Bloomberg News

Microsoft Aims for VMware With Debut of Windows for Cloud

September 04, 2012

Microsoft Corp. (MSFT:US) released a new version of Windows for running corporate networks, trying to take share from VMware Inc. (VMW:US) and gain ground as companies seek to cut the cost of managing business programs.

Windows Server 2012 improves features for virtualization, which allows companies to cut costs by using fewer server computers in their data centers. More businesses are relying on virtualization technology amid the shift to so-called cloud computing, where information is managed and stored remotely, rather than on local software and hardware.

The new program has already won over customers such as Equifax Inc. (EFX:US) and Bank of Montreal, which tried out early versions of the product, said Satya Nadella, president of Microsoft’s server and tools division, in an interview.

Microsoft, the world’s largest software maker, wants to boost sales of Windows Server by getting customers to set up so- called private clouds, which are accessed from within a corporate network, rather than the wider Internet. Forrester Research Inc. forecasts spending on private clouds will top $20 billion in sales next year, allowing companies to get the benefits of running applications on large pools of servers and storage machines while keeping programs secure on their own servers.

“They have to go into hand-to-hand combat with strong competitors,” said Al Gillen, an analyst at IDC. “VMware is very, very well established and has a very strong platform.”

VMware rolled out its latest offering last month.

Competitive Offering

Microsoft doesn’t break out annual sales of Windows Server, which market research firm IDC estimated at more than $5 billion in 2011.

Included in Windows Server is a program called a hypervisor, a piece of software that lets companies run multiple operating systems on a single server, helping cut costs. Many customers will stick with their current hypervisor vendor when setting up private clouds, Gillen said.

That’s a disadvantage for Microsoft, which had 26 percent of the hypervisor market last year, compared to VMware’s 58 percent, according to IDC.

Part of the issue is that for years Microsoft didn’t have a competitive hypervisor offering, so even companies using Microsoft products for things such as e-mail and internal company websites chose VMware when they wanted to use virtualization software on fewer servers, Nadella said.

Good Enough

Now Microsoft is trying to get those customers back and attract new ones, Nadella said. One such company is window-maker Pella Corp., which mostly uses Microsoft programs yet chose VMware for virtualization software in 2004. The company, which plans to deploy Windows Server 2012, will save hundreds of thousands of dollars in the costs of licensing the software compared with what Pella paid VMware, Nadella said.

“The refrain was ‘hey we are good enough,’” Nadella said about Microsoft’s previous appeal to VMware customers. “For the first time we can claim we are better.”

VMware executives said they’ve heard that before.

“This is not a new strategy for Microsoft,” said former VMware Chief Executive Officer Paul Maritz, in an interview on Aug. 27. A former Microsoft executive until 2000, Maritz left VMware on Sept. 1 to become chief strategist at EMC Corp. (EMC:US), which owns 79 percent