VMware revenue model shifts, CEO says

VMware Inc. has shifted its revenue model away from its hypervisor technology to value added services, said Diane Greene, the company’s president and CEO.

“We shifted our revenue model. Over 80% of VMware’s revenue comes from outside of our hypervisor today,” Greene told journalists yesterday at the VMworld 2007 conference being held in San Francisco, Calif. “We’ve done a very effective job building products that unlock virtualization to our users and customers pay for real value,” Greene added.

Greene was reacting to questions regarding last week’s introduction by Microsoft of its Systems Center Virtual Machine Manager 2007 that virtualizes servers and has a hypervisor code-named Viridian, which will heighten competition in the virtualization space.

On Monday, VMware introduced the ESX Server 3i — its next generation thin hypervisor, which will be embedded in server hardware from Dell, Fujitsu Siemens Computers, HP, IBM, NEC and others. The ESX 3i has all the functionality of the ESX Server, but has been scaled down to a compact 32 Mbytes of memory.

The ESX 31 announcement has partners like Keith Norbie, director of storage at Plymouth - Minn., based Nexus Information Systems, concerned that other features like high availability (HA) for virtual machines, distributed resource scheduler (DRS) and VMotion, VMware’s live migration technology, will also be embedded into other vendor’s hardware.

“The key question is how this affects the channel’s ability to do license volume for VMware. There seems to be a lack of clarity, because if those are included what are we going to sell? VirtualCenter and some services and be happy that HP, Dell and IBM got the business? Partners are unsure about how much this will benefit them,” Norbie said.