Competition, Virtualization, and VMWare
This post might be my final post re VMWare/VMW because... well, I do not want to overstay my welcome and bore you as I did with my drum-beating for Google/GOOG.
But what a way to exit -- a very bullish commentary from THE ECONOMIST (link embedded) that offers crucial insights into VMWare: its products, its competition, and the power of being the first mover...
-- David M Gordon / The Deipnosophist
===================================
Virtualisation
The rise of the hypervisor
Jan 17th 2008 From The Economist print edition
Is this the most disruptive technology in business computing since the internet?
HISTORY may not repeat itself, but it does sometimes rhyme. In 1980 when IBM asked Microsoft, then an unknown software firm, to provide the operating system for its personal computer (PC), it made the mistake of allowing its supplier to license the software, called DOS, to other hardware firms. DOS quickly became the dominant computing platform for the PC and the basis of Microsoft's might.
Two decades later Microsoft may have made a similarly seminal mistake. In 2002 it balked at paying a high asking price for VMware, then also an unknown start-up. VMware was later acquired by EMC, a big data-storage supplier, but the Silicon Valley firm remained largely independent. This allowed it to develop software that may yet emerge as a dominant platform in its own right—not for single computers, but for the vast warehouses full of machines, known as data centres, where much computing will be done in future.
VMware's claim to fame is a technology called virtualisation, originally developed for big computers such as mainframes. It allows computers to split themselves into several “virtual machines”, each of which can run its own operating system and applications, in effect separating software from hardware. To do this, VMware developed a small program called a hypervisor, which controls how access to a computer's processors and memory is shared.
Before VMware came along, virtualisation had lingered in obscurity. Rather than splitting up big machines, firms found it easier to use small ones for each new application. For a while, this was a rational strategy. Servers were cheap. Machines that ran more than one application were more likely to crash. Yet the approach led to “server sprawl”, turning data centres into complex warrens of understretched hardware that required ever more people, space and power to keep them going. So it is hardly surprising that virtualisation, which allows multiple servers to be consolidated into a single machine, is one of the fastest growing areas in the software industry (see chart).
But what a way to exit -- a very bullish commentary from THE ECONOMIST (link embedded) that offers crucial insights into VMWare: its products, its competition, and the power of being the first mover...
"The ultimate goal of virtualisation is to make a data centre, or even several of them, look like a single pool of computing, storage and networking resources that can be allocated as needed... Yet for the vision to become reality, something is still missing: a set of tools to manage all these computing resources—an operating system for the data centre, if you will. VMware is well on its way to building just that... it has become one of the fastest growing software firms, a fact that explains its blockbuster flotation last August (EMC still holds a majority stake). Although VMware is best known for its hypervisor, it now makes more money from a suite of other products, such as software to manage virtual machines. And it has been successful at persuading other computer firms to make their wares work well with its products, thus building an ecosystem around its emerging platform. How was it possible for a newcomer to leave incumbents such as HP, Microsoft and Sun Microsystems in the dust?..."Full Disclosure: Long the shares of VMWare/VMW.
-- David M Gordon / The Deipnosophist
===================================
Virtualisation
The rise of the hypervisor
Jan 17th 2008 From The Economist print edition
Is this the most disruptive technology in business computing since the internet?
HISTORY may not repeat itself, but it does sometimes rhyme. In 1980 when IBM asked Microsoft, then an unknown software firm, to provide the operating system for its personal computer (PC), it made the mistake of allowing its supplier to license the software, called DOS, to other hardware firms. DOS quickly became the dominant computing platform for the PC and the basis of Microsoft's might.
Two decades later Microsoft may have made a similarly seminal mistake. In 2002 it balked at paying a high asking price for VMware, then also an unknown start-up. VMware was later acquired by EMC, a big data-storage supplier, but the Silicon Valley firm remained largely independent. This allowed it to develop software that may yet emerge as a dominant platform in its own right—not for single computers, but for the vast warehouses full of machines, known as data centres, where much computing will be done in future.
