VMware is many things to many people, but at its core, it is a software vendor whose virtualization wares run on Intel-based servers. And given that fact, there are inherent tensions between VMware and the server vendors on whose hardware it runs.
IT buyers making decisions about their server virtualization platforms would do well to consider these issues, which have the potential to alter the face of the data center as it exists today.
Complicating VMware's relationship with server OEMs is the fact that it is owned in large part by another hardware vendor, Hopkinton, Mass.-based EMC Corp. Granted, EMC sells storage, not servers, but it nevertheless has its own relationships with server OEMs that could come to bear on VMware's. Also, Cisco Systems Inc., a newcomer to the server space with its Unified Computing System (UCS), and chipmaker Intel Corp. both have multimillion-dollar equity stakes in the Palo Alto, Calif.-based VMware Inc. Thus far, VMware has deftly navigated what could easily be treacherous waters, said Jonathan Eunice, a principal IT adviser at Illuminata Inc. in Nashua, N.H., thanks in large part to clear "rules of engagement" put forth by former VMware CEO Diane Greene, and maintained by current CEO Paul Maritz and company.
Those unwritten rules, in a nutshell, say, "We are not a vassal state of HP-IBM-Dell, etc. We treat everyone equally, and the decisions we make are a VMware matter, not an EMC matter," Eunice said.
Marginalizing server hardware
That being said, VMware-style virtualization still poses distinct challenges to server OEMs. Another way of saying that VMware virtualizes hardware is that it marginalizes hardware (i.e., renders it unworthy of much IT buyer attention -- or spending).
That dynamic is not lost on server buyers.
"In my humble opinion, all these servers are the same," said Stan Horwitz, a data protection professional at a large Northeastern university that runs VMware on top of Dell servers. Once you've layered VMware on top, "Dell doesn't really make anything that stands out and neither does HP, really, so they have to go on price and customer service."
Indeed, virtualization does a great job of hiding technological differentiation that server vendors build into their wares, said Illuminata's Eunice. "OEMs have for years tried to sell how extraordinary their products are," he said. With virtualization, "customers don't have nearly the same level of enthusiasm."
Further, you can point the finger directly at VMware and server virtualization for the gradual decline in server unit shipments over the years.
If you go back to the 2004-2005 time frame, server unit shipments increased about 15% per year, said Jed Scaramella, a senior research analyst at IDC. This year, unit shipments are recovering from a dramatic drop-off during the recession, but once things normalize, Scaramella said he expected growth in server unit shipments to slow to the mid-single digits.
Server vendors take solace in the fact that new virtualization deployments are typically carried out on new, high-end hardware. But that's a game of diminishing returns as more workloads find their way into virtual machines, either because they have been migrated there or because they started out as a VM to begin with.
Looking forward, none of this can come as good news for server vendors, which could conceivably react by penalizing VMware. But in many respects, the server vendors have only themselves to blame, said Scaramella.
"Sure, virtualization reduces unit shipments. But the way people were building out their infrastructure after the dot-com bust -- building out a fleet of servers -- it really wasn't sustainable," said Scaramella, citing issues like spiraling management costs, server sprawl and power and cooling constraints.
With ESX 2.5, VMware arrived on the enterprise stage in 2005: a prime example of being at the right place at the right time. "It was a classic 'pull technology.' Users found it, started using it, and started asking for more and more enhancements," Scaramella said.
Next up: Cloud computing
In fact, this is an old problem for server vendors, and VMware and virtualization are just the latest protagonists, said Illuminata's Eunice.
"It's a fact of life," Eunice said. "Performance goes up every year, and units shipped collapse every year -- regardless of who the vendor is. We've been seeing this for years with bigger systems -- fewer, but bigger units going out."
Looking out, cloud computing could be an even bigger thorn in OEMs' side than plain old VMware virtualization, he said.
"Cloud computing does something related: It takes the total number of customers available to each OEM and shrinks it," Eunice said. Thus, cloud computing has the potential to make IBM President Thomas Watson ("I think there is a world market for maybe five computers") a prophet after all.
Partner until it hurts
With all these factors as a backdrop, it's surprising that hardware vendors continue to ink partnerships with VMware.
The latest example is VMware, Cisco and EMC's Virtual Computing Environment (VCE) Coalition, whose Vblock Infrastructure Packages combines servers, storage, networking -- and, yes, virtualization. But while the coalition claims to actively sell Vblock, publicly identified customers are few and far between.
Even among service providers for which Vblock is the target audience, there's reluctance to bundle VMware with the hardware because they don't want that unilateral commitment. For example, Logicalis Group Ltd. is a U.K.-based service provider that is building a cloud offering on top of Cisco Unified Computing System. The company also looked at Vblock but decided it did not want to be locked into VMware for its cloud offering, which is a good fit for about half the workloads it services, said Chris Gabriel, Logicalis director of solutions and marketing.
If Logicalis is representative, Vblock may suffer the same fate as Dell Inc.'s Veso, a two-socket "virtualization-optimized" server with the ESXi hypervisor embedded, which was announced in 2007. Whether for business reasons or because customers prefer to layer virtualization on their hardware themselves, Veso never took off and is no longer offered.
Meanwhile, the vast majority of VMware shops run the software on server hardware from a vendor that partners with VMware's competition, for example Hewlett-Packard with Microsoft, and IBM with Xen and more recently KVM.
According to Brett Waldman, a research analyst at IDC, with some slight variations, server market share sliced by server virtualization vendor tracks closely to server market share overall, namely, HP, followed by Dell, followed by IBM.
A rising tide lifts all boats
For the time being, everyone in the server virtualization ecosystem appears content, customers included. Whether this live-and-let-live attitude will prevail in the future, however, is up in the air, said Illuminata's Eunice.
"The net is that there's enough success here that VMware hasn't had to get petty or sweat it," Eunice said. "OEMs have done things that compete with VMware, and these are potential sources of enormous friction, but it's hard to be angry when you're making money together."