A Virtual Door Opens for SMBs
Microsoft's maturing virtualization stack offers opportunities for partners with customers of all sizes, including the "S" in SMB.
In the beginning of 2009, Dave Sobel toured user groups in the United Kingdom to talk about virtualization.
"I got a lot of comments that this was the first time they'd ever heard of virtualization in SMB or the first time that they'd thought about virtualization in SMB," says Sobel, CEO of Evolve Technologies, a Certified Partner in the Washington, D.C., area, and the author of a book on virtualization for small to midsize business (SMB) consultants.
"By December, I visited a group in Philadelphia and more than half the room was already doing virtualization. To have that level of change in the user group community, which is largely small business IT consultants, is pretty dramatic," Sobel says.
If there's any evidence that virtualization has really gone mainstream, it's in those user-group meeting rooms. Once the "S" in SMB declares that it's ready for a relatively sophisticated technology like virtualization, then everybody is ready.
Across the board, virtualization is having a major effect on the industry. "There's no doubt that people have gone way beyond testing and development," says David Greschler, director of virtualization strategy for Microsoft. "People are starting to think about virtualization on the server side as the default."
Dave Sobel, CEO of Fairfax, Va.-based Certified Partner Evolve Technologies, is a cheerleader for virtualization. But even he has been surprised by how much mindshare the approach has picked up in the last year.
Indeed, virtualization may be helping to lead the server market out of recession. A December quarterly server tracker report by research firm IDC credited blade servers with positive quarter-over-quarter revenue growth for the third quarter of 2009, a time when the rest of the server market was still showing declines. What's more, blades were going against general IT trends by increasing in average price per server. Providing the blade-virtualization connection was a statement from IDC analyst Jed Scaramella: "IDC sees virtualization and blades are closely associated technologies that drive dynamic IT toward the future data center."
Microsoft positioned itself and its partners well through 2009 for the growing momentum behind virtualization. The company released the free Microsoft Hyper-V Server 2008 R2 and System Center Virtual Machine Manager 2008 R2. Together, the products deliver a few key capabilities that Microsoft previously lacked. The most notable feature was the addition of the capability to perform live migrations, which is moving a virtual machine from one host to another without downtime. Other new features included host clustering, support for up to 64 logical processors, networking enhancements and the ability to "hot add" virtual machine storage.
Industry consensus seems to be that Microsoft made huge strides forward in 2009 but has not reached technical parity with VMware Inc., which allows live migrations of multiple virtual machines simultaneously, supports a feature called memory overcommit and boasts more years of virtualization experience and reliability in the data center. Still, experts say Microsoft's virtualization technologies have become viable alternatives for Microsoft-centric shops and other environments without specialized, high-end requirements.
How Microsoft partners are marketing and selling virtualization technology right now depends on what part of the market they're in.
Taking SMBs Virtual
At Evolve Technologies, most of the customer deployments in 2009 were virtualized, Sobel says. The most sensible way to bring virtualization into SMB customer accounts is for disaster recovery, he says. "The one we find is most interesting to customers is moving their backup images off-site with the ability to virtualize into a remote location," he says.
Sobel is also finding SMB customers receptive to using virtualization to move to new hardware without overhauling software environments that they're happy with. "When they were shoving servers off the line three or four years ago, energy consumption was not as important as it is now," Sobel says. "If you get new systems and get rid of old ones, that results in real savings."
The main element in getting virtualization into SMBs is getting the channel to understand the benefits and consider it seriously. Sobel points out that very few customers in that space push back over technical concerns. "Smaller customers are pretty comfortable handing that over to a provider because that's what they've been doing the whole time. They'll happily take the recommendation, and many times that provider is in charge of maintaining the systems," Sobel says.
IDC analyst Al Gillen says small and medium business deployments through Windows Server Essential Business Server (EBS) and Small Business Server are places where Microsoft should be seeing quick gains in virtualization market share.
"The sweet spot for Microsoft is in deployments with anywhere from one to four operating system images," says Gillen. "Some of those businesses may want EBS but they may not want to have four physical servers, so they may say 'I'm going to run two servers with Hyper-V on [them] and just put these four operating systems on the two servers,'" Gillen says.
"Those are scenarios Microsoft can address, and they can very successfully beat VMware at its own game in this marketplace. Where it will be harder for Microsoft is at the high end of the enterprise, where VMware is pretty well-established already."
