News Analysis: Citrix Seals XenSource Deal, Pressures VMware

Citrix just sealed the deal that had the virtualization community buzzing when it was first announced in August, the $500 million acquisition of XenSource. As outlined yesterday at Citrix’s iForum user conference, Citrix has finalized its purchase of XenSource and its Xen enterprise server virtualization software. As I noted earlier this year in a blog post, for enterprise IT departments, a rivalry between VMware and Citrix can only be good news, since rivalry equals faster product innovation and more pressure on pricing and support quality. Citrix also announced new products and marketing deals at the conference yesterday. What does this burgeoning battle mean to you?

For starters, choice. Lots more of it than you’ve had in the past few years, when VMware reigned as the uncontested beauty queen of virtualization. But should you go with a best-of-breed approach for tools, or stick with just one vendor? You may want to keep your options open on that one.

Virtualization as a technology presents one of the biggest opportunities for enterprise IT today because it can save money, improve disaster recovery and, more importantly, speed up business process. It’s also one of the richest pools of opportunity for vendors. In announcing the finalization of the XenSource deal yesterday, Citrix said it sees growth in the neighborhood of $5 billion during the next four years in the server and desktop virtualization markets.

Citrix, with its long history in the thin-client computing arena, can now, thanks to the XenSource server software, pitch enterprise IT on a complete solution, spanning from servers to desktops. XenSource’s well-known Xen enterprise server virtualization product will now be called Citrix XenServer. Along with this, Citrix will offer its current application virtualization tool, Citrix Presentation server (which stores Windows applications in one data store in your data center, instead of local PCs). Rounding out the Citrix trio, the new Citrix XenDesktop software will allow truly virtual desktops, for which data lives in the data center. (Citrix added that XenDesktop will work with VMware or Microsoft server virtualization software, if the customer prefers.)

Also at the conference, Citrix unveiled new marketing deals with Dell and HP. Dell will preload XenServer in an embedded (basic, low-cost) version on selected server models; giving customers the option to upgrade to the enterprise version. HP will preload XenServer enterprise edition on some of its boxes. Both of these agreements are all about customer convenience; both server vendors emphasize they’ll continue to work with multiple virtualization vendors including VMware.

Not surprisingly, given its current advantage, VMware wants to be a one-stop shop for enterprise IT on virtualization tools. But Citrix and some startups are plugging the idea that an open architecture, including use of multiple vendors’ management tools, makes more sense for CIOs.

As my fellow CIO.com blogger Bernard Golden has noted, Citrix and XenSource sure makes an interesting marriage, given Citrix’s marketing power and traditionally tight relationship with Microsoft on the one hand, and Xen’s open-source heritage and close bond with the Linux community on the other. (Xen shepherds the open-source Xen virtualization software, in a separate effort from marketing its XenEnterprise product.)

So how do industry watchers see this stacking up in the next few years, and what’s their planning advice for CIOs?

Generally, consolidating IT (and the number of vendor partner relationships) is a top priority today, says Natalie Lambert, a senior analyst with Forrester Research. The usual rules apply. Managing less complexity costs less. And the more you buy from one vendor, the better your potential discount. Today, she says, many companies are buying “good enough” functionality from a single virtualization vendor as opposed to best-of-breed functionality from many vendors to get cost savings.

It’s early for CIOs to even be able to pick between VMware, Citrix or Microsoft (which delivers its Viridian server virtualization product next year) as a long-term virtualization partner. “Citrix is going after virtualization across servers, desktops and applications,” Lambert says. “Microsoft is more focused on the desktop. VMware today does it all. So, while consolidating on a single vendor is a better strategy in the long run, we are not at a point where all of these vendors are interchangeable.”

Meanwhile, a slew of smaller companies including Akorri and Marathon Technologies have produced interesting virtualization management and performance tools to address tactical needs like workload balancing and rollovers in case of trouble.

Given the amount of noise and hype in the virtualization market right now, these vendors will have to work hard to get your attention. That’s not all bad—nor is the fact that there’s enough money at stake that the scrappy smaller companies are not going to sit back and let the big guys make all the breakthroughs.

In the near term, at least, picking and choosing between various companies may net you some real benefits.

By the way, if you think desktop virtualization is something you don’t have to worry about long term, think twice. With its XenSource deal, Citrix just made a $500 million bet that you’re wrong.