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VMware goes into hyper-drive with vSphere 4.0

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Whither Citrix?

You can't necessarily say that for the freebie XenServer 5.1 and 5.5 hypervisors from Citrix. XenServer 5.5 and its related Essentials tools (which also work with Microsoft's Hyper-V) were announced in February, but it did not start shipping until mid-June. As a stop-gap maneuver to blunt the oncoming vSphere onslaught and to get parity with the freebie Hyper-V, Citrix started giving away the older XenServer 5.1 Enterprise Edition hypervisor back in February and said that a lot of the enterprise-class capabilities that VMware was charging for in vSphere would be free with XenServer 5.5.

Two weeks ago, Citrix was bragging that 150,000 users have downloaded the free XenServer since February, and 50,000 of them have done downloads since XenServer 5.5 was available. That's 50,000 customers, presumably all opting for XenServer 5.5, in a five week span. If you assume one license download per customer, then we're talking 6,250 licenses per week on average. (Customers could be doing more than one download, of course). VMware's vSphere 4.0 is averaging more than 29,000 licenses per week. It's the old 80-20 rule, but if VMware is getting traction, it looks like XenServer is too.

Ah, but is XenServer making Citrix any money? We'll have to see. Customers can continue to use the freebie code or buy add-ons to make it more useful.

Microsoft and Citrix both want to slow down VMware, hence their partnership this spring that will see Citrix integrate Microsoft's System Center Virtual Machine Manager (SCVMM) with the Essentials tools for XenServer and Hyper-V that Citrix has cooked up. Microsoft released SCVMM R2 to manufacturing on August 24 and is getting ready to ramp Windows Server 2008 R2 and its related Hyper-V R2 to take on VMware and possibly not accidentally crush what Citrix is trying to peddle into the Windows base. Through fiscal 2009 ended in June, Microsoft's management division had in excess of 30 per cent revenue growth and is now at approximately $1bn in sales, and the company clearly wants virtualization management tools to be part of that.

Even after giving away Hyper-V, Microsoft's virtualization management software business, including the Essentials add-ons, could grow to rival the $1.9bn in annual sales pushed by VMware. It is hard to say for sure, but the vast majority of VMware's sales has to be for ESX Server licenses and support and tool add-ons for this product, not for desktop and other virtualization products. And with Microsoft banging on about how the average VMware customer that moves to Hyper-V and SCVMM has saved $170,000 by switching (heaven only knows where that stat came from), Microsoft will get people to listen to its sales pitch that customers "no longer have to pay a virtualization tax with VMware," as David Greschler, director of virtualization and management marketing in the Server and Tools Business unit at Microsoft puts it.

The question is when Citrix will make it a three-horse race in terms of revenues. It is beginning to look like a two-and-a-quarter horse race at this point. Citrix can give away all the software it wants, but it needs to make money on something to appease its shareholders. While the XenServer and XenDesktop virtualization products were growing at 250 per cent in the most recent quarter, they only accounted for $10.5m in revenues. There has to be a lot more sales to even get that $500m in bait back. ®

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