X64 server virtualization maturing already
Let the market stats begin
The box counters at IDC and Gartner know a good thing when they see it, and they both make a pretty good living modelling the economics and shipment rates of all kind of IT hard and softwares. IDC is the first out of the gate, at least publicly, with a model that covers server virtualization.
The first pass of the model shows that server virtualization on x64 platforms is living in dog years, meaning that it is rapidly maturing and already showing signs of declining rates of adoption. In fact, according to the quarter server virtualization tracker IDC has built, which counts (well, estimates and then begs the server makers and hypervisor makers for some validation) the number of hypervisors installed on servers in each quarter, shipments of hypervisors on CISC processors (these days, that mostly means mainframes) dropped by 15 per cent and on RISC iron (which means mostly Unix boxes with a smattering of proprietary operating systems running on the same iron) fell by seven per cent in the second quarter of 2008.
According to Brett Waldman, research analyst for systems software at IDC, the virtualization tracker has been in development for a few quarters, and this is the first time IDC is making some of the data public. Unlike IDC does with quarterly server stats, the company is not giving away the candy store by showing revenues and shipments, although it does have that data - and it is not yet sharing it with the press.
The slight declines in virtualization in 2Q on mainframes makes a certain amount of sense. Mainframes have had logical partitions for two decades, and Unix and proprietary midrange servers started getting virtualization a decade ago. This is not new tech in these areas. So since the virtualization tracker counts new hypervisor installs, as a particular platform's sales drop in a quarter, the hypervisor count will also drop unless adoption suddenly spikes. (This is unlikely, given the established nature of hypervisors on mainframe and midrange gear.)
On Itanium-based machines, which are dominated by Hewlett-Packard's Integrity line at this point, with a smattering of boxes from Fujitsu-Siemens, NEC, and a few other vendors (but significantly not Dell, IBM, or Sun Microsystems), server virtualization is being driven upwards by the HP upgrade cycle from HP 9000 and AlphaServer gear to Integrity machines. This is the main reason why hypervisor shipments rose by 18 per cent on Itanium platforms in Q2.
The hot market for newbie server virtualization is, of course, the volume x64 server space, which had a 60 per cent hypervisor shipment growth rate in Q2. But hot is cooler than it was a year ago, in terms of growth rates.
"Quarterly totals of x86 server virtualization licenses continue to experience healthy growth, although the growth rates have slowed over the last four quarters," explained Waldman in a statement accompanying the virtualization stats, still using the retro "x86" term. "The modest decline in growth rates indicates that the market is showing early signs of maturation. Based on our conversations with end users, IDC believes that the high-volume consolidation opportunities - the low hanging fruit in the x86 server virtualization market - is starting to dry up. This is, in turn, resulting in smaller deals overall."
According to Waldman's analysis, shipments of hyervisors across all types of servers and hypervisors rose by 52 per cent in the second quarter, down from the 70 per cent growth rate seen in the first quarter. HP was the leader of the pack in terms of raw server virtualization shipments, with 34 per cent of the total hypervisor pie; HP's hypervisor shipments rose by 52 per cent in Q2. But Dell apparently had the fastest growth in hypervisor shipments installed on servers, with 110 per cent growth year-on-year in the second quarter; Dell had a 29 per cent share of hypervisors shipped. IBM ranked third in the server virtualization wars, with 16 per cent of hypervisors shipped and 32 per cent growth year-on-year. (IDC was pretty stingy with the stats.)
The thing to remember is that each machine IBM virtualizes is from one to three orders of magnitude more expensive than an x64 box, where IBM's sales are comparatively weak compared to HP and Dell. (You can judge for yourself if that price spread on servers and their related hypervisors is good or bad for IBM. You go to war with the army you have, right?)
As for the money angle on this, IDC reckons that software revenue relating to server virtualization had a 15 per cent increase in Q2, a much lower growth rate than the 32 per cent growth rate in the first quarter. (Can you tell Microsoft has entered the building with Hyper-V on its Windows Server 2008 operating system?) Revenue growth for server virtualization software on x64 platforms rose by 39 per cent; on Itanium platforms, sales only rose by nine per cent. IDC did not give out revenue growth rates for other servers.
The box counters at IDC did say that VMware was the shipment leader on x64 boxes, with a 44 per cent share. But that in the second quarter, if you added Virtual Server 2005 and Hyper-V together, Microsoft had 23 per cent of shipments. And it won't be long, is my guess, before VMware and Microsoft are at shipment parity on x64 machines.
Interestingly, Waldman said that the hypervisor attach rate on new server sales was about 15 per cent. At that rate, against just under nine million server shipments per year, we're talking about 1.4 million hypervisors. ®