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VMware and Google Put the Squeeze on Microsoft

How long does the operating system have to live? A very long time, probably. But how much longer will Windows be a major revenue driver for Microsoft? That's another question altogether. The same question applies to the productivity suite, otherwise known to most users as Microsoft Office.

Both stalwart Microsoft moneymakers are under attack again, but this time, the competition looks fierce. The New York Times published this week an interesting piece about how Google and VMware are putting the squeeze on Microsoft by attacking with Web-based applications (Google Apps) and virtualization (VMware, obviously). Here's the crux of the NYT's argument:

"Google, the search giant, offers...alternatives to Microsoft's popular Office products. For Web-based programs like these, it is the browser -- not an operating system like Windows -- that is the vital layer of software on the computer.

"VMware is the leader in so-called virtual machine software, which allows a computer to run two or more operating systems at once. Its software resides on top of the hardware and beneath the operating system.

"But as VMware's technology becomes more powerful and it adds more features to its products, it can start to supplant the operating system from below -- just as the browser can from above."

OK, so it's not anything you haven't heard before. And, for the sake of this discussion, let's drop Google Apps' threat to Office. It might eventually be very real, but it's still minimal right now. The real point of interest here concerns the future of the operating system itself. From Google's perspective, the pathway to making the operating system irrelevant is pretty obvious: Make the browser (and the cloud) the basis of accessing applications, and the operating system doesn't really matter anymore.

And then there's VMware. This week at VMworld, the company unveiled vCenter, a suite of management products that, while quite logically focused on virtualization management, sure looks like a potential entry into the market currently occupied by Microsoft products such as System Center Operations Manager.

"Our overall vision is to help IT run technology as a business," Melinda Wilkin, senior director of marketing at VMware, told RCPU last week. She said the goal of vCenter was to provide "a whole new modeling for fundamentally managing service levels in the datacenter."

Obviously, that's pretty much marketing speak (and, to be fair, Wilkin did later get into specifics, which the linked press release covers very well), but listen to the language that VMware is using here. It's very broad. Yes, we're talking about virtualization and virtual environments, but VMware folks aren't using the word "virtual" as much as they used to. They're just talking application management now.

In other words, VMware doesn't want to be a niche company anymore. It's a virtualization vendor, sure, but the idea -- as far as we can tell -- is to make virtualization the foundation of enterprise computing, not just a handy little cost-cutting accessory for it. And, as desktop virtualization grows in functionality and popularity, the operating system becomes less and less important. Here's another quote from the NYT article:

"In August, the company announced that it planned to pay $420 million to acquire SpringSource, a maker of open-source software development tools, some of which analyze and tweak the performance of applications. Adding such features could allow VMware's technology to essentially sidestep an operating system like Windows."

Analysts say that virtualization does put Windows sales -- specifically Windows Server revenues -- at risk. And Microsoft isn't alone in feeling the pinch; Linux is taking it on the chin, too. Of course, Microsoft is aware of all this and is busy combating Google with Office Web Apps and taking on VMware with Hyper-V and other associated virtualization products.

But the difference between the threats of today and the threats of the past are that today's competitors can skirt Windows altogether with new technologies. Microsoft crushed everybody when the game was OS vs. OS, but -- to borrow a phrase from the '90s -- the paradigm is shifting. Windows was always Microsoft's ace in the hole, the lockdown on the desktop that meant that the road to market share always went through (and usually stopped in) Redmond.

Now, though, Microsoft is behind Google in terms of Web-based productivity apps (although client-installed Office obviously still leads the overall productivity suite market), and Redmond is struggling to catch up with VMware, which is still the runaway leader in virtualization and, let's not forget, is a company that's joined at the hip with storage titan EMC and has the resources to withstand a challenge from Microsoft.

Of course, Windows isn't likely to go anywhere any time soon, and the hype surrounding Windows 7 suggests that the OS will be a revenue producer for Microsoft for some time to come. But the technological landscape is changing, and suddenly Microsoft and many of its partners find themselves battling in unfamiliar territory. Microsoft has to keep Windows relevant while also developing competitive technologies outside of its comfort zone that take the focus off of the OS and fit into new computing models. It'll be a challenge...but never, ever count out Microsoft in a fight.

Incidentally, VMware and its partners have generated a slew of news already at VMworld this week. And Microsoft, in its effort to come from behind, has released some virtualization and systems management products of its own; these are aimed at mid-size businesses. Stay tuned to RCPU and VirtualizationReview.com for more news from the show.

What's your take on virtualization's threat to Windows? How well do you think Microsoft is dealing with shifting technology models? Sound off at lpender@rcpmag.com.

Posted by Lee Pender on September 02, 2009 at 11:55 AM