VMware: Market Share Analysis

New technology and lower costs have transformed the business of virtualization software into a booming market. Virtualization is a framework for enabling the resources of a computer to function as multiple “virtual” systems, thereby dividing up its resources into multiple environments.

VMware Inc. (NYSE:VWM) sells software that is integral to the operation of efficient network resources and data centers. VMware's virtualization software can make multiple physical computers behave like a single, ultra-powerful "virtual" machine, or split apart a single physical machine and make it behave like multiple computers (for example, to host several different websites on the same server). In addition to software sales, thirty percent of VMware's revenue comes from services such as maintenance and upgrades and training.

In 2007, VMware is expecting to post an impressive 67% sales increase over 2006’s figures. These numbers reflect virtualization's rising popularity in the marketplace. As IT professionals become more familiar with virtualization, the technology should become more commonplace. By the year 2010, it is estimated that around 15% of all physical servers will be virtualized, as opposed to 2% in 2006.

VMware is currently the leader in the virtualization market, with its estimated market share ranging from 55% to 80%. Depending on how one defines the virtualization market, VMware's competitors include Microsoft, Citrix System, IBM, Hewlett-Packard, Oracle, and Sun Microsystems.

The Main Competitors

VMware leads the market today, but competition looms. Though Microsoft hasn't released much virtualization software yet, it is expected to include a free version of its proprietary virtualization software, called Hyper-V with Microsoft Server 2008. It is expected to hit the market in mid-2008. Hyper-V is expected to be pretty basic compared to VMware's fine-tuned virtualization programs. The fact that it is free and carries the Microsoft name makes it a notable competitor.

In August 2007, Citrix jumped at the chance to gain market share through acquisition. They spent $500 million to buy privately held virtualization vendor, XenSource. XenSource’s flagship product is XenEnterprise 4, which is in a direct competitor to VMware Infrastructure 3. XenEnterprise 4 features premium functions such as live migration of virtual machines among physical servers, but with a significantly lower price tag.

The Here and Now

Seekingalpha.com recently surveyed ChangeWave Alliance corporate IT members about their company’s spending on virtualization software and services. Of those that use virtualization software, 55% chose VMware. Note: some companies use more than one vendor.

What the Future Holds

To get an idea of where the virtualization market is headed, Seekingalpha.com asked the respondents about future virtualization purchases. Seventy-one percent said VMware should be their software of choice, easily eclipsing the competition.

Customer Satisfaction is the Key

According to the respondents of the ChangeWare Alliance survey, VMware customers are reporting the highest satisfaction levels in the industry. Fifty-six percent say they are Very Satisfied with VMware.

With VMware customers reporting the highest satisfaction levels in the industry – it’s clear why VMware leads the market.

Sources:

Citrix Acquires XenSource, Heats up Virtualization Market
http://www.nemertes.com/free_content/research_notes/impact_analyses/nemertes_impact_analysis_citrix_acquires_xensource_heats_up_virtualization_market_0

Microsoft vs. VMware for the Virtualization Crown
http://www.glgroup.com/News/Microsft-vs.-VMWare-for-the-Virtualization-Crown-19944.html

VMware Sees New Competition
http://blog.trade-radar.com/2007/12/vmware-sees-new-competition.html

VMware Rules the Virtualization Market
http://seekingalpha.com/article/54307-vmware-rules-the-virtualization-market