Year: 2008

VMware finally made the move that everybody predicted and was awaited for a long time: releasing its hypervisor for free.

During the Q2 2008 earnings call the company announced that before the end of July (the planned date is July 28) it will release the Update 2 for VMware Infrastructure 3.5 and that will give away the lightweight edition of the product, ESX 3i, for free.

The new 3i edition was introduced at the end of the last year.
It doesn’t change the characteristics of the hypervisor but fundamentally chances a part of its architecture, dropping the Console Operating System (COS) and reducing the overall system footprint to 32Mb.
The change allowed several OEMs to preload this edition of the hypervisor into their servers, through internal USB keys, Solid-State Drives (SSD) or hidden partition in the primary hard drives.

virtualization.info has learned some additional details about the move:

• VI 3.5 and ESX 3i will continue to share a the large majority of the code base (so there will be an ESX 3i Update 2). There will be no delays on the release of both products.
• ESX 3i will continue to have the same features that has today, without additional limitations
• ESX 3i will continue to have the same APIs, allowing anybody to develop free or commercial alternatives to VirtualCenter (despite some features like VMotion cannot be replicated because of the VMware SDK limitations).
• VMware will not require the purchase of any software & support subscription to access the product. Customer will be able to get the code without any restriction.
• The customers that purchased the current version of ESX 3i directly from the VMware online store will be eligible for a rebate.
• The ESX version that includes the Console Operating System (COS) will not be faded out (at least in the short timeframe). Most VMware customers are currently using that version and the company will support them for a long time.
• VMware Server will not be faded out (as many could suppose). The company still sees the product as a valuable proposition for a different kind of audience.

At first sight this move seems a clear attempt to recover the terrible stock performance that VMware is suffering from the departure of its former CEO Diane Greene.
But virtualization.info has learned that the plan was not developed by the new CEO Paul Maritz, but by Greene herself several months ago.

How the free ESX will impact the market?

First of all, the competition will move on the virtual infrastructure management (with a special focus on the storage) and automation (for hosted desktops, virtual labs, VM lifecycle, autonomous computing, cloud computing) areas, turning the hypervisor as a commodity, embedded in the operating system or not.
Any vendor that will not adopt the same strategy (like Citrix or Virtual Iron) will have a hard time to justify the price of its solution.

Secondarily, the product will finally boost the diffusion of VMware technologies in the SMB market.
This will seriously disturb the Microsoft effort in this space and all the other virtualization vendors that have a clear focus on the small companies (like Virtual Iron or Parallels).

Last but not least, the sales channel will become critical to win the competition for most customers.
When multiple market leaders have a similar proposition in terms of price and feature set, the experience in managing the channel does the real difference.
VMware didn’t seem able to compete with Microsoft and Citrix here, but the new CEO certainly has the knowledge to correct the mistakes of the past.

VMware finally released the much feared Q2 2008 earnings report:

• Revenues for the second quarter were $456 million, an increase of 54% from the second quarter of 2007
• GAAP operating income for the second quarter was $61 million, compared to $47 million for the same period last year 
• Non-GAAP operating income was $112 million, an increase of 52% from the second quarter of 2007
• GAAP net income for the quarter was $52 million, or $0.13 per diluted share, compared to $34 million, or $0.10 per diluted share, for the second quarter of 2007
• Non-GAAP net income for the quarter was $92 million, or $0.23 per diluted share, compared to $52 million, or $0.16 per diluted share, for the second quarter of 2007
• Cash exceeded $1.5 billion and deferred revenue was $721 million as of June 30, 2008

The company adjusted its 2008 outlook accordingly:

• 2008 revenues are targeted to grow approximately 42% to 45% compared to 2007. 
• Third quarter 2008 revenues are targeted to be within a range of approximately $462 to $468 million.
• Third quarter GAAP operating margin is targeted to be between 11% and 13%.   This guidance includes stock-based compensation, employer payroll tax on employee stock transactions, amortization of intangible assets and capitalized software development costs which are targeted at 9% of projected revenue.

As this wasn’t enough, the company said that, because of the weak economy, it expects a further slowdown in closing the enterprise agreements.

The numbers, already expected below the forecast, had a seriously negative impact on the shares value.

