The Virtual Iron virtualization strategy

Posted by Staff   |   Monday, April 14th, 2008

So far the Xen hypervisor offered a unique opportunity to enter the virtualization market as a major player.
Top industry vendors invested (Citrix, through the XenSource acquisition, Novell, Red Hat) or are investing (Sun) million of dollars to bring it inside the enterprise business.

One the first companies embracing Xen is Virtual Iron which achieved some notable goals in the last few years:

and yet the company has to face major compeitition for all the other big players mentioned above. met Ed Walsh, the new CEO of Virtual Iron and asked questions about the competition, the go to market and acquisition strategies, the technology roadmap, the relationship with Microsoft, and more. For its virtualization platform Virtual Iron adopts the Xen hypervisor. Despite the project is open source it was historically influenced by XenSource. What changed since the Citrix acquisition? Is now easier or harder to work on new patches? Is Virtual Iron still has the same commitment on this project?

Ed Walsh: Yes, Virtual Iron is absolutely committed to the Xen hypervisor and the Xen project. There are several factors that make the project stronger than ever:

  • The recent changes in the oversight of the project make it more independent and objective. Companies like AMD, HP, IBM, Intel and others are now playing a much stronger role in the project. There are also important new contributors further strengthening the development efforts of the project such as Sun and Oracle.
  • At the same time, with Ian Pratt and Keir Fraser leading the project, there is important continuity and stability.
  • You also have the natural maturity of the hypervisor itself. This is exactly what open source is about – the power of many. As a result, Xen as a hypervisor, is more proven, more reliable and easier to work with and build on.

VI: The open source world offers an alternative to Xen called KVM, which got a lot of traction in the last year despite it’s a young project. What would happen if most of the current Xen contributors would switch to KVM? Is Virtual Iron able to sustain the Xen development alone?

EW: The hypervisor is a very small component of the Virtual Iron platform. And which hypervisor we use is largely irrelevant for our SME customer base. They are only concerned with whether the product works. Whether we use Xen or KVM is not important to them. It is important to Virtual Iron obviously and we feel Xen is more mature and offers us and our customers the best performance.

If KVM ultimately developed into a better alternative, and it provided real advantages for our customers, than we would be open to integrating it into our platform. We are still the only company that has a history of integrating with more than one hypervisor. We initially developed our solution based on our own hypervisor before deciding to migrate to the Xen platform to leverage the power of the Open Source community.

VI: Some of the newest players in the virtualization market, like Oracle and Sun, decided to adopt Xen as well. They will join Citrix, Novell, Red Hat and obviously Virtual Iron. What is the company long term strategy to differentiate from all these competitors?

EW: I think there is a large misperception in the market regarding Xen and the notion that all Xen solutions are somehow the same. They are not. We all leverage the same hypervisor, but we all build unique value on top of it. We also target very different types of customers and market segments with the way we package and price our unique offerings. At the end of the day, it’s about delivering real solutions for target customers.

Virtual Iron is gaining great traction amongst SME customers because these buyers demand a full-featured solution that can support all primary use cases – without all the cost and complexity that they find in VMware. Virtual Iron is the only solution on the market that can deliver both. This segment of the market also holds the greatest potential for growth in our view. And I think our growth trajectory, which far outpaces where VMware was at the same time in its history, validates the size of this opportunity.

Oracle and Sun are targeting entirely different market segments, as are Red Hat and Linux. Whether they use Xen is irrelevant to most users.

Our chief strategy officer, Tony Asaro, commented on this whole issue in detail recently on his blog, titled Transcending Xen. I’d encourage you and your readers to see what he had to say.

VI: Just like any other virtualization vendor out there, Virtual Iron suffers the limitations imposed by ISVs which don’t support their applications inside virtual machines.
The most striking example comes from Oracle, which refuses to support its database server on any hypervisor but its own. What do you say to your customers that adopt Oracle?

EW: Per my comment above, I think Oracle is targeting those companies’s running its full application stack. In general, these are not the types of SME customers Virtual Iron is targeting, although we do have customers running their Oracle database on Virtual Iron. Honestly though, it’s really a non-issue for us. It may be an issue for VMware, because they target the same type of customer that Oracle is targeting with this policy.
Ultimately though I think the market will decide. This is the beauty of the free market.

VI: Recently Virtual Iron closed its 5th round of investments, reaching a remarkable equity capital of $65 million. Despite that the company decided to not exhibit at the first European edition of the biggest industry event we have today for virtualization: the VMware VMworld. What’s happening? Isn’t Virtual Iron interested in the European market?

EW: Virtual Iron is absolutely committed to the European and Asia Pacific markets, which account for 40 percent of our business. We recently expanded our distribution channels in Europe via agreements with Avnet and TechData, and have done the same in Asia Pacific with Avnet. We also have significantly increased our investment in these markets including online marketing, channel programs and new resources on the ground.

