Does VMware Need to Nip/Tuck Its Prices? - Page 2

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Reporter's Notebook: Part of the job of Raghu Raghuram, vice president of product and solutions marketing for VMware, is to beat back the FUD and answer such questions in an increasingly competitive environment.

VMware currently has no plans to slash prices.

Raghuram told me that VMware products are priced appropriately, delivering a return-on-investment usually within six months of the software license acquisition.

He said most customers report high satisfaction with the ongoing economic benefits they realize, such as a 70 percent hardware savings, the roughly $600 per server per year in energy costs, or the operational cost savings from 30-minute provisioning.

Yet Virtual Iron folks counter that VMware's "monopoly" over the server virtualization market for the last several years has "created a lot of anxiety and frustration" among its customer base.

But Pund-IT analyst Charles King said the only way VMware will yield and cut its prices is if Virtual Iron, XenSource, Microsoft and SWSoft make some serious inroads into its massive market share.

That's a tough task against a proven company that expects to break the $200 million revenue mark when EMC  announces Q4 earnings later this week.

"[VMware] has executed pretty amazingly over the last three years," King said. "When competitors go against that, you can either deliver a product that is significantly better or significantly cheaper. By definition I don't think any of the competing offerings are better than VMware ESX."

If the competition won't be rooted in price or performance, then it will be about the technological innovation going forward in the virtualization space.

"What economic value remains will be in higher-level virtual infrastructure services, such as load balancing, disaster recovery and virtual appliances," Haff said.

Indeed, virtual appliances, a virtual machine comprised of an operating system running a pre-configured application, seem to be the next big battleground as vendors seek to chart new territories.

Designed to further consolidate hardware acquisition costs, virtual appliances are meant to replace traditional server appliances, including e-mail servers and security appliances.

Virtual appliances were, of course, introduced by VMware, who has partnered with several vendors, including Red Hat , Novell , Oracle  and BEA Systems  in this effort.

Clint Boulton is managing editor of internetnews.com.