Microsoft’s Hyper-V bundling with Windows Server 2008: Deja vu?

You may recall the 1998 anti-trust case in which Microsoft Corp. was sued by the U.S. for bundling Internet Explorer with its Windows operating system, because doing so gave Microsoft an advantage that led to the demise of the incumbent Web browser, Netscape Navigator.

Fast-forward 10 years to today. Microsoft bundles its Hyper-V hypervisor with Windows Server 2008, so anyone who uses Windows Server 2008 also gets Hyper-V.

Is this déjà vu?

Just for fun, let’s play a little game. In the Wikipedia definition of United States v. Microsoft, let’s replace “Web browser” with “hypervisor,” “Netscape” with “VMware,” and “Internet Explorer” with “Hyper-V.”

Here we go:

United States v. Microsoft 87 F. Supp. 2d 30 (D.D.C. 2000) was a set of consolidated civil actions filed against Microsoft Corp. on May 18, 1998 by the United States Department of Justice (DOJ) and twenty U.S. states. Joel I. Klein was the lead prosecutor. The plaintiffs alleged that Microsoft abused monopoly power in its handling of operating system sales and hypervisor sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Hyper-V hypervisor software with its Microsoft Windows operating system.

Bundling them together is alleged to have been responsible for Microsoft’s victory in the hypervisor wars as every Windows user had a copy of Hyper-V. It was further alleged that this unfairly restricted the market for competing hypervisors (such as VMware Inc.) that were slow to download over a modem or had to be purchased at a store.

Underlying these disputes were questions over whether Microsoft altered or manipulated its application programming interfaces (APIs) to favor Hyper-V over third-party hypervisors, Microsoft’s conduct in forming restrictive licensing agreements with OEM computer manufacturers, and Microsoft’s intent in its course of conduct.

Microsoft stated that the merging of Microsoft Windows and Hyper-V was the result of innovation and competition, that the two were now the same product and were inextricably linked together and that consumers were now getting all the benefits of IE for free. Those who opposed Microsoft’s position countered that the hypervisor was still a distinct and separate product which did not need to be tied to the operating system, since a separate version of Hyper-V was available for Mac OS. They also asserted that IE was not really free because its development and marketing costs may have kept the price of Windows higher than it might otherwise have been. The case was tried before U.S. District Court Judge Thomas Penfield Jackson. The DOJ was initially represented by David Boies.

That was fun. Just a game, of course.

But it appears to me that by bundling Hyper-V with Windows Server 2008, Microsoft has the same advantage over VMware, Citrix and any other hypervisor provider that it had over Netscape Navigator in the 1990s.

This time around, Microsoft is probably safe from a lawsuit, though.

According to Wikipedia, “On November 2, 2001, the DOJ reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies. … However, the DOJ did not require Microsoft to change any of its code nor prevent Microsoft from tying other software with Windows in the future. … Nine states and the District of Columbia did not agree with the settlement, arguing that it did not go far enough to curb Microsoft’s anti-competitive business practices. On June 30, 2004, the U.S. appeals court unanimously approved the settlement with the Justice Department, rejecting objections from Massachusetts that the sanctions were inadequate.”

I’m not saying that what happened to Netscape will happen to VMware. In the virtualization market, VMware is in a strong position with a huge lead over Microsoft, and VMware’s products are far more mature and feature-rich. Hell, Microsoft doesn’t even offer live migration yet.

But some analysts predict that history will repeat itself.

I hope all the existing hypervisor vendors can co-exist. It gives users choice and keeps costs down, as we saw when both Citrix and VMware reduced their hypervisor prices to zero this year.

I’d like to hear your feedback on the virtualization industry and whether you think VMware can maintain its position as industry leader.