Sobel's experience exactly matches those server consolidation ratios. "For the S in SMB, you don't see the 16-to-1 and 20-to-1 consolidation that they talk about in the enterprise. But you are seeing the 3-to-2 and 4-to-2," he says.
The Enterprise, Part I: Virtual Desktop
Partners focused on enterprise customers are beginning to develop opportunities involving virtual desktops, combining Microsoft and other technologies with business-process experience and general solution provider know-how.
A growing number of enterprises are letting employees choose and manage their own work PCs, using desktop virtual machines to provide secure access to applications and data while reaping cost savings.
According to a survey of enterprises by Gartner Inc. last year, 10 percent of organizations were allowing the use of employee-owned computers as their primary work PCs. According to the survey of 528 IT managers, that figure will increase to 14 percent this year (2010). While nearly half of those sampled prohibit the use of employee-owned PCs, 43 percent permit such use. Over the next year, some 60 percent of IT managers in the United States expect to increase support of employee-owned PCs.
In its report, Gartner said enterprises installing managed virtual machines on those PCs -- or, in many cases, Macintoshes -- can reduce the cost of ownership from 9 percent to 40 percent, while also offering less quantifiable benefits such as greater employee satisfaction and productivity.
Looking to capitalize on this trend, providers of managed desktop services are stepping up their support for managed virtual desktops. Unisys, the Blue Bell, Pa.-based hardware and services giant and Gold Certified Partner, last year shifted its outsourced desktop management services to include what it calls End-User Productivity Services, or EUPS. The service is based on the IT Infrastructure Library (ITIL) framework, an industry standard set of best practices for providing service desk design, automation and management.
Unisys' offering is intended to provide common global support of desktop operations. The company has broken EUPS into three areas: traditional desktop, virtualized or hosted desktop and the managed digital allowance. The latter is aimed at supporting non-standard PCs including user-owned systems, says Larry Guevel, vice president of strategic planning for Unisys global outsourcing and infrastructure services, which accounted for more than half of Unisys' $5.2 billion in 2008 revenues.
Guevel points to an early trailblazer in offering the digital allowance: Cisco Systems Inc., which has started a pilot program allowing employees to choose their own systems and manage them. Cisco is reportedly hoping to roll that out by year's end.
Enterprises in less tech-savvy industries need to tread cautiously, Guevel warns. "It's tough to move from the traditional model into the newer model, as you can imagine. If you open up the floodgates and let your employees do whatever they want, you get a wide variety of device types and it wreaks havoc within your support model," he says.
The challenge for most organizations from the traditional desktop to a virtualized desktop environment are fears that employees won't be able to adapt to these environments and concerns about security. "These are some of the challenges we are addressing," he says.
Unisys is working closely with Intel Corp. and Microsoft to use the combination of Intel's vPro technology designed to provide hardware-based security and system management with Microsoft System Center Operations Manager respectively.
"Our top clients indicate that they're all thinking seriously about these delivery models for IT support and enabling the gen Y workers to bring in their own devices because they are, frankly, more productive that way," he says.
Where does Microsoft stand with this new model? Says IDC's Gillen, Microsoft has been somewhere between disinterested to contentious about client virtualization. "Even though Microsoft has a pretty robust portfolio of client virtualization technologies, generally speaking Microsoft is concerned because when customers talk about client virtualization, very typically they say it's a really big bucket," Gillen says.
"But in reality when they're thinking virtual desktop infrastructure, they're thinking a centralized collection of desktop operating systems running on a hypervisor on a server somewhere. And in that context, that's a scenario that Microsoft has not been supportive of. As a result, Microsoft licensing is fairly incompatible with any kind of centralized desktop deployment scenario like that."
The hostility to desktop virtualization that is baked into Microsoft's licensing model masks its healthy portfolio of desktop virtualization offerings, Gillen says. For one, there's Microsoft Remote Desktop Services, formerly known as Terminal Services, which provides the ability to centralize an application, making it accessible as a screen-scraped application. Also there's the application virtualization (App-V) technology it gained when it acquired Softricity in 2006. And Microsoft has the ability to package up Windows and applications into a virtual machine through its Microsoft Enterprise Desktop Virtualization (MED-V) technology. MED-V is a key component of the Microsoft Desktop Optimization Pack offered for Software Assurance customers, providing enhanced deployment and management of Virtual PC images for Windows 7.
