Microsoft aims at VMware's virtualization lead

Microsoft Corporation CEO Steve Ballmer is seen in New York August 20, 2007. Microsoft Corp., seeking to preserve the dominance of its Windows franchise, launched a new software application that takes aim at VMware Inc, the leader in ''virtualization'' technology that allows a single computer server to operate like many machines.

SEATTLE (Reuters) - Microsoft Corp. (MSFT.O), seeking to preserve the dominance of its Windows franchise, launched a new software application that takes aim at VMware Inc. (VMW.N), the leader in "virtualization" technology that allows a single computer server to operate like many machines.

Systems Center Virtual Machine Manager 2007, introduced on Thursday, allows companies to deploy virtualization technology, centralize management and convert machines running VMware to a Microsoft format.

The move is considered one of Microsoft's first major efforts to cut into the lead held by VMware -- which went public this summer in the hottest technology IPO in years -- and thus undercut a potential threat to Windows server software.

"The sleeping beast has awoken," said Stephen Elliot, research director at IDC. "Microsoft's been a little slow to the game."

Windows accounts for about two-thirds of the market for computer-server operating systems, by shipments, but Microsoft is considered a laggard in virtualization to allow servers to run Linux or Unix operating systems alongside its own software.

Virtualization is one of the fastest-growing segments of the technology industry since it enables technology departments to use servers more efficiently, cutting the need for machines and reducing electricity costs.

It also allows companies more flexibility on how data centers are managed and simplifies the implementation of new software applications.

VMware, an affiliate of data storage firm EMC Corp (EMC.N), holds more than 70 percent of the virtualization market and its sales have doubled year-on-year for the past several quarters.

TAKING ON VMWARE

Microsoft's main weapon against VMware is expected to be a piece of software, code-named Viridian, that will be included as a feature of its next generation of Windows Server software. Viridian will act as a "hypervisor" or extra layer that sits between the hardware and the operating system.

The Redmond, Washington-based company has experienced some delays in bringing Viridian to market. It now expects Viridian to be available six months after the release of Windows Server 2008, which is due for completion before the end of 2007.

Still, Microsoft pointed to industry analyst figures that forecast virtualization-enabled Windows Servers to surpass 10 million units by 2010.

Industry analysts see virtualization as both a threat and an opportunity for Microsoft. On one hand, it may weaken Microsoft's grip on the server market and may force it to share space on single machines with other operating systems.

But if it executes properly, analysts think, Microsoft could become a platform upon which all virtualization is done.

The first step starts with Systems Center Virtual Machine Manager 2007. It integrates with Microsoft's existing software tools into a single suite of applications to manage both virtualized and non-virtualized servers.

Microsoft also said that once Viridian becomes available, the software tools will work with other virtualization software including ones from VMware and XenSource Inc., a company recently acquired by Citrix Systems Inc. (CTXS.O)

Microsoft sees virtualization as more pervasive than the prevailing view that the technology is limited to servers, saying customers also want their desktop computers and individual applications to take advantage of it.

For example, a company may want one of its computers running Microsoft's new Windows Vista operating system to run an older version of Windows on the same machine.

"We think the impact of virtualization is much broader than how VMware is defining it," said David Greschler, a Microsoft director of integrated virtualization strategy.