The fact that VMware is going to release its hypervisor for free (a news that the audience probably didn’t clearly received) couldn’t help recovering the investors’ trust.

At the end of the day VMW lost 13% during after-hour trading:

Just two weeks ago the shares already lost 24% of the value because its co-founder and CEO Diane Greene was suddenly removed without further explanations.

The situation is so negative that VMware had to launch a stock options replacement program to compensate the loss that its newest employees suffered so far.

virtualization.info was launched in September 2003 and in almost five years of activity we received thousands of emails and comments.
Some of them carry on recurring questions so that at this point we can safely compile a top 3 FAQ:

• Which processor grants the best performance for virtualization between AMD and Intel?
• Which storage array is the best for virtualization?
• Why doesn’t virtualization.info cover storage virtualization?

Let’s save the first two for better times (we are actively working to provide an unbiased answer to those questions).
It’s time to answer the third one: virtualization.info doesn’t cover the so called storage virtualization because at today this term doesn’t mean anything.

Unlike what happens for hardware virtualization, OS virtualization and application virtualization, the storage vendors seems unable to find an agreement on the definition.
The term is abused in almost every press announcement and it can refer to at least ten different approaches.

Depending on the vendor you are talking to, storage virtualization is the abstraction of the directories, of local volumes, of the remote volumes, of the array, etc.
So even well known concepts like RAID or distributed file systems become storage virtualization and get sold as brand new, cutting-edge technology enhancements.

For years, starting in early 2003, the worldwide press followed the marketing folks claiming the advent of storage virtualization as the new mainstream. But the reality is that the market is so incredibly confused that potential customers just distrust the technology.
How can we have confidence in something that not even the vendors recognize in a univocal way?

It’s evident that the vendors are using the term in a wild way hoping to raise the same interest that server virtualization created in the last few years.
What they are missing is that they are obtaining exactly the opposite effect.

Server virtualization (and VDI) are the best thing ever happened to the storage market in years.
Thanks to VMware, Citrix, Microsoft and all the other companies we track on virtualization.info the need for shared storage reached record levels so that even the SMBs have to contemplate it now.

There’s no need to use the term storage virtualization and confuse the market to sell more.

We are so glad that the independent analysis firm Burton Group has a similar opinion:

…

So what’s important? Forget about the term ‘storage virtualization’. Focus on function and features. Determine what you are looking for in the ultimate storage ecosystem. Do you want to provide nuts to bolts information lifecycle management? Ok then, look for storage vendors who can move data auto-magically from storage tier to tier with some content management thrown in. Or are you tired of managing volume capacities? Then get yourself into thin provisioning. Need volumes to follow around server virtual machines? Look for storage that can flit along with the VM. Need to backup and archive?  Get data deduplication. Consolidate all those disk arrays you’ve got into a common management point with a few extra features thrown in? Yes we can. Whatever – you get the idea. Call it what it is, describe the function you’re looking for and find vendors who can deliver. If the storage vendor wants to call it virtualization, then great, give him a knowing smile, pat him the back, but ask for a firm bid…

At virtualization.info we are ready to talk about storage virtualization, as soon as the industry stops to mislead the customers.

The application virtualization and streaming startup Endeavors Technologies problems seem never ending.

From May 2006 to October 2007, when it was still called Stream Theory, the company was involved in patent lawsuits with Microsoft (after the Softricity acquisition), Citrix, AppStream and Exent.

In May 2008, it mistakenly announced the advent of a new Microsoft licensing (SPLA) which allows 3rd parties to stream Office.

And last Friday the company suspended its share from the London Stock Exchange detailing a difficult financial situation:

The Company announced on 14th February 2008 that it had anticipated completing a major funding round during the first quarter of 2008 and a Prospectus proposing a placing and open offer was in final draft form. However, financial market conditions at that time were not favourable and the Company had not received commitments from potential placees to the level that the Directors considered necessary to maintain existing operations and finance the planned growth, although the process was still ongoing.

The Company subsequently, having reviewed the alternatives, proposed a new funding initiative based on attracting private and institutional investors using a combination of convertible loan notes and ordinary shares. The first two stages of a three stage process were successfully executed and the Company held a general meeting at which shareholders approved the changes necessary to meet the requirements of the proposed stage 3 investors. In addition the Company received approval from the tax authorities for the proposed treatment of VCT/EIS tax relief of such an investment.

