VMware Bucks Microsoft's Cheaper is Better Mantra

'Expensive' VMware might actually be cheaper than Microsoft's Hyper-V.

By Kevin Fogarty
Thu, March 26, 2009

CIO — The conventional wisdom in the admittedly brief tradition of x86-based server virtualization, predicts that when money gets tight, Microsoft Corp. does well with its all-but-free Hyper-V, while VMware, Inc. and its comparatively expensive ESX loses ground.

Money in IT is unquestionably tight. But for every slashed technology budget is an IT manager screaming for better manageability, more efficient consolidation and greater power for lower cost, according to a range of analyst surveys and reports.

Cost relates more to the number of virtual machines that can be effectively housed in one physical server, however, a measure in which VMware has a distinct advantage, according to a recent report from the Taneja Group.

Physical hosts running VMware software can pack in 1.5 VMs for every 1 VM on a Microsoft Hyper-V server, according to the report. Comparing costs based on the number of VMs a host can support, Taneja Group concluded VMware is actually cheaper by between five percent and 29 percent than Hyper-V.

With a higher VM density per server, customers have to buy fewer physical servers, fewer OS licenses, fewer licenses or instances of management software, and simpler configuration because fewer machines are involved, the report concluded.

Even without a straight dollar-cost comparison of the purchase and licensing costs, however, VMware still has a considerable advantage over Microsoft, according to Bob Laliberte, an analyst at Enterprise Strategy Group.

VMware's track record, management tools and technical maturity are all advantages Microsoft struggles to match, he said. In surveying customers on which vendor they're likely to favor, about 20 percent said they'd choose Microsoft even before they did any serious testing, Laliberte said.

"Even before Hyper-V came out, we got these answers that some places are just a Microsoft shop, no matter what," he said. "The rest is still divided up. Microsoft has a good share in test and dev, but when you get into production, you want that extra support. So the level of interest in test and dev is probably higher than in the rest of IT."

"So far it hasn't made too much of a dent in VMware," Laliberte said.

Wall Street seems to agree. While almost all tech stocks have dropped dramatically, and the comparison is unfair because Microsoft is involved in so many more markets than is VMware, the 57 percent drop in VMware's stock price between April 1 of last year and March 23 of 2009 is significantly lower than the 63 percent Microsoft's dropped.

VMware has also improved its standing with a number of analysts, who upgraded their recommendations from Sell to Hold, or even Buy, following a series of VMware-benefitting announcements from other vendors and VMware's own February announcement that it had exceeded market expectations in its Q4, 2008 financial results.

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