. “The suite is in version three and we’ve added disaster recovery, which has become popular. The fourth generation is in development for next year and it will deal with another headache, desktop management, and we’ll continue to build on that foundation,” Maritz said.

VMware has also seen growth in its channel business, with more than 48 per cent of sales being deals of $50,000 or less.

Maritz added the company will continue to extend the virtual infrastructure to more users by lowering pricings on several SKUs that will target the SMB.

“We want to bring enterprise value to smaller companies and work with partners who target the enterprise with the intent to strengthen those and help them reach the SMB,” he said.

— With files from Elizabeth Montalbano and James Niccolai of IDG News Service

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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