Microsoft Tells Investors Why VMware Will Lose
Microsoft's Brad Anderson on Tuesday talked about the company's management product strategies, while downplaying those of VMware, at investment banker-sponsored event.
Anderson is corporate vice president for Microsoft's Management and Services Division. He was recently promoted and now oversees Microsoft's profitable System Center line of products worldwide, along with Windows client and server management components.
The lead question at the Pacific Crest Technology Leadership Forum, held in Vail, Colo., was not about Microsoft's business per se, but about VMware's acquisition bid for SpringSource, which was announced on Monday. SpringSource is a provider of a Java-based open source application framework that also works with .NET technologies. VMware currently is the leading vendor of virtualization solutions.
VMware and SpringSource have indicated that they will combine their technologies to enter the datacenter and cloud computing markets, which are being contested by Microsoft with its Windows Azure platform. VMware already has its own cloud "operating system" called vSphere, with version 4 rolled out in late April.
Anderson suggested that the VMware-SpringSource deal would fall short of the mark. He said that VMware is basically acquiring a development platform for J2EE applications, but he dismissed the potential competition with Microsoft's Windows Azure cloud computing platform.
"I look at that [VMware-SpringSource deal] as a response to what Microsoft has been communicating in the market about the application architecture," Anderson said in a Webinar. "But I think they're moving into a space that really is away from what their core competency is, and moving into a space where, if you look at what Microsoft has with Visual Studio, I think Microsoft has a lot of strength there."
Windows Azure continues Microsoft's .NET Framework into the cloud, and Visual Studio will provide .NET developers with a hook into that cloud computing environment.
"As you think about virtualization and cloud computing, the architecture of the application really becomes a critical component of the cloud," Anderson said. "And as you think about what we're doing with Windows Azure, a big part of the Azure platform is an architecture of the application that allows that application to understand what a cloud is, and understand the concept of the cloud."
VMware, which is Microsoft's principal rival in the x86 virtualization market, stands to gain a large pool of developers if the acquisition goes through. Rod Johnson, founder of SpringSource, cited a Gartner estimate in his blog that about two million developers use the SpringSource framework.
Anderson admitted that Microsoft has been "coming from behind" on the virtualization front with its Hyper-V hypervisor, compared with VMware. However, he cited progress based on Microsoft's revenue in the last 12 months. He said that Microsoft's management revenue in the datacenter "grew at a rate north of 50 percent." In contrast, VMware reported a 13 percent license revenue decline in its third quarter and a 20 percent license revenue decline in its last quarter, Anderson said. He claimed that Microsoft's growth of management revenue was "staggering" compared with VMware's results.
Anderson also cited Microsoft's familiar estimate that Hyper-V, which ships with Windows Server 2008, costs one sixth that of VMware's virtualization solutions. He claimed that Hyper-V costs $9,000 to license vs. $59,000 for VMware's solutions.
VMware's acquisition bid for SpringSource may pull developers toward the vSphere platform, but Anderson argued for Microsoft's approach. He claimed that Microsoft's hypervisor is an "integrated component" of the OS.
"If you know understand Windows, then you understand virtualization on Windows," he claimed.
VMware just manages their stack, whereas Microsoft is the "heterogeneous provider," according to Anderson.
"Not only do we do the physical and the virtual in one breath, we understand what's happening in the application," Anderson said. "Where VMware looks at the operatives of VM as a black box, it has no idea of what is happening with the application."
While much of the Q&A was absorbed with such VMware discussions, Anderson did note a few other details about Microsoft's Management and Services Division. For instance, System Center has turned out to be the fastest growing business inside Microsoft, with "more than 30 percent growth year over year" in the last 12 months, according to Anderson.
He described the Microsoft Desktop Optimization Pack (MDOP), which comes with Microsoft's Software Assurance licensing option, as the fastest selling product in Microsoft's history, with revenues growing "north of 100 percent" in the last year. MDOP is priced at $10 per year per PC on a subscription basis, Anderson said.
MDOP contains Microsoft's application virtualization technology called App-V, which was just released this month as a new beta. It also includes Microsoft Enterprise Desktop Virtualization, or MED-V, which lets Vista or Windows 7 users run older applications.
Kurt Mackie is senior news producer for 1105 Media's Converge360 group.