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Microsoft, IBM, And Business Objects Start Delivering Software Via Virtual Appliances

It's early in the game. But VMware's founder predicts virtual appliances will be the "predominant" way it delivers software.
Businesses are on the hunt for cheaper, less complex ways to deploy software--one big reason software as a service has gained so much attention. Now interest is picking up in the nascent market for virtual appliances, a concept driven by VMware that offers some of the same appeal.

These software bundles contain everything you might get in a server tuned for a specific purpose--say, security or data warehousing--except there's no hardware. Instead, the application and an operating system optimized for that software are formatted to run in a virtual machine environment.

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Among the benefits of virtual appliances is simplified data center management. Since the application vendor has optimized the virtual appliance, including stripping out anything in the operating system not needed to run the app, there's no painstaking physical server configuration to get the appliance running well. That could also cut deployment time, letting IT deliver new business services faster. Unlike SaaS, the data's in-house, which some companies prefer with sensitive information.

Virtual appliances will be the predominant delivery platform, Rosenblum says

Virtual appliances will be the "predominant" delivery platform, Rosenblum says

The virtual appliance model has its drawbacks. For one, a company needs a virtual server environment like VMware's ESX Server, something many small and midsize companies haven't invested in and might not have the expertise to manage. Also, larger companies may not want to give up the flexibility of fine-tuning and reconfiguring software. Managing a large virtual environment also can add complexity.

There's not a wide range of business software options yet, either, as virtual appliances come mostly from small vendors. But that could change quickly.

VMware launched its Virtual Appliance Marketplace last November and now offers about 600 appliances on its Web site. Some of the marketplace's vendors, such as Blue Lane, whose software secures virtual machines, have made a name in their niches. VMware co-founder Mendel Rosenblum predicts virtual appliances will become the "predominant way we distribute software."

More big guns are joining. Business Objects, the largest pure-play business intelligence vendor, last week began selling its Crystal Decisions reporting software as a virtual appliance to run in a VMware environment. Business Objects plans to have more of its software available, for sale directly or through VMware's marketplace, as virtual appliances next year. Just one other BI vendor, Panorama Software, offers a virtual appliance on VMware's marketplace.

Virtual appliance versions of Microsoft's Exchange Server and SQL Server are among the most popular downloads on VMware's marketplace, along with various firewalls and other security systems. IBM last month released an e-mail security virtual appliance that runs on VMware and will support other virtual environments in the future. LeftHand Networks last week introduced a storage area network appliance that runs on VMware.

Virtual appliances are being downloaded from VMware's marketplace at a rate of more than 2,500 a day, but it's hard to tell what success that translates to, since many are likely 30-day product evaluations. If someone downloading an appliance decides to license it, that's done directly with the software appliance maker.

For now at least, VMware says virtual appliances make the most sense for small companies, whose small IT staffs struggle to implement, configure, and install software applications. As more companies invest in virtual server environments, virtual appliances look like a viable rival to approaches such as SaaS and hardware appliances. "You could consider virtual appliances as a local software as a service, where you can have most of the provisioning and management benefits associated with SaaS while keeping your data in control," says Srinivas Krishnamurti, director of product management and market development at VMware.

App vendors like Business Objects know they need to provide software any way companies want it. So it's also offering its software on hardware appliances sold by IBM and Netezza, and it has 50,000 subscribers to its hosted software service. They both appeal to small and midsize companies, a customer base growing 50% faster than big-business customers, says VP Todd Rowe.

Most companies are in the early days of their virtualization strategies, focusing on quick returns from server consolidation. When those savings dry up, many will look at virtual appliances as a way to get more value out of their virtual infrastructure.