Vendors who were hoping to get rich on the server virtualization trade have been disappointed by the effect the economic meltdown has had on their business. Just when virtualization products from VMware, Citrix Systems, Microsoft, and a few others have the kind of management features to make them enterprise grade, companies are afraid to spend money on the new servers that are really needed to run server virtualization hypervisors.
The box counters over at Gartner and IDC are starting to count unreal servers just like they still count real machines, because if they don't, virtualization might drive them out of business some day. (What are Gartner and IDC going to do when there are only five "servers" sold each year to Google, Microsoft, Amazon, Yahoo, and pick your telecom giant of choice, and these five machines each have millions and millions of virtual machines on them? Maybe IBM's founder, Tom Watson, was right: The world will only need maybe five computers after all. Watson just got the year and the architecture wrong - perhaps).
At its Symposium/ITxpo last week, Gartner's server wizards said that as far as it can model, about 16 per cent of the corporate server workloads running out there in the data centers and data closets of the world are running inside of virtual machines. The company is projecting that around 50 per cent of x64-based workloads will be running atop of virtual or logical hypervisors of some sort by the end of 2012. This will, says Gartner, represent 58 million deployed virtual and logical machines.
The current installed base of physical servers, across all architectures, is reckoned to be somewhere around 30 million machines, so this is a doubling of the server base between 2009 and 2012, if you compare the orange of a virtual server to the apple of a physical one. What is not clear is how many physical servers will be underpinning the virtual ones. With the core counts exploding on servers of all types and the number of VMs per box on the rise, the server installed base will probably contract some.
It is hard to predict what the compression will be from the virtualization effect, but after the current replacement cycle burns out - in perhaps another three or four years thanks to the recession - I think the number of physical servers shipped each year could drop by half. That's 4 million or 5 million servers against a peak in shipments of over 8 million units in 2008. And the installed base could compress by as many as 10 million machines because some of the boxes in the installed base will be heavily virtualized.
I am not hoping that this happens. Because it will really screw up the revenues and profits in the server racket.
By Gartner's reckoning, server virtualization adoption is growing fastest among small businesses, but this only stands to reason since enterprise customers have been virtualizing Unix servers for a decade and proprietary machines for even longer than that. Large enterprises were also the first part of the server installed base to begin virtualizing x86 and x64 servers too, and virtualization has been working its way into midrange boxes for quite some time.
"While large enterprises were quick to leverage virtual machines to reduce server sprawl and power costs, as well as conserve data center space, small business started late on virtualization," explained Tom Bittman, vice president and distinguished analyst at Gartner. "However, by year-end 2010, enterprises with 100 to 999 employees will have a higher penetration of virtual machines deployed than the Global 500. For years the entry point was simply too high for small enterprises, but increased competition by server vendors has enabled smaller firms to embrace virtualization."
Over at IDC, the box counters put some hard numbers on recent virtualized server shipments. Of the 1.49 million physical servers that shipped in the second quarter, only 246,000 of them shipped with one kind of hypervisor or another on them, or about 16.5 per cent of the servers that went out the door. In terms of penetration, this was higher than in the second quarter of 2008, when 14.5 per cent of the servers sold had a hypervisor on them.
But the number of servers sold with hypervisors installed on them was 310,300 in the second quarter of 2008. The overall server market declined in terms of shipments by 30.4 per cent, but virtualization efforts were also hit by the downturn, and virtualized server shipments fell by 20.8 per cent. It is better, but not all that much better.
IDC also believes that revenue derived from server virtualization product sales declined by 18.7 per cent in the second quarter of this year, to $344m. The number of server virtualization licenses shipped did grow compared to the first quarter of the year, and the penetration of for-fee hypervisors increased to 60.8 per cent of total hypervisors, compared to 57.2 per cent of all hypervisors a year ago. (These numbers include hypervisors shipped for new servers as well as those acquired for existing machines and freebies downloaded for new or existing machines).
While IDC was not specific in its public report (you have to pay money for the details), it ranked VMware's ESX Server as the number one virtualization hypervisor in terms of shipments, followed by the freebie VMware Server (formerly GSX Server). VMware's hypervisor revenues declined 22 per cent in Q2, according to IDC. Microsoft's Virtual Server 2005 ranked third, and it had a 16 per cent revenue decline. Hyper-V showed a big 54 per cent revenue spike in Q2 2009, to reach the number four position. Parallels Virtuozzo ranked fifth in terms of license shipments, but declined by 36 per cent compared to Q2 2008. While the XenServer hypervisor from Citrix Systems did not make it to the top five playlist for hypervisor shipments, it did show the most shipment growth, with a 108 per cent increase year-over-year.
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