VMware Drops Greene, Names Microsoft Veteran As CEO

Only 1-2% of medium and small businesses have virtualized their servers, Gartner estimates, but VMware products have primarily found a home in large enterprises where IT staffs have known how to adopt them. VMware under Maritz will have to decide whether VMware stays high end, competes head to head with Microsoft for small and medium business or goes after major niches, such as service providers in the cloud who will have large virtual machine needs. One reason Maritz was selected is that he's well versed in all three, Bittman said.

"VMware has had a tough time in the small and medium sized business market. It won't get any easier," he said.

In addition to virtualization as a feature of Windows Server, the open source KVM hypervisor is now part of the Linux kernel and Red Hat plans to add it soon to its Enterprise Linux. Both Red Hat and Novell also support Xen's operation outside the kernel with their enterprise editions.

While VMware's total virtual environment product line exceeds Microsoft's, the Redmond giant has the distribution mechanism in Windows Server sales that automatically bring large scale customers its way. And the hypervisor itself is backed by systems management capabilities being added to Microsoft Systems Center, the standard way of managing groups of Windows servers in the data center. With Microsoft, virtualization is a feature of the product line, not the whole product.

"Microsoft offers a far deeper server and infrastructure management solutions than VMware," argued Joe Clabby, president of Clabby Analytics, in a report, "Six Reasons Why Microsoft's Hyper-V Will Surpass VMware," issued July 2.

VMware previously competed with an underfinanced and understaffed XenSource, maker of the open source code Xen hypervisor. When Xen showed it was approaching maturity in version 3.0, VMware made its entry level product, VMware Server, available for free and kept rolling along. Then Xen was acquired by Citrix Systems for $500 million in August 2007, and the technical brains at XenSource went to work with Presentation Server expertise at Citrix to attack desktop virtualization.

The budding alliance between XenSource and Microsoft also got closer as XenSource expertise went to work with Longhorn Windows Server developers to get Linux support into Hyper-V and added to the operating system. The way Citrix' XenServer stores virtual machines matches the file format that Microsoft uses, giving the two broader reach among third party vendors seeking to supply virtual machine management tools.

Citrix itself zeroed in on the desktop space as if VMware's dominance on the server side was irrelevant. Meanwhile, Sun Microsystems and Oracle chipped away at VMware's future customer base by offering products to their own customers based on Xen.

If VMware wants to keep its customer base, "it's got to keep expanding the portfolio, keep moving the function bar up, up, up," said Bittman.