April 21, 2009, 11:57 AM — VMware on Tuesday unwrapped the latest version of its Virtual Infrastructure -- re-christened as vSphere 4.0 -- and detailed a new pricing structure that might make IT shops consider more ways to reap virtualization's bounty.
Simply put, VMware now offers two lower-cost stratifications called vSphere Essentials and Essentials Plus, as well as two new higher-end iterations in the form of Enterprise and Enterprise Plus. Pricing at the high end has risen while it's plummeted at the low end, but more importantly, the new versions mean that IT shops have more midrange options, pointed out Richard Jones, vice president of datacenter services at Burton Group.
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"VMware owned the market for a couple years, but now with the introduction of Microsoft's Hyper-V, Citrix making XenServer free, and even Oracle's VM, there's pricing pressure on VMware," said Mark Bowker, an analyst at Enterprise Strategy Group.
VMware has responded to the pricing pressure. The new options unveiled on Tuesday stretch from the low-end vSphere Essentials at $166 per processor to vSphere Enterprise Plus, which carries a $3,495 ticket for each processor.
Granted, vSphere Essentials is for smaller customers only. But even for enterprises virtualization pricing is dropping, according to Charles King, principal analyst at Pund-IT. "The way that virtualization has spread into every corner of the enterprise is creating the opportunity for volume pricing."
The upgrade to vSphere 4 is free for existing VI 3.x Enterprise customers, said Raghu Raghuram, VMware vice president of products and solutions. "You don't have to pay a dime extra."
In addition to lower prices, Pund-IT's King said, the virtualization sector is undergoing "a real shift in the way vendors' quantify business value." Today, that means proving a return on investment as well as the quality of business performance. "That's in reaction to how cautious IT has become with their dollars before spending tens of thousands," King explained.
What's more, other factors are driving the cost of virtualization down as well. "As the price of hardware cores drop and the density increases, the price of virtualization will also come down," said Jeff Byrne, a senior analyst at Taneja Group, a technology analyst firm. And the superiority of Nehalem Xeon and Barcelona Opteron processors in themselves stretch the capacity of the ESX host. In other words, customers will pay less to accomplish the same work.
While enterprises have largely harvested virtualization technologies from the likes of VMware, Citrix, Microsoft, and in specific cases Oracle for server and datacenter consolidation, Pund-IT's King said that "with pricing becoming so aggressive, it gives IT the opportunity to sit down and think about even more ways to use virtualization."
That includes expanding datacenter and server consolidation, of course, but doesn't stop there. Burton Group's Jones added that lower prices "remove excuses for not virtualizing Tier-one workloads" and can be used to create higher levels of availability with fault-tolerance.
Storage and networking are two more areas ripe for virtualization, said Dave Bartoletti, a senior analyst at Taneja Group. "The advantages are there, but people just don't know about them. You can get the same efficiencies with storage that people have in servers."
Burton Group's Jones said that the falling prices will also have an impact on the low end of the market. "For non-critical workloads for which many customers could not justify the high price of VMware, they can now do that. Especially when they buy a single processor $700 Dell tower server for low-end work, they can now get closer to justifying virtualizing from a price point."
To gain purchase in smaller IT shops, VMware on Tuesday also unveiled what Raghuram called "Always-on IT for the SMB." That's the $166 per processor offering and it's designed to enable small offices to virtualize and manage up to three physical servers, which would cost a total of $995.
"SMBs that think virtualization is only for big companies should think again," Raghuram added. "We're bringing them a tailored solution that meets their top three needs -- availability, management, and security -- at a price they can afford."
