"Growth in Hyper-V is inevitable. It wins with price sensitive customers, small customers, and customers new to virtualization."
-VMware partner quoted in the MS Virtualization Profitability Kit
A Virtualization.info article this morning titled, Microsoft admits that VMware has been the only choice for partners so far, reported Microsoft's "call to action" beseeching the partner channel to promote Hyper-V. A Microsoft Virtualization Partner Profitability Kit claims the lower cost of the Redmond giant's virtualization offering allows partners to "sell more of it". The hypervisor huckstering approach, though, is not likely to be widely embraced by entrenched VMware partners.
Partner Profitability Model
The Kit, while primarily encouraging VMware partners to also sell Microsoft, includes a Partner Profitability modeling tool that calculates incremental revenues and margins from promoting Hyper-V products rather than vSphere. It emphasizes an assumed concentration on "more price-sensitive" customers.
The modeling tool's default assumptions, not surprisingly, show that a Hyper-V practice results in more business than vSphere – driving $111K of increased revenues the first year which increases to $1.1M by year three. A 2-month payback covers the $16,000 (2.5 days) of training required for converting two VMware engineers to Hyper-V prowess.
One of two primary variables determining whether the outcome will favor Hyper-V or vSphere, the assumption that lower Hyper-V licensing costs enable an upsell of additional hardware/software products has only a minor impact on the results. The implication is that spending less money on virtualization software frees up funds to purchase more of said software along with more hardware. But virtualization should be part of a strategic initiative that first calculates the overall savings and then works backward to determine the optimal architecture and associated products required to enable the savings.
The second and truly key assumption is that pitching Hyper-V results in a higher win rate in price sensitive segments. This is a huge stretch, especially since VMware continues to dominate the market despite the free inclusion of Hyper-V with every copy of Windows Server. It also disregards the significantly higher percentage of servers that can be successfully virtualized with vSphere due to superior performance and many more enterprise capabilities such as zero downtime and the ability to virtualize the network.
As Alessandro Perilli points out in his Virtualization.info article, Microsoft's channel entreaty is a departure from its messaging focus on customers. Microsoft is one of the savviest companies on the planet, and certainly understands the value of channel influence. I recently met with the COO of a sizeable Windows shop who opened the conversation with the declaration, "I've made my decision. We're going with Hyper-V". A few weeks and an ROI analysis later, however, the purchase orders were issued for VMware vSphere Enterprise Plus along with a large Cisco UCS.
The Profitability Tool Kit argues that increased deals and product sales more than compensate for the lower Microsoft revenues and margins. Offering a lower-cost Hyper-V solution enables partners to become trusted advisors. It also warns that increasingly customers "will choose the partner that offers them the lower-cost, feature-parity Microsoft solution".
Despite the apparent hullabaloo over Hyper-V vs. vSphere, virtualization plays a relatively minor role at Microsoft and virtualization revenues result only from associated management products. It is hard to imagine the Redmond giant truly fired up about Hyper-V with so much going on from Office 2010 to Xbox to Bing. VMware, on the other hand, lives or dies by its ability to provide the most innovative, high quality and and effective virtualization solutions. It spent over 3,000,000 engineering hours alone on developing vSphere over a period of three years.
Attending VMware Partner Exchange or VMworld quickly reveals both partner and customer fervor for the technology. But I doubt whether it is unbridled passion or the ability to make a little extra margin that drives partner loyalty. VMware provides the best and easiest way for organizations to achieve their overall business goals which, in the end, is the best way for a partner to build a successful and profitable consultancy.
Author Disclaimer: I work for a leading VMware partner and am VMware biased, but the opinions expressed in this article are my own and are not approved or endorsed by my employer.