VMware’s Private Cloud

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Virtualization has changed the IT landscape more dramatically than perhaps any other technology introduced over the past decade.  Virtualized environments are omnipresent in the modern data center due to their economic advantages in hardware consolidation and manageability.

As the pioneer of virtualization, VMware has been both a major beneficiary and enabler of this trend. VMware is far and away the most successful commercial vendor of virtualization technologies, and boasts the largest number of virtual machine deployments overall.  However, rather than feeling secure in a near-monopoly position, VMware has good reason to worry about the future. 

The hypervisor-the software layer that interacts between the hardware and the virtual machine-is becoming increasingly commoditized. The open source Xen hypervisor and the Microsoft Hyper-V hypervisor are especially making significant inroads into VMware's market.    

Commoditization is a common fate for initially innovative technologies. The process of commoditization results from the emergence of "good enough" competitors and a subsequent erosion in profit margins.  When that happens, it's typical for the big profit margins to move from the commoditized item to more sophisticated offerings built on top of the commoditized technology.  For instance, EMC built a successful company by building sophisticated disk storage arrays on commoditized disk drive devices.

EMC now owns VMware, and the company is aware that virtualization technologies are becoming commoditized, while the "next big thing" is being built on top of virtualization.  That "next big thing," of course, is cloud computing.

Therefore, it's not surprising to see VMware repositioning old technology and introducing new technology with a cloud computing focus.  For instance, the latest release of VMware's enterprise technology, Vsphere 4.0, is described as "the first operating system for building the internal cloud." 

A cynic might point out that Vsphere appears primarily to incorporate incremental improvements to the previous Virtual Infrastructure product,  and might suspect that VMware is merely trying to take advantage of the hype magnification field surrounding cloud computing.  However, while VMware no doubt is taking marketing advantage of the cloud computing hype bubble, the reality is that it‘s very well positioned to deliver some of the promised benefits of cloud computing.  

Infrastructure as a Service (IaaS) public clouds like Amazon are suitable mainly for short term bursts of activity, rather than for long term economic deployments.  However, IaaS concepts deployed internally-in the form of a "private cloud"-will generate significant cost savings through server consolidation and administrative efficiency.  For most companies today, the closest thing to a private cloud is their VMware ESX server farm.  By adding cloud style management and services to these clouds, and promising the ability to interact with external clouds, VMware could be the first vendor to enable widely-deployed private infrastructure clouds.

VMware certainly is not going to be unchallenged in this arena.  Microsoft will continue to aggressively develop its Hyper-V technology, and, if the Microsoft Azure public cloud is successful, it will provide a highly cohesive, though Microsoft-specific, public and private cloud technology.  Open source-based cloud technologies such as Eucalyptus and Ubuntu, and innovative start-ups such as 3Tera, are gaining steam.  However, VMware has an established presence in the enterprise data center and, if it plays its cards right, could become the one to beat in the internal cloud mar