Beyond Binary

One of the topics I didn't get a chance to write about during last night's Churchill Club speech was Steve Ballmer's comments on virtualization.

Here's a ZDNet video with Ballmer talking about Microsoft's "opportunity to democratize virtualization."

For those who want to skip to the money quote, here it is:

"If you want virtualization on 80 percent of servers instead of 5 percent of servers, you better not charge three times as much as the price of the server for the virtualization," Ballmer said. "For certain high-end applications, the approach that VMware has used is a perfectly good approach, but it's not an approach that is going to lead to virtualization of a high percentage of servers."

ZDNet posted other videos as well, including Ballmer on the economy and on competition with Google.

Microsoft said on Monday that it now plans to offer its server virtualization product for free.

Ahead of a virtualization event in Redmond, Wash., Microsoft said that its Hyper-V Server 2008 will be released within 30 days and be available at no cost via the Web. The software maker had planned to charge $28 for the product.

Also on Monday, Microsoft plans to show off a live migration feature that will be part of the next version of its Hyper-V virtualization technology. Live migration allows companies to move a running virtual machine from one server to another.

The feature will be part of Windows Server R2, Microsoft said Monday. The software maker had originally intended to make Live Migration part of the first Hyper-V product, but pulled the feature in order to try to make its shipping deadline.

Microsoft also said that major computer makers note that nearly all of their customers who order Windows Server 2008-based systems are opting to include Hyper-V. Microsoft finalized the Hyper-V code back in June.

Diane Greene

(Credit: CNET)

VMware announced on Tuesday the abrupt departure of founder and CEO Diane Greene, replacing her with former Microsoft executive Paul Maritz.

The virtualization software also warned that full-year revenue will be "modestly below the previous guidance of 50 percent growth over 2007." The company did not update its guidance for the just-ended quarter, saying it will report results as scheduled on July 22.

VMware shares plummeted on the news, changing hands recently at $39.50, down $13.69 or more than 25 percent.

The company's revenue warning is the second recent financial hiccup for VMware, which also reported disappointing earnings in January.

Paul Maritz

(Credit: EMC)

Maritz, who spent 14 years at Microsoft, had been at former VMware parent EMC since February, when the storage giant bought Maritz's start-up, Pi.

Although VMWare issued a nice statement praising Greene for her contributions, the company made it clear that the decision for Greene to leave was made by the board.

"VMware's Board of Directors announced today that it has made a change in the leadership of the company with the departure of Diane Greene as president and CEO," the company said.

The move comes as VMware faces stepped-up competition in the virtualization field it has dominated, including from Maritz's former employer, Microsoft.

VMware's fortunes have shifted drastically since the company launched a wildly successful IPO last summer. The company's stock rose from an initial price of $29 per share to a high of $55.50 in its first day of trading.

EMC purchased VMware for approximately $635 million in 2003.

In Field of Dreams, Kevin Costner is wary of building a baseball diamond on his farm, which is already near foreclosure. But a voice tells him, "If you build it, they will come."

Microsoft has the same vision for its virtualization technology. Several years in the making, Microsoft's Hyper-V officially entered on Thursday a field dominated by VMware and other competitors, including the open-source Xen product.

Microsoft Corporate Vice President Bill Laing told me that he understands his company faces an uphill battle in trying to win over customers that have been using VMware and Xen, in some cases for many years.

"I think we'll do best initially in 'green field' opportunities," Laing said. "Small business, I think, is a completely green field. In the enterprise, where customers haven't deployed (another virtualization technology), I think we'll do well."

Over time, Laing said he wants Microsoft find its way into data centers that already use VMware.

"I think it will take longer to rip and replace, but that's certainly our ambition," Laing said.

As expected, Microsoft announced on Thursday that it has finished work on Hyper-V. For now, Microsoft is making Hyper-V available for download via its Web site, though it plans on July 8 to make it an option via Windows Update. By releasing it now, the company is following through on its pledge to ship the virtualization hypervisor within 180 days of the release of Windows Server 2008.

Microsoft is expected this week to announce that it has completed work on Hyper-V, a virtualization technology that allows a single server to act as many separate servers.

ZDNet's Mary Jo Foley reported Tuesday that Microsoft is expected tomorrow to say it has released the product.

The move will allow Microsoft to fulfill its pledge of releasing Hyper-V within 180 days of the release of Windows Server 2008, which launched in February. The company issued a near-final "release candidate" version in March.

To make its target, however, Microsoft was forced last year to strip out several features from the product, including Live Migration.

Hyper-V will compete with a number of existing virtualization technologies, including a range of products from industry leader VMware.

VMware took in less money on virtualization software than expected in the fourth quarter, leading to a steep drop in the company's shares.

The software maker said Monday that it earned $78 million, or 19 cents per share, as compared with $31 million, or 9 cents per share in the prior quarter. Its sales were also up sharply, to $412 million, though that was slightly less than the average analysts' forecast.

