VMware Slashes Virtual Server Prices

Seeking to beat Microsoft at its own game, VMware has drastically cut prices on its GSX Server, software that virtualizes machines in departments and other less demanding workloads.

VMware’s software helps consolidate server workloads by allowing
clients to partition and isolate servers into virtual machines, each of which can run standard operating systems, such as Windows, Linux and NetWare.

Customers are increasingly using virtualization to improve the efficency of their
data
centers by shifting computing resources around.

Michael Mullany, vice president of marketing at VMware, said VMware
will
lower the price of GSX Server for Windows and Linux operating systems
from
$2,500 to $1,400 for a two-CPU license.

VMware will also now charge $2,800 for an unlimited license that
supports
systems with up to 32 CPUs. Previously, the concern was charging $5,000
for
a four-CPU system and $10,000 for an eight-CPU GSX server, which
Mullany
admitted didn’t sell much.

“We’re doing this because we can afford to,” Mullany said. “We grew 30
percent quarter-on-quarter from Q2 to Q3 and grew our revenues from $47
million to $61 million.” He also said the company wanted to lower the
barrier of entry to virtualization technology for more cost-conscious
companies.

But the decision was also aimed at undercutting Microsoft, which makes
a
competing product dubbed Virtual Server 2005. Mullany noted VMware
seeks to
offer customers “the lowest total acquisition costs for a
virtualization
server without having to pay for client access licenses or terminal
services
licenses.”

These are licenses that Microsoft charges that drive up the total cost
of
ownership for customers, Mullany said.

While the Virtual Server 2005 Standard Edition costs $499 for up to four processors
and $999 for a 32-CPU license, Mullany said adding costs for the Windows
license brings the acquisition cost to $1,500 on a standard edition and as much
as $4,000 for the enterprise edition. Of course, there are Windows
client-access licenses to account for as well.

Moreover, even if clients are running Linux or NetWare, users accessing
those systems running on Virtual Server have to pay Windows
client-access
licenses. “It’s kind of a hidden tax on the use of Linux or NetWare in
a
virtualization environment.”

Mullany admitted that slashing the price for one of its most
popular products is a way to pressure Microsoft’s products; but he also stressed that its primary motivation is to provide customers with virtualization options as their interest in the technology grows.

“We think that this is the type of market where if you bring the price
down
people are going to try it,” he said.

Cutting prices for its software is not a new practice at VMware. The
EMC-owned subsidiary pared the cost for its workstation product from
$300
per copy to $189 per copy, which Mullany said accelerated its unit
sales.