Microsoft spies virtual-machine territory

Microsoft is on a quest to conquer the world of VM (virtual machines). With its acquisition of San Mateo, Calif.-based Connectix and its flagship virtual-machine software, Microsoft embarks on a strategy to fuel server consolidation and build momentum around its forthcoming Windows Server 2003.

The Redmond, Wash.-based software giant’s acquisition immediately gives it Connectix Virtual PC for the desktop that allows users to run multiple versions of Windows, Macintosh, and Linux operating systems on the same box.

Yet the technology will be of more strategic value to Microsoft on its servers, analysts report. Microsoft officials believe that virtualization technology working with its servers can save users a significant amount of time and money by consolidating multiple, older servers onto more modern systems such as Windows Server 2003, where they can take advantage of the latest hardware and software technologies, most notably security.

“If a user has an app they have written themselves and no longer have the technical resources to update it, or if they have a packaged app where the vendor has gone out of business, they can now buy Windows 2003 server and start taking advantage of security and storage arrays without having to rewrite or buy new applications. It gives them a way to continue moving forward,” said Bob O’Brien, group product manager of Microsoft’s Windows Server division.

The strategy is designed to establish Microsoft as a low-cost alternative for corporate departments and midsized companies looking to eliminate costs by consolidating older Windows NT-based applications, according to some industry analysts. But Microsoft will not be able to execute against this vision until Connectix delivers its Virtual Server product now due in this year’s fourth quarter. The company had originally hoped to ship the product this quarter.

On one hand, IBM is facing competition in the server consolidation space from IBM with its VM and zOS operating systems bundled with its zSeries mainframes. The company is gaining traction with midrange server markets of Windows and Unix, where users have consolidated dozens of servers onto a single host system over the last year or two. To date, IBM has sold a little more than 3,000 zSeries systems, according to the company.

But Microsoft’s biggest competitor in the virtual-machine space is VMWare, which claims that Microsoft is one of its biggest customers. Predictably, VMWare officials are not pushing the panic button over the Connectix deal, arguing their server product has a comfortable technical lead over Connectix.

“We have been shipping our server product for two years and just announced out SMP [symmetric multiprocessing] support for it. We also have good partnerships with IBM, Dell, and a close relationship with [Hewlett-Packard],” said Diane Greene, CEO of VMWare in Palo Alto, Calif.

Perhaps underplaying the server rivalry, O’Brien said Microsoft will continue to work with VMWare in supporting users common to both companies. O’Brien also believes there are enough technical differences in their respective products to avoid head-on collisions in the marketplace.

“When you look at our intent around this technology, it is for NT 4.0 and server consolidation. That is much narrower than VMWare’s [technology], which has a broader set of capabilities and goes across multiple platforms. There is an intersecting set of interests but there isn’t a lot of overlap,” O’Brien said.

If Microsoft can convince most of its existing Windows NT 4.0 users to move their servers onto a single box, it could represent a hefty financial gain for the company. Most analysts agree, noting that Windows NT 4.0 servers constitute about 35 percent of all existing Microsoft-based servers.

“This could shape up as a nice alternative for a lot of people like us who can’t afford the likes of an IBM zSeries [mainframe] or a Unix box in order to virtualize a big number of servers. We can go with a lower-cost, multiprocessored Intel box,” said Ben Holt, a purchasing agent at a large regional transportation company in Chicago.

Microsoft’s O’Brien said Connectix technology can also benefit users by largely eliminating the sometimes laborious and expensive task of having to test hundreds of existing Windows applications when rolling out a new server operating system such as Windows Server 2003.

“For those with a single piece of hardware not being heavily utilized and who want to have several Linux or Novell operating systems running on it, this it is a nice way to do it without going out to buy an IBM zSeries,” said Al Gillen, research director of the system software group at IDC in Framingham, Mass.

Microsoft’s Windows licensing creates a potential problem for some users using virtualization as a consolidation strategy, according to Gillen, because it prohibits users without a volume-purchasing agreement to take a copy of Windows off one server and move it to another technology.

“If you have a PC with Windows 95 and a set of critical apps on it, and you buy a new PC with Windows XP, you are not allowed to move that Win 95 license … to the XP machine with VM. This could be a problem unless you have volume licensing in place,” Gillen said.

A larger question remains what role VM technology will play in Microsoft’s long-range plans. Gillen and other observers believe that logically Microsoft will embed it into a number of Windows environments and develop a set of provisioning capabilities on top of its core functions.

“The question is are there provisioning capabilities coming along, and in what time frame and what will they be capable of doing? There are a lot of questions and no answers right now,” Gillen said.

A recent IDC report expects solid and consistent growth in the virtual-machine market, increasing from $50 million in 2002 to the “several hundred million” dollar range by 2006.