VMware's claim to fame is a technology called virtualisation, originally developed for big computers such as mainframes. It allows computers to split themselves into several “virtual machines”, each of which can run its own operating system and applications, in effect separating software from hardware. To do this, VMware developed a small program called a hypervisor, which controls how access to a computer's processors and memory is shared.
Before VMware came along, virtualisation had lingered in obscurity. Rather than splitting up big machines, firms found it easier to use small ones for each new application. For a while, this was a rational strategy. Servers were cheap. Machines that ran more than one application were more likely to crash. Yet the approach led to “server sprawl”, turning data centres into complex warrens of understretched hardware that required ever more people, space and power to keep them going. So it is hardly surprising that virtualisation, which allows multiple servers to be consolidated into a single machine, is one of the fastest growing areas in the software industry (see chart).
As the software industry matures and consolidates—this week Oracle said it would buy BEA Systems, and Sun said it would buy MySQL—the emphasis has shifted away from fancy new technology and towards tools that cut costs and allow firms to do more with less.
Server consolidation is only the most obvious merit of virtualisation, however. Once computers have essentially become bits of software, getting new ones up and running takes minutes, not weeks. Even more important, servers can be moved around, even when in use. This allows for clever tricks such as concentrating virtual machines on as few computers as possible and switching off the rest to save energy. And particular server configurations can be packaged into downloadable and highly reliable “virtual appliances”.
It is not just servers that can be disembodied. Desktop computers are next on the list, because virtualisation allows them to be managed centrally. Operating systems and applications need no longer run on PCs on desks, but can run on virtual machines in the data centre that can be accessed remotely—theoretically from any PC in the world. Storage is also getting more and more virtualised, so that data can be shunted around just as easily.
The ultimate goal of virtualisation is to make a data centre, or even several of them, look like a single pool of computing, storage and networking resources that can be allocated as needed. Thomas Bittman of Gartner, a market-research firm, calls this “real-time infrastructure”. Yet for the vision to become reality, something is still missing: a set of tools to manage all these computing resources—an operating system for the data centre, if you will.
VMware is well on its way to building just that. Founded ten years ago by a bunch of computer scientists and run by Diane Greene, it has become one of the fastest growing software firms, a fact that explains its blockbuster flotation last August (EMC still holds a majority stake). Although VMware is best known for its hypervisor, it now makes more money from a suite of other products, such as software to manage virtual machines. And it has been successful at persuading other computer firms to make their wares work well with its products, thus building an ecosystem around its emerging platform.
How was it possible for a newcomer to leave incumbents such as HP, Microsoft and Sun Microsystems in the dust? One reason was that VMware had the right product at the right time. More important, VMware delivered “a non-disruptive disruptive technology”, as Ms Greene puts it. Customers can install it without having to rejig their existing set-ups. By contrast, other virtualisation efforts were too ambitious and required extensive changes.
Now the industry's heavyweights are fighting back with a vengeance. In recent months they have announced big virtualisation initiatives. HP and Sun want to bring technologies developed for their high-end servers to the rest of the data centre. Microsoft, meanwhile, will integrate its own hypervisor, called Viridian, into the next version of its Windows operating system, essentially giving it away—and raising the spectre of yet another antitrust case. (On January 14th the European Commission opened two new investigations to see whether Microsoft abused its desktop monopolies to restrict competition.)
Yet the most interesting competitor is another newcomer: XenSource. It distributes its hypervisor as free, open-source software but sells related products. Simon Crosby, the firm's technology chief, likens this to giving away an engine in order to sell a car around it. He believes this approach will help to spread virtualisation more quickly and prevent VMware from becoming another Microsoft. XenSource now has the necessary backing, having recently been acquired by Citrix, another software firm, for $500m. Some people think that if Microsoft fails to catch up with VMware on its own, it will buy Citrix.
Will VMware be able to withstand the collective onslaught? It is unlikely to crumble like Netscape, the most recent start-up to vie to become a new platform, since hypervisors are much harder to replace than browsers. And VMware has already reacted cleverly by slashing the price for its hypervisor and persuading hardware firms to embed it in their machines, putting it on a more equal footing with Microsoft when it comes to distribution.
