Virtualisation market booming, says IDC

IDC predicts the sector will be worth $2.7 billion by 2009. Jennifer Mears reports

As x86 server virtualisation software vendors roll out tools to better manage virtual environments, corporate users are increasingly looking to virtualisation technology for more than testing, development and simple server consolidation, according to a pair of reports from analyst firm IDC.

Virtual machine software “is moving beyond test and development and production consolidation to high availability and disaster recovery,” writes IDC analyst John Humphreys in a September research report titled Worldwide Virtual Machine Software 2005 Vendor Shares.

“These new use cases will drive future growth and adoption for the new technology.”

In a separate report, Worldwide Virtual Machine Software 2006-2010 Forecast, also issued last month, Humphreys predicts that an already strong virtualisation software market will expand to more than US$1.8 billion (NZ$2.7 billion) in 2009. The market stands at about US$810 million today, up 46% from US$560 million in 2005.

The market is heating up as companies such as Microsoft and SWsoft, and the open source Xen virtualisation technology, get more serious about taking on market leader VMware.

VMware, which is owned by EMC, continues to dominate the market it created, growing its revenues nearly 80% from US$172 million in 2004 to US$310 million in 2005. It held a 55% share of the market in 2005, according to IDC.

Microsoft grew its virtual machine software revenues 48% between 2004 and 2005, expanding from US$33 million to US$49 million and grabbing 8.7% of the market last year.

SWsoft, which takes a different approach to x86 server virtualisation by employing the technology on top of a single instance of an operating system, rather than enabling multiple operating systems to run on a single physical box, was the fastest growing virtual machine software vendor. It grew revenues 98% between 2004 and 2005, jumping from nearly $24 million in 2004 to about $47 million last year. Despite the fast growth, its market share hovered around 8% in 2005.

Others, including Xen, brought in about US$15.6 million in 2005, up from US$12.4 million in 2004, but account for just about 3% of the market.

At the same time, Humphreys notes that Linux is the fastest growing platform for virtual machine deployments (opening up a big opportunity for Xen) and accounted for 40% of the dollars spent on virtual machine software in 2005. Windows accounted for 28%, with most of the rest going to Unix and mainframe environments.

One big driver behind the fast-growing virtual machine software market is an expanded view of how the technology can be deployed, Humphreys says. While x86 server virtualisation software was initially presented as appropriate for test and development, and server consolidation, it is maturing into a broader platform for utility computing, analysts say.

For example, in June, VMware introduced VMware Infrastructure 3, which heightens the focus on management and high availability to enable customers to group virtual resources into a pool that can be allocated according to application demands.

The challenge for users is to differentiate among vendors according to the types of management tools they offer, Humphreys says.

Users need to “focus primarily on the management, operations and service level of virtual environments and not on how they virtualise,” he writes.

“Virtualisation will need to integrate with legacy management tools and enhance management functionality to solve specific business issues.”

As part of that shift towards better integration, vendors are working towards opening up their frameworks in order to create a standard virtual machine interface that will reduce vendor lock-in and enable customers to move among the different virtual machine software vendors, analysts say.

“Common interface frameworks will ultimately provide customers with greater choice in their selection of virtual machine technology,” Humphreys says.

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