Virtual Iron was in attendance at VMworld Europe and we chose not to exhibit because the event is owned, operated and controlled by VMware. We felt it would be very difficult to get our message across effectively in that environment. VMware owns the stage and everything that happens from the time the show begins to the time it ends. In addition, the sponsorship fees were hefty and we felt it was a bad marketing investment. We’ve learned this from our participation the past two years at VMworld in the U.S. and we saw it again first hand in Cannes where VMware seemed to tighten their grip over the proceedings even more. Our marketing efforts are better leveraged in other areas. We do not plan on exhibiting at the next VMworld event in the U.S. either.

VI: How Virtual Iron will invest the money collected so far? Are there acquisitions at the horizon?

EW: Virtual Iron has always been committed to delivering leading-edge server virtualization solutions for the mainstream market and we will continue to invest in product development. We have also taken a much more aggressive marketing and channel development stance and are investing much more in these areas. This includes significantly increased investment in Europe and Asia-Pac.

We are not currently looking to acquire other companies. We feel our current product more than meets the requirements of our client set. Of course, we continue to have an aggressive product roadmap.

VI: In August 2007 Virtual Iron joined the Microsoft Interop Alliance. Which kind of benefits that partnership is bringing to your customers besides a seamless import of Virtual Server 2005 virtual machines? How Virtual Iron will implement the interoperability with upcoming Microsoft Hyper-V?

EW: Our participation in the Microsoft Interop Alliance is focused on enhancing interoperability for our users with Microsoft systems. As you would expect given our SME focus, the majority of our customers are running Windows-based infrastructures.

In November, we also announced our plans to join the Microsoft Virtualization Validation program. This will ensure complete Microsoft support to Virtual Iron customers running Microsoft Windows Server as guest operating systems in Virtual Iron virtual environments. Our customers will have greater access to Microsoft’s comprehensive support capabilities and it will improve support hand-offs between the two companies, increasing satisfaction and adoption. The complete text is available here.

VI: Recently the virtualization industry seemed to evolve into three main directions: VDI, disaster recovery and data center automation. We already know about the Virtual Iron efforts in the VDI space through the partnership with Provision Networks (now acquired by Quest). What the company is doing or will do in the other two market segments?

EW: Virtual Iron is currently delivering solutions in all three of these areas.

Regarding data center automation and disaster recovery, it’s important to point out that policy-based management has been a core competency for Virtual Iron since Version 1 of our product. Today more than 50 percent of our customers today are using virtual infrastructure capabilities like policy-based management, transparent workload migration and automated failover for disaster recovery. Virtualization is also a huge enabler for disaster recovery in SMEs. Traditional DR strategies simply aren’t an option for these companies. It just isn’t feasible for an SME. You can also expect to see us secure additional partnerships in the disaster recovery area.

These are some of the reasons customers choose Virtual Iron. It has all the advanced capabilities for data center automation and advanced use cases like disaster recovery without all the cost and complexity. We have highlighted some of our customer implementations here in a new Blog called Customer Spotlight. I think these examples highlight the types of advanced functionality our typical SME customers are using with Virtual Iron.

VI: Another application of virtualization that several vendors tried to push in the last two years is the so called Virtual Appliance. Virtual Iron started to endorse this approach in January 2007 but it doesn’t seem it got any traction so far. Why the market answered so tepidly?

EW: Virtual Appliances are still a very new concept. They make great sense on paper and present an exciting opportunity, but the packaging, pricing, sales, implementation and support systems that will make them common practice in the data center are not there yet. There are still no common standards for virtual appliances. Microsoft is still charging for Windows guests running in production within virtual appliances.
Most ISVs have yet to embrace virtual appliances. The industry has not even really figured out how to sell virtual appliances yet. Take something as fundamental as the channel (the primary distribution vehicle for the server virtualization market). How do they buy, sell and license a virtual appliance? There are a whole set of fundamental pieces like this that are not in place yet. I think the market will ultimately embrace virtual appliances, but it’s a matter of time before these other pieces of the puzzle are in place.

VI: Recently VMware suffered a bad stock performance. This could be a signal that investors don’t trust virtualization anymore. What’s your opinion?

EW: The virtualization market is very strong, and we believe immune from any broader economic downturn. Some would even argue that virtualization will rise in importance if the business climate continues to slide. I also think SMEs will continue to invest in virtualization regardless of the tech economy. History has shown SME technology purchasing s to be far less impacted by economic factors than large enterprises. That bodes well for disruptive companies like Virtual Iron.

Regarding VMware’s recent stock performance, I don’t believe that it truly reflects the company’s performance. VMware grew 80% quarter over quarter and was immensely profitable. The stock was just overhyped during its IPO, and the last quarter was a reflection of the market’s overreaction to some very lofty expectations that were set over the summer. The virtualization space is early enough and large enough for VMware and several other industry players to grow and be very successful.