The Company signed a binding heads of terms with a lead institutional investor based on syndication with other institutions.

Regrettably, other potential institutional investors have been unable to agree detailed terms, principally on matters of taxation and security and therefore the Company has been unable to complete the final stage of its fundraising.

The Company had intended to move from the Official List to AIM as part of the proposed corporate strategy and shareholder approval for such a move was obtained at the recent general meeting. A condition of the transfer is that the Directors of the Company must provide a confirmation of at least one year s working capital prior to admission to AIM.

The Directors are not able to make such an undertaking without a significant proportion of the intended stage 3 funding having been committed…

virtualization.info has learned that the amount of money required to immediately recover is over £1.5 million.
Alternatively the company has to wait the profits coming from the current partnerships (like the one with Wallace Systems or the one with Vector Networks), not earlier than Q2 2009.

Of course there’s a third option: the company (and its patents) could be acquired for a cheap price.

Considering the impressive consolidation seen so far in the application virtualization market it’s not a too unlikely scenario:

• VMware acquired Thinstall
• Symantec acquired Altiris and AppStream
• Google acquired Greenborder
• Citrix acquired Ardence
• Microsoft acquired Softricity

Tomorrow VMware will present its financial results for Q2 2008.
The numbers are already expected slightly below the forecast (the apparent reason behind the removal of Diane Greene).

VMware already lost 30 points at Wall Street and the upcoming earnings report may further impact the stock performance.

Despite the strong competition, so far VMware retained a lot of its employees because of its vision, of the cutting-edge technology, of the leadership position in the market, and of course the stock options granted after the IPO in August 2007 (depending on the level in the organization and the years of service).
But if the value of those stock options goes too down VMware may face an exodus, at least involving the newest employees.

Probably to avoid this, on July 17 VMware has filed a replacement program:

I am pleased to inform you that the VMware Board of Directors has approved a proposal to exchange your post-IPO out of the money (or “underwater”) stock options. This proposal must also be approved by our stockholders and we are currently scheduling a special meeting to gain that approval.

Under the proposal, all U.S.-based non-executive employees of VMware holding stock options granted after our IPO will be able to exchange their out of the money stock options for an equal number of new options. The exercise price of the new options will be the stock price at the close of trading on the New York Stock Exchange on the day immediately following the date that the exchange is completed. The exchange will restart your options’ vesting schedule. Executive officers of VMware will not be eligible to participate.

Participation in this option exchange is entirely voluntary. The exchange program will be highly regulated and subject to specific rules that we will provide to you when the exchange offer period commences. It will take some time to roll out the program, seek stockholder approval and grant new options. We appreciate your patience during this period.

For our employees in non-U.S. jurisdictions who hold post-IPO options that are underwater, instead of the option exchange, we plan to grant you a to-be-determined proportionate number of restricted stock units after the exchange offer for U.S. employees is completed. Non-U.S. employees will continue to hold their current stock option grants.

The new Microsoft hypervisor will reach most companies through the inclusion in Windows Server 2008 but this doesn’t grant that it will be deployed and tested. So Microsoft is figuring out ways to build confidence in the product without obliging the potential customers to become early adopters.

One of these ways, unnoticed so far, seems pretty brilliant: requiring Hyper-V as mandatory component for every classroom course (the Microsoft Official Curriculums or MOCs) that its learning partners teach worldwide.

To sell MOCs each Microsoft learning center has in fact to comply a Hardware Level blueprint that describes the minimum hardware requirement to install the course products and run the labs.

The new Hardware Level 6.0 guideline that Microsoft recently released includes Hyper-V as mandatory component for every course:

• Hardware Requirements
  • 64-bit Intel Virtualization Technology or AMD Virtualization processor (2.8 GHz dual core or better recommended)
  • Dual 120 GB hard disks 7200 RPM SATA or better (striped)
  • 4 GB RAM expandable to 8 GB or higher
  • DVD (dual layer recommended)
  • Network adapter
  • Sound card
  • Video adapter aero-capable recommended
  • Super VGA monitor (17 inch/ 43 cm)
• Software Requirements
  • 64-bit Windows Server 2008 Enterprise Edition
  • Hyper-V role configured
  • Microsoft Learning Lab Launcher – Hyper-V version

The first courses requiring a Hardware Level 6 class will be the ones about Windows Small Business Server 2008, to be released in H2 2008.
In 2009 the requirement will be extended to a new course about the upcoming Microsoft Exchange Server 14, and over time to all other courses.