"Microsoft has a pretty good portfolio of desktop virtualization solutions. They've just done a pretty poor job of marketing them," Gillen says, though he sees that changing. "What I am hearing from Microsoft is [that] they're starting to get more serious about approaching the client virtualization opportunity."
The Enterprise, Part II: Server Virtualization
The question remains, however: Can Microsoft best its entrenched rival VMware in the more-established market of server virtualization?
Rand Morimoto, president of Convergent Computing, a Gold Certified Partner in the San Francisco Bay area, was an early adopter partner of the R2 version of Hyper-V. Morimoto says Microsoft listened to the feedback he and other partners provided about its virtualization technology.
"A year ago, as a partner, it was very difficult to have a conversation because Microsoft was a step behind VMware," Morimoto explains. Now, he says, "we're finding more and more opportunities to have conversations with our customers."
"The big area where VMware was beating us up was live migration in large data centers. Microsoft had Quick Migration, but it wasn't live, and it wasn't enterprise-class. Quite frankly, the technology is better now," Morimoto says.
Meanwhile, with Microsoft's pricing model, Morimoto says he's been able to lure one enterprise financial customer away from VMware, and hopes to get more as customers begin to consider the prospect of migrating to VMware's vSphere 4.
IDC's Gillen sees cases of Microsoft partners being able to steal VMware customers as relatively rare. "In terms of leapfrogging VMware, at this point I don't think Microsoft is in a position to directly leapfrog them in terms of having the level of maturity and level of customer deployments that VMware has been able to do, and VMware of course is moving forward as quickly as they can because they know that Microsoft will be coming at them as quickly as they possibly can," Gillen says.
Burton Group analyst Chris Wolf agrees. "When Windows NT hit the scene, people scoffed at the idea of Windows being a dominant server OS in the data center, and today it is," Wolf says. "VMware execs know all too well that history can repeat itself. Microsoft is in position to have a very good 2010. They won't come anywhere close to leapfrogging VMware in 2010, but they will cement themselves as the solid No. 2 in the market and primary alternative to VMware."
One thing in Microsoft's favor is most enterprises are not wedded to one vendor when it comes to server virtualization, says Andi Mann, an analyst at Enterprise Management Associates Inc.
"People are implementing multiple virtualization tools. They're not going to throw away VMware, but they're going to acquire Hyper-V, and it's going to get solid penetration over time. We are already seeing that as Microsoft not only builds out its own tools but its partner ecosystem for managing Hyper-V," Mann says. "I am certainly seeing this happening right now: ISVs are announcing support for Hyper-V in all sorts of areas."
Still like Wolf and Gillen, Mann says VMware for now still has an edge over Microsoft. "If you think about Microsoft coming to parity with that sort of partner landscape, it's going to take a long time -- that's millions of man hours of development that has gone in there, and so that's not going to be fully realized in 2010. I don't know, but I think the deployment of Hyper-V will go up," he says.
Gillen says the market could start to open up for Microsoft and other VMware rivals. IDC research indicates a downward trend on average selling prices for VMware's high-end virtualization solutions. That's beneficial to Microsoft, which can afford to see the hypervisor market contract from a revenue perspective. "While it creates a more challenging environment for VMware, it doesn't really challenge Microsoft even if it has to discount the management tools because they still get to sell applications on top of that," he says.
Indeed, the market for server virtualization is still wide open. Gillen says IDC research shows that less than 20 percent of all servers are virtualized. "Most people think it's closer to 40 to 50 percent, but it's nowhere near that amount," Gillen says.
Another Reason to Go Virtual
The greenfield nature of the market for virtualization is a reason to go after the business, but Sobel sees another one, especially for smaller partners serving SMB customers. It has to do with positioning channel businesses for cloud computing.
"Despite everybody's hype around the cloud, I think on-premises is still going to be a solution for a little while. Bandwidth is not as ubiquitous as everybody makes it out to be, and there are a lot of solutions that are architected for low latency and high connectivity," Sobel says.
"Solution providers that are thinking about their virtualization strategy should link it to their cloud strategy and understand how they all fit together," says Sobel, adding that managed services providers, who may not be thinking about virtualization at all, have a solid shot at being formidable players.
"Managed services providers are going to be some of the best positioned to deal with this transformation," he says. "They're already highly focused on contractual relationships, and on service delivery on a recurring basis. Cloud and virtualization benefits all fit into that same model."