FAQ: Virtualisation in the SMB

Can VMware retain its lead?

VMware is synonymous with x86 server virtualisation. It's the unquestioned market share leader with more than half or as many as 80 percent of customers using its hypervisor, depending on who's counting.

But cracks in the armor are starting to appear. Competitive products are cropping up all over the place; the behemoth Microsoft is preparing an assault with the upcoming release of Hyper-V. Investors punished VMware for disappointing earnings growth in late January, when VMware stock dropped 34 percent in a single day. Uneasy lies the head that wears a crown. Just ask Bill Shakespeare or Bill Belichick.

"VMware is the champion right now, but everyone's looking to take them down," says Laura DiDio, a Yankee Group analyst.

So if VMware is the major player, who are the competitors?

The obvious choice is Microsoft. But it could also be Citrix or Sun, Oracle, Virtual Iron, Novell or Red Hat.

"VMware's biggest vulnerability is pricing," says DiDio, who just published a report on the virtualisation price war.

Less expensive is not always better, but VMware's product retails for about US$3,000 (£1,500) per socket, while the other virtualisation vendors typically charge $700 (£350) to $800 (£400), according to DiDio. Microsoft's Hyper-V will cost $28 (£14) as a stand-alone product or come free as an add-on to Windows Server 2008. The EMC-controlled VMware hasn't indicated any possibility of lowering prices, but it does offer one free product called the VMware Server, intended to lure new customers.

A Yankee Group survey last year had 55 percent of server virtualisation customers planning to use VMware, 29 percent opting for Microsoft, 14 percent undecided and the rest buying from one of several other vendors. Some estimates have VMware holding 80 percent of the market or more. (These numbers don't include Unix and mainframe virtualisation, where IBM is a big player).

Microsoft is thought to have the most promising shot at overcoming VMware's huge market lead. But this is a rapidly growing market, and each player has a chance to carve out its own niche while luring customers away from VMware and its flagship ESX Server. Here's a detailed look at what several analysts say are the vendors that pose the biggest threats to VMware.

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