Inside Virtual Iron's New Strategy

New service offerings and partnerships aim to win over midmarket IT shops.

It might be a good idea to keep an eye on Virtual Iron during the next few months.

Not because it recently changed its strategy away from a head-to-head competition in the virtualization market with VMware to one in which it focuses on the small- to mid-sized businesses.

That's a good enough reason, if you're among the SMBs. VMware doesn't spend much effort on that market, so Virtual Iron has more room to build, using its low-cost, packaging of its Xen hypervisor and management products as the primary attraction.

The real reason is that it's expanding its delivery methods to focus on more than just getting product into the hands of its customers—a tactic that's becoming all the rage, even among customers.

Virtual Iron has already packaged and designed its software to make it easy to install and manage, which is important among midmarket companies that can't afford to hire a raft of virtualization specialists.

Now it's working on a series of new service offerings and partnerships to allow it to offer virtual-server management, disaster recovery, integration, technical support and other services on a pay-as-you-go basis, provided either by Virtual Iron or its DR and reseller channel partners.

The strategy is in place, according to Virtual Iron Chief Strategy Officer Tony Asaro, but the company won't lay out any details or make any announcements for the next month or so.

What he will say is that the service offerings will be friendly to the reseller channel—on which Virtual Iron relies exclusively for sales.

They'll be structured in such a way as to give both customers and VAR partners a choice in how they want to buy or sell the services. Customers could hire an MSP directly for management or disaster recovery, for example, buy through Virtual Iron, or rent on a relatively ad hoc basis from providers specializing in managed services or software as a service (SaaS).

It's a smart strategy for a company that would otherwise be competing directly with market leaders VMware and Microsoft.

So far Virtual Iron has grown, but has had limited success pitching itself as the low-cost, full-featured alternative to VMware.

Its shift to a focus on the mid-market puts it in a segment where low product cost has a greater impact than in segments dominated by multi-billion-dollar companies.

Its reliance on the channel limits how directly it can challenge either Microsoft or VMware from a marketing perspective, but VARs and resellers own the midmarket—they're the ones mid-size companies rely on as infrastructure designers and integrators.

Channel companies are also the ones that provide DR and other managed services mid-market companies desperately need, but can't afford to provide themselves. Not many, for example, can afford a second data center of any kind, let alone one that remains unused unless something horrible happens in the primary data center.

The services angle also moves Virtual Iron further from the price competition, which will become more intense when Microsoft ships Hyper-V for a reported $28 per instance and other companies offer their versions of the Xen hypervisor free or at extreme discounts.

"Free" doesn't mean "free" in virtualization, though, any more than it does in open source or any other serious area of IT. Add-on products for management, load balancing disaster recovery, application integration and security all cost extra, as do the technical support and consulting services most companies need to set up their own virtual-server farms.

Those are exactly the kinds of services Virtual Iron is hoping to provide, on financial terms that are acceptable to mid-sized customers.

Virtual Iron's approach also treats the more basic functions of virtualization—the ability to create and do basic management of virtual machines, for example—as a given.

Of course customers want virtualization; but what they really want is an affordable alternative for disaster recovery, extremely flexible server load balancing, the ability to save money by consolidating hardware and administration and the ability to deliver all those things without breaking the bank, reinventing the wheel or stretching IT so thin it can't support its own clichés, let alone the needs of its users.

Virtual Iron is, in other words, going to focus on the critical IT infrastructure business (steroided and performance-enhanced with virtualization) rather than staying in the virtualization business and offering infrastructure services as lagniappe.

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Copyright © 2008 IDG Communications, Inc.

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