Citrix Buying XenSource: Real VMware Rival?

One day after VMware’s red-hot IPO, Citrix announced today that it will purchase XenSource for $500 million. XenSource, while far from a household name, is perhaps the best-known company in the virtualization space, apart from VMware. One of the most interesting questions about this purchase: Will it give VMware a formidable rival, finally?

As most IT execs know, with regards to virtualization technology and tools, you can buy VMware, or VMware, right now. Microsoft’s promised virtualization products won’t arrive to the party until next year, so there’s no alternative there yet.

It’s interesting that it’s Citrix buying XenSource. You might have guessed that, say, IBM or HP would be the one to decide to buy XenSource and take on VMware.

Server virtualization will be one of the most important technologies in the data center in the next few years, and this might have been a valuable piece of that data center puzzle for HP to own.

Citrix, on the other hand, is well known for its thin client technologies, an expertise that fits in well with the lesser-discussed but perhaps hotter topic in virtualization that’s looming for enterprise IT: desktop virtualization.

Some pioneering IT chiefs, like David Siles, CTO of the Kane County government in Illinois, whose efforts my colleague Tom Wailgum profiled earlier ths year, are knee-deep in deploying this technology already.

With desktop virtualization, the client apps and data all live on a VM image on a server in the back room, instead of on a user’s PC hard drive. There’s a lot of control and security advantages to this approach for say, finance, insurance or other heavily-regulated companies.

But wait, you say? This sounds like the bad old days when everything lived on the mainframe? Your users will hate it? There will be a mass revolt? That’s what I said when an IDC analyst earlier this year told me that all kinds of banking clients of his couldn’t wait to virtualize their users’ PC desktops. But I kept asking around, and people kept telling me this analyst was not crazy, this was the model that large enterprises in those industries were moving toward.

Then last week, Simon Yates, a VP and research director at Forrester who follows infrastructure and virtualization, told me that desktop virtualization is on the one-to-three-year roadmap for his largest enterprise clients, and not just the ones in banking or insurance. They’re not just thinking about it. They’re preparing for it.

This will be one of the most controversial issues for enterprise IT in the next few years. How do virtualized desktops fit into my organization? Who gets them? How much money will they save me on hardware and management costs? And, whose tools will I use to build out this virtualized infrastructure? 

And, this is the burgeoning area where Citrix will presumably have a leg up on other companies, due to its long history with thin client computing. The XenSource acquisition will help them build out server virtualization capabilities as well.

As reported by my IDG News Service colleague China Martens today, Mark Templeton, president and CEO of Citrix, said during a morning conference call that Citrix hopes to create better than $50 million in revenue via XenSource’s virtualization products by 2008. Then they expect to “take a significant share of the overall virtualization market by 2011.”

XenSource will continue to work on both its open source and commercial products, and XenSource’s commercial products will work with either Xen’s hypervisor software or Microsoft’s upcoming “Viridian” hypervisor software, the company stated.

If you’re not familiar with the term hypervisor, you can think of a hypervisor as a layer of abstraction between the server’s OS and the rest of the software on it. One thing a hypervisor does is let a machine run more than one operating system. XenSource’s Xen hypervisor is one of its claims to fame, well known to RedHat and Novell Linux fans.

In short, Citrix just jumped into one hot game with VMware, and for enterprise IT, that competition can only be a good thing.

Virtualization gives IT tremendous cost savings and flexibility to act quickly on business requests, as CIOs like Credit Suisse’s Tom Sanzone are proving. But the tactical job of managing a virtualized enterprise isn’t easy yet: The management tools for virtualization are just starting to get brawny.

So let the Citrix, VMware and Microsoft rivalry begin.