Microsoft’s surge in numbers found in latest IDC report

VMware may still be the current giant in the virtualization arena, but according to a recent report by IDC, the winds could be shifting. The analyst firm recently put out its Worldwide Quarterly Server Virtualization Tracker, and with it, some surprising numbers.

With only a short period of time in the market with its Hyper-V product, Microsoft’s market share now commands 23% of the market based on shipments of new licenses. However this number could be a little misleading on its own — the 23% market share is a combination of Hyper-V and Microsoft Virtual Server 2005. Still, an impressive number, and one that is expected by many to climb as Hyper-V continues to mature.

VMware, on the other hand, still has the lion’s share of the market. According to the study, VMware grew its x86 server virtualization software business 27% year over year and maintained the No. 1 position in the market. When looking at new x86 virtualization licenses, VMware continues to hold on to its strong position in the x86 market with a combined market share of VMware ESX and VMware Server at 44%.

To continue its land grab, Microsoft is aggressively pricing its hypervisor technology at $28 per server. The company also recently announced a free version of the Hyper-V technology called Hyper-V Server 2008 — a free download.

With Hyper-V only recently being released, the majority of Microsoft virtualization installations is still based on Microsoft’s hosted technology, Microsoft Virtual Server 2005, which is also a freely available product. As a result of these free offerings and its highly discounted technology, Microsoft’s market share by revenue is only around 1%, while VMware continues to demand nearly 78% of the marktet’s revenue. As the hypervisor becomes commodity and pricing becomes more of a factor in an organization’s decisionmaking process, things will have to change.

A Microsoft spokesperson said, “Customers now have choice in market, which is more critical now than ever with the current macro-economic climate. Customers are looking for cost savings and efficiency.”

Part of that cost savings, according to Microsoft, is the fact that they offer server virtualization and management software at 1/3 the cost of VMware. And on the business efficiency side of the fence, they said customers can leverage existing skill sets using Microsoft’s broad portfolio of datacenter, management, collaboration, and desktop software.

Microsoft also said IDC’s findings reflect the strong customer and partner adoption that they are seeing with Microsoft’s datacenter virtualization software. As an example, they shared that SAP now supports their ERP software running on Windows Server 2008 Hyper-V. And they also said that Microsoft’s global server OEM partners have seen Hyper-V attached to nearly 95 percent of their Windows Server 2008 orders.

Overall, IDC found that the server virtualization market slowed down yet again. Worldwide virtualization license shipments in the second quarter of 2008 did increase, 53% year over year, but that is down compared to a 72% year-over-year increase from the previous quarter.

On another note, HP held on as the No. 1 worldwide shipper of new servers virtualized with 34% of the market share. Dell is in second place with 29% market share, while IBM remained in third place with a respectful 16% market share number.