John Katsaros

Lady in Red

We were treated to a delightful trip down the coast to attend Trend Micro's Industry Analyst Conference earlier this month at the stately beachside Hotel del Coronado. It's hard to believe that it has been 20 years since CEO Eva Chen started the company (one of those legendary dorm room startups). I first encountered Trend in the early nineties when the company was selling AV protection for e-mail systems. Trend is an interesting security company in large part because its revenues are over a billion dollars annually with only 27% of that coming from the US market. So Trend interprets market demand from a different vantage point than most other security companies. And Eva's collaborative management style is fun to watch. The key note in Eva's keynote presentation was Trend's new tagline — SECURITY THAT FITS. As she sees the market the growth areas for security are: 1) virtualization, 2) new devices (3G, NetBooks...), 3) services offerings (XaaS stuff) and 4) Cloud Computing. We're looking forward to following the company as things progress...

What's in a Word?

Here is an interesting factoid that Sungard's Don Norbeck pointed out to us.  When you use Google Trends to do a comparison of search queries for the words "virtualization" and "cloud computing," you'll find that 2009 is the crossover year when cloud computing consistently beats virtualization.  That's one reason why we love the infrastructure industry so much — there's always "the next big thing" that, no matter how good or bad the economy is, gives us all something to look to the future for.

New Positioning

If you've got all of this "infrastructure stuff" that makes virtualized data centers operate efficiently, then why not wrap it up in a nice bow and call it an operation system? Paul Maritz could have used words like "platform" to describe it but it really doesn't matter. What's important is that VMware has built a lot of special stuff and once they get customers using it it'll be hard for them to switch to something else. Is this a new category like VMware claims? Who cares? The phrase Data Center Operating System is functional enough to serve as an overarching name for this collection of virtual infrastructure stuff. So why not fight the battle against Microsoft this way? Interestingly, Maritz spent a lot of time talking about their virtual desktop plans which, apparently, he felt has been underfunded and for which we'll see a big investment in the future. It seemed that Maritz's vision of where VMware is heading served the dual purpose of informing customers as well as telling VMware's own internal employee base where they need to head. If one of his goals was to politely close the book on the Diane era ("we own the market") and start dealing with the competitive threats from Microsoft and Citrix, then that was successful.

BYOPC

With all of the fuss from Microsoft's big virtualization coming out party and the VMworld users conference, Citrix wasn't sitting around idle. Citrix announced its XenServer 5 edition, its partnership with Marathon and its cloud computing strategy -- Citrix Cloud Center (C3). At its analyst conference earlier this month, Citrix demoed its desktop virtualization product portfolio -- probably the most comprehensive suite of desktop virtualization products. Their "guiding light" is that ultimately CIOs will want to get out of the business of owning and managing desktops and instead will adopt the "Bring Your Own PC" for the modern workforce that wants the benefits of consumerism in order to use their own laptops and iPhones instead of clunky corporate issued devices. Two concepts -- BYOPC and "follow me desktops" form the foundations of the virtual desktop initiatives.

Market Shift

Frequently we've had people tell us that virtualization is still in the "experimental" stage and not yet generally deployed in production environments. That might have been the case a couple of years ago but today there are more than enough production virtualization case studies to validate the claim of the production readiness of virtualization. Last week's VMworld with 14,000 attendees provided ample proof of virtualization's production deployment status. VMware handed out the results of its periodic customer research survey which shows EMX production deployment at 94% of its customers -- a remarkably high deployment rate -- and that 47% of VMware's customers use virtualization as the "default build" for new server deployments (up from 25% in 2007). What's more, their survey showed an increase in the percentage of customers who run in production virtualized versions of higher payload applications like databases and Microsoft Exchange. The more significant change from VMware users is that their CIOs are asking the question -- "What are you going to do for me this year?" These CIOs like the initial returns from virtualization but now want incremental improvements from datacenter operations -- like improved server consolidation ratios, improved management, Disaster Recovery, High Availability, Fault Tolerance... Now that the initial virtualization steps are underway, the market is shifting to operational improvements. So if you think the market is still experimenting with virtualization, you're likely to miss what's actually happening.

System Center By The Numbers

As the Microsoft vs. VMware Virtualization Wars heat up, the management questions are important because 1) the management system can influence which hypervisors get deployed and 2) as hypervisors become commoditized, much of the profit to be made in virtualization will come from the management systems side of the business. Since the majority of the servers being virtualized are Windows Servers, its Microsoft's belief that customers will find it more appealing to extend the management system already in use -- System Center -- to manage both physical and virtual servers, rather than having separate management systems. Further, Microsoft is adding support for VMware's ESX products so that customers can manage both ESX and Hyper-V from the same console. So then the question is -- "How much of the market uses Microsoft's System Center?" We're told that on the server side, 45% of enterprises use it with 40% penetration rate (penetration rate refers to the percent of attached systems inside an organization), and on the desktop side, 56% of enterprises use it with an 80% penetration rate.

Nothing Personal

The sense that you get after watching Microsoft describe its upcoming virtualization product portfolio is that they're throwing everything including the proverbial kitchen sink into this battle and it's a battle that no one there is willing to lose -- future career options are at stake. Bob Muglia puts it on a more personal level when he talks about being half way down his ten year mission to improve datacenter operations. It's always hard to tell how the battle for the virtualization market will shape up -- VMware has a huge lead, a good product line and satisfied loyal customers -- at this stage the thing that is clear is that the team from Redmond is prepared for a long siege.

First Mover Advantage

The energy that was around at VMworld was electric -- the type of energy that comes from being around an exciting market disruption.  Things are moving fast in the virtualization world -- customers are racking and stacking VMware systems at breakneck speed.  Vendors want to partner with VMware in the hopes that some of its magic will rub off in the process.  Channel players are moving to get a piece of the action.  For you business school majors, VMworld was a hands-on look at First Mover Advantage.  Since most of the server virtualization taking place is around Windows servers, you'd expect Microsoft to chime in pretty soon which, from the looks of things, won't happen until Microsoft's new hypervisor ships which will be about six months after Windows 2008 ships.  In the meantime, VMware is moving quickly to consolidate its first mover advantage.  Unlike what's happened with emerging markets in the past, Microsoft has no margin of error -- they've got to "get it right the first time" just to remain in the game.  There are those legendary stories about how Bill Gates had to personally intervene to get Microsoft to take the Internet seriously.  From the looks of the virtualization world, Microsoft is going to need a similar monumental course correction or else this market slips away without even a fight.

Virtualized Trojans?

Last week someone pointed us to a recently posted VMWare Best Practices Whitepaper -- Vmware Infrastructure 3 Security Hardening which makes a case for some of the security steps that IT architects should consider when deploying VMWare platforms.  While it makes some good points about hardening and isolating virtual server applications, it is as revealing for what it doesn't say about the many new ways that bad things can happen to good datacenters.  While new attack vectors have yet to be exploited (or at least haven't been widely publicized yet), what's clear is that virtualized environments have many of the same vulnerabilities as traditional environments plus they open up entirely new classes of vulnerabilities that have yet to be understood.  Firewalls, IDS and IPS packaged up as virtual appliances are probably just the beginning of a longer story on the security infrastructure that needs to be built as datacenters adopt virtualization.