After the report, VMware shares plummeted more than 25 percent in after-hours trading. As of 3 p.m. PST, its shares were trading at $60.60, down $22.40 or more than 26 percent.

In a statement Monday, CEO Diane Greene praised the company's position, even as it faces a stepped-up attack from Microsoft and other rivals.

"We begin 2008 with more than 100,000 customers, 500 technology and consulting partners, nearly 10,000 go-to-market partners, and more than 5,000 employees," Greene said. "As others begin to enter the market, VMware and our partners are continuing to broaden and deepen our highly reliable end-to-end virtualization solutions."

Microsoft's decision to allow Home versions of Vista to run inside virtual machines may have far-reaching benefits in the coming years.

The initial market for such virtual Vista machines is likely to be among Mac users looking to run Windows or within the ranks of hard-core PC enthusiasts. But the move could also benefit the average PC user who just wants a machine that's easier to use, says Woody Hobbs, CEO of Phoenix Technologies, a leading maker of the BIOS (basic input/output system) software that loads before a PC boots up.

Woody Hobbs, CEO, Phoenix Technologies

(Credit: Phoenix Technologies)

Phoenix has been working on HyperSpace, a technology that allows for a range of software from embedded Web browsers to media players to security programs, to run outside the main operating system. The company has been working to bring HyperSpace to market this year, but because the technology relies on virtualizing some components of the PC, Hobbs said, it was hampered by Microsoft's licensing rules, which limited Vista virtualization to the two priciest versions of the operating system. Virtualization allows a computer to run a single version of an operating system but seem to be running multiple copies.

"We'd like to think they are accommodating us but, nevertheless, we are happy with the change," Hobbs said in a telephone interview on Monday.

Hobbs said Microsoft could benefit too, given the fact that he feels Windows has been losing share to the Mac because consumers believe Apple's machines are simpler to run and manage.

Microsoft's change on the licensing front, Hobbs said, opens the door for significant changes to the PC landscape, such as having security software that can run before and after Windows runs, as well as a machine that can boot instantly for simple tasks such as DVD playback, while simultaneously running Windows. Some machines have a "fast boot" Linux option today, but the machine has to restart to boot into Windows, meaning that users can't easily switch back to the DVD and keep their place in the movie.

"It really makes it a much more intuitive usage model and starts to make the PC a little more friendly, a la the Mac," he said.

Phoenix announced the HyperSpace technology in November, but expects it will take until at least the back-to-school season before the first machines hit U.S. shelves, and probably the holidays before machines start to make sophisticated use of the non-Windows space for things such as Web browsing or e-mail.

The licensing change for Vista has been a long time coming. Microsoft was criticized before Vista's launch for its limitations, which allowed only the Ultimate and Business editions to run as guest operating systems within a virtual machine. In June, Microsoft briefed reporters that it would ease the restrictions, but pulled back at the last minute for unspecified reasons.

Parallels, which makes software that lets Windows run on a Mac and is among those that stands to gain most immediately from the decision, praised the move.

"We're glad to see that Microsoft is taking steps to increase the pace of the adoption of virtualization," Parallels' Benjamin Rudolph said in an e-mail interview. "This shows that Microsoft is committed to the virtualization market, and we think that this opens new opportunities for us to partner."

Rudolph, too, suggested that the change might help boost Windows' fortunes among those otherwise inclined.

"This move is a good thing for those computer users who aren't Microsoft customers (like Mac and Linux users) since they now have a cost-effective way to access Windows and its massive software library," he said, noting that Microsoft now has a shot at the 6 percent of desktops not running its operating system today. "This is a great way for Microsoft to effectively reach 100 percent of the desktop market."

That Microsoft has its sights set on the virtualization market dominated today by VMware is nothing new. However, the announcements Microsoft made on Monday show that the company is putting a tremendous amount of resources toward moving from vision to reality, analyst say.

Microsoft's approach of having a data center that can respond dynamically to business needs, while still years off, is compelling, said Forrester Research analyst Frank Gillett. Virtualization is a key component that can take the Dynamic Systems Initiative of a few years ago and make it approach reality.

Now, Microsoft is far from alone in this vision. I've heard similar talk over the years from Hewlett-Packard, Veritas (now Symantec), IBM and others.

But clearly a fire has been lit under Microsoft, which was comparatively late to the virtualization game, despite its 2003 purchase of Connectix.

It should be an interesting battle between Microsoft and VMware.

"VMware has a first mover advantage and a head start," Gillett said. "But Microsoft's model-based approach to it is a more appealing ideal."

That ideal, though, will take some time.

"We believe VMware has a broader product portfolio and it will take some time for Microsoft to match the breadth, probably until 2010," Gillett said.

The moves come as virtualization is entering the mainstream on the server side and a looming presence on the desktop. Forrester said a recent survey showed half of businesses using server virtualization currently, with two-thirds planning to by next year. On the desktop, things are more nascent, with just over a quarter of businesses saying they either are using PC virtualization or will do so in the next 12 months.