Whatever happens to VMware, however, the virtualisation technology it has helped to popularise is here to stay—and will transform the economics of computing in the years to come. In particular, computing will be much easier to outsource. Perhaps the best way to understand virtualisation is to view it as an electronic form of globalisation: when borders disappear, everything is up for grabs.
Server consolidation is only the most obvious merit of virtualisation, however. Once computers have essentially become bits of software, getting new ones up and running takes minutes, not weeks. Even more important, servers can be moved around, even when in use. This allows for clever tricks such as concentrating virtual machines on as few computers as possible and switching off the rest to save energy. And particular server configurations can be packaged into downloadable and highly reliable “virtual appliances”.
It is not just servers that can be disembodied. Desktop computers are next on the list, because virtualisation allows them to be managed centrally. Operating systems and applications need no longer run on PCs on desks, but can run on virtual machines in the data centre that can be accessed remotely—theoretically from any PC in the world. Storage is also getting more and more virtualised, so that data can be shunted around just as easily.
The ultimate goal of virtualisation is to make a data centre, or even several of them, look like a single pool of computing, storage and networking resources that can be allocated as needed. Thomas Bittman of Gartner, a market-research firm, calls this “real-time infrastructure”. Yet for the vision to become reality, something is still missing: a set of tools to manage all these computing resources—an operating system for the data centre, if you will.
VMware is well on its way to building just that. Founded ten years ago by a bunch of computer scientists and run by Diane Greene, it has become one of the fastest growing software firms, a fact that explains its blockbuster flotation last August (EMC still holds a majority stake). Although VMware is best known for its hypervisor, it now makes more money from a suite of other products, such as software to manage virtual machines. And it has been successful at persuading other computer firms to make their wares work well with its products, thus building an ecosystem around its emerging platform.
How was it possible for a newcomer to leave incumbents such as HP, Microsoft and Sun Microsystems in the dust? One reason was that VMware had the right product at the right time. More important, VMware delivered “a non-disruptive disruptive technology”, as Ms Greene puts it. Customers can install it without having to rejig their existing set-ups. By contrast, other virtualisation efforts were too ambitious and required extensive changes.
Now the industry's heavyweights are fighting back with a vengeance. In recent months they have announced big virtualisation initiatives. HP and Sun want to bring technologies developed for their high-end servers to the rest of the data centre. Microsoft, meanwhile, will integrate its own hypervisor, called Viridian, into the next version of its Windows operating system, essentially giving it away—and raising the spectre of yet another antitrust case. (On January 14th the European Commission opened two new investigations to see whether Microsoft abused its desktop monopolies to restrict competition.)
Yet the most interesting competitor is another newcomer: XenSource. It distributes its hypervisor as free, open-source software but sells related products. Simon Crosby, the firm's technology chief, likens this to giving away an engine in order to sell a car around it. He believes this approach will help to spread virtualisation more quickly and prevent VMware from becoming another Microsoft. XenSource now has the necessary backing, having recently been acquired by Citrix, another software firm, for $500m. Some people think that if Microsoft fails to catch up with VMware on its own, it will buy Citrix.
Will VMware be able to withstand the collective onslaught? It is unlikely to crumble like Netscape, the most recent start-up to vie to become a new platform, since hypervisors are much harder to replace than browsers. And VMware has already reacted cleverly by slashing the price for its hypervisor and persuading hardware firms to embed it in their machines, putting it on a more equal footing with Microsoft when it comes to distribution.
Whatever happens to VMware, however, the virtualisation technology it has helped to popularise is here to stay—and will transform the economics of computing in the years to come. In particular, computing will be much easier to outsource. Perhaps the best way to understand virtualisation is to view it as an electronic form of globalisation: when borders disappear, everything is up for grabs.
Labels: Chart analysis, Company analyses, Economics, Lessons, Market analyses
posted by David M Gordon | 12:39 AM
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