The learning partner may need several months to upgrade their classroom facility but at the end every customer purchasing a course will interact with Hyper-V.

The MOCs length varies from one day to five days: during such timeframe the student has all the time to interact with the new hypervisor and most of all to verify its performance.
Best of all, professionals in different IT areas will become familiar with Hyper-V and once back in their companies may recommend the product or at least accept its adoption with easy.

The security firm SteelEye launches today a brand new product called Protection Suite with offers disaster recovery capabilities for Citrix XenServer.

Differently from the approach used by the company (and many competitors) so far, Protection Suite doesn’t sit inside a virtual machine but inside the XenServer Dom0.
From there the product is able to backup all or some virtual machines from the production site to the recovery site, in a way similar to the new VMware Site Recover Manager (SRM) does for VI 3.5.

Protection Suite interacts with Citrix XenCenter to register the copied VMs and power them on in case of disaster at the primary site.

To achieve the goal the suite is made of two products: LifeKeeper for Linux and a new Data Replication for XenServer.

While VMware SRM requires a replication between the back-end storage arrays at the primary and recovery sites, Protection Suite performs a host-based replication, using the Ethernet connection that links two virtualization hosts.
This approach allows to run across a WAN link but it may have a major bandwidth constrain depending on the size of the virtual infrastructure.

Protection Suite will be available next week for all versions of Citrix XenServer with a per-server licensing model.
The price starts at $2495 per server (unlimited VMs) with XenServer Standard Edition.

SteelEye has been included in the virtualization.info Virtualization Industry Radar.

In November 2007 Oracle surprisingly announced its own virtual infrastructure: Oracle VM.

The virtualization offer is comprised of two components: the hypervisor, Oracle VM Server (based on Xen) and the management console, Oracle VM Manager.

The product comes free of charge (customers can to buy optional support) and even counts on a free of charge VDI solution offered by Ericom.

While database giant is not a recognized virtualization player (and it’s unlikely it would ever be), the hypervisor provoked an earthquake at VMware because of the new policy that locks-in all the customers that want an official support for their virtualized Oracle products.

In these months Oracle silently updated the product that reached version 2.1.1 in March 2008.

The Release Notes don’t highlight any major feature inclusion.

Download it here.

The virtualization.info Virtualization Industry Roadmap has been updated accordingly.

Launched in April, the US startup Desktone already achieved some pretty amazing results: in just three months it closed agreements to power leading OEMs like HP and telco giants like Verizon which want to become VDI providers.

The series of successes may continue with the arrival of IBM.

Last week in fact the company announced a deal to deliver Desktone-powered VDI solution to Pike County Schools for 5 years.

The served environment is pretty remarkable, 1,400 PCs, and may act as pilot before IBM signs a definitive business agreement with Desktone to become the third hosted VDI provider in the market.

The long awaited Microsoft hypervisor was released less than one month ago and the impact on the market that it generated (and will generate over the long term) is immediately recognizable by the many reactions at different levels of the ecosystem.

Unlike Virtual Server, the product raised the attention of the customers and even if Microsoft cannot match yet the level of interest generated by VMware ESX, the activity around Hyper-V is growing in a healthy way (source: Google Trends):

Obviously, the blogosphere coverage of the new hypervisor is increasing as well, with new blogs launched every day.

The popular website about Microsoft technologies, Bink.nu, for example just launched a new independent project totally dedicated to Hyper-V: HyperVoria.com

And Microsoft didn’t even unleash its marketing machine.
The company planned to start a 6-months series of events across the world, starting September 8, 2008.

Virtual Server 2005 didn’t receive anything similar in terms of investment, giving VMware the opportunity to catalyze the customers’ attention as the only real player on the scene.
It’s evident that Microsoft doesn’t want to repeat the same error with Hyper-V.