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Virtualization in 2008: Where are we heading?

That is what 95% of the 2000 professional and amateur investors seem to agree upon:

More than 95% of the more than 2,000 professional and novice investors at Motley Fool CAPS have agreed that EMC will outperform the market. Nearly a quarter of those bullish investors are considered All-Stars, top-rated players who consistently outperform their peers. And 16 Wall Street analysts tracked at CAPS unanimously support the enterprise software solutions provider.

His take:

Yet even in its infancy -- analysts estimate that there is only 5% market penetration so far -- the virtualization field is so promising that the opportunity for competitors is still vast. That could mean that VMware may face greater competition from Microsoft (Nasdaq: MSFT). Microsoft is currently a distant second in the industry, with approximately 7% market share. However, with Citrix Systems (Nasdaq: CTXS) acquiring Microsoft virtualization partner XenSource, Microsoft could see an increase in the number of virtual servers running in Windows. Also, the launch of Windows Server 2008 next year may allow Microsoft to make greater inroads.

My take:

  • Innovation is scratching the surface right now, you see a lot happening in the next year and a half! Yes, innovation itself is scratching the surface to see its real self emerge.
  • Community influenced Open Source innovation will take the market to next level (I call it "Cylindrical Verticalization" and will explain someday what that means)
  • Hypervisor commoditization (or commodification, saw this term being used by the 451 guys) will remain a hot topic as VMware will continue to battle for superiority with its ypervisor claims as being superior, which it is today.
So what has to be happen to really get a competitive scenario in the coming 12-18 months?
  • Microsoft has to really ship its product as promised. They have had several delays with their OS and other applications and it might look good for once.
  • VMware may have to do some more disruptive moves. Move into application virtualization by buying BEA and start moving up that "business bulk" (from infra to business layer), it could also give away the ESX for free with limited options in order to steal the SMB away from the competition, it may also have to shelve the laggards (products that are there but not much value-add).
  • Citrix has to really evengelize/support the Xen project. Just like how Bob Young/ Szulik did with Red Hat (I am really curious how Jim, the new CEO will do their Cylindrical Verticalization, as they are past that stage. There are talks of RTL = Real Time Linux etc) and Fedora.
  • Parallels has a strategy and are by far the biggest in the "generic virtualization area" but rebranding itself will not be just enough (I am talking to Ben soon, so I'll see what he has to say about it)
  • Oracle had better get serious with its VM and start working within their client base, to start with, and integrate all management fucntionalities into its OEM (Oracle Enterprise Manager), like Microsoft's SC (System Center).
  • Sun too has some long way to go, Jonathan has declared that they will spend $2 Bn into virtualization but he needs to do loads of "internalization" (He knows what I mean ;-0)), sometimes its more than just a strategy. Good thing is his extrapreneurship initiatives are paying off. He has a strong community support but if I were the investor, I'd say: "Lets put that $2 Bn to good use starting today!"
  • Virtual Iron: Must go harder and deeper into the SMB. They are selling it cheap, they are one of the very first Xen "Sproutlings" and can start building an ecosystem not just with hw and storage vendors but these disruptive start-ups (coming next)
  • Disruptive start-ups: These ones are probably the most dangerous of all, lets take a look at a few of them:
LM, Policy Mgmt, Accountability: Embotics (They are going into VMLM, Virtual Machine Life Cycle Management), they and other start-ups like Fortisphere etc will really help the management to focus on business issues, and building a product around a RWS (Real World Scenario) will really help them come out are stronger parties than individual "my hypervisor better than yours" vendors. So they may also take the route to go to satisfy a fully Heterogeneous enviroment where you have thin linux servers, fat virtual servers hosting thin guests, network components (again here both hw and sw - as you know virtualization in network too is already prevalent and all the equipment must be visible on the "enterprise stack"). That way the start-ups will create a whole new "field" for themselves.

Desktop virtualization or "Topless Virtualization"?: Panologic kind of firms are really telling us something really big. Why thin if you can totally eliminate that layer! I think Pano Logic will, if it doesn't get absorbed too soon, innovate on that little cube hardwaree. They will, if they are listening to the right music, will create a hubnets kind of scenario. I do have some crazy ideas but I'm sure a lot of that is being discussed at the PanoLogic office. VPN/SSL all will also be integrated as we move on to more mobility and less location bound working identities.

Security Start-ups: They can also penetrate into the "adjacent fields" such as LM and if not collaborate then cannibalize the other disruptive start-ups. I do also have a strategy to do that amicably though. But they too can move on to the LM market. Virtualization Security will be of massive interest within the investors as well "acquirers" circles. Firms like Catbird, Bluelane, ReflexSecurity and others will com unveil their evolving strategies. There may also be a start-up or two in 2008

ITSM, CMDB, ITIL and all the BPM: Today we are seeing start-ups building their products using Xen such as StackSafe, that is yet another area that can either "synthesize" with the adjacent fields or cannibalize if a seamless alignment is not possible.

Although this cannibalization, systhesis, whatever will heat up the innovation, I still think that a great idea/product should be allowed to do its thing. Unless of course if you really know what you plan to do with this fully-baked, half-ready start-up. If not let them grow and show what their products can do before you go for acquisition. Last night when I was speaking to Jerry, CTO Marathon Technologies, I raised the same sentiments, we are seeing more acquisitions but we just don't know if the consumer really is happy to stay in this "high innovation, hyper-disruptive" times. Well one thing is for sure, they are unsure and are not willing to buy as of right now.

More disruption is coming for sure, no wonder that its leaving all the folks, consumers alike, in a state of flux. I predict that the real innovation and real opportunities lie in "the middle". You have to first find the "new middle", which is a moving target, and try building your stack there. Keep it agile so it can quickly move to the next "new middle".

PS: I'll check for typos later
PS2: I am sure to have missed several players and trends but they will be mentioned elsewhere for sure.

Here's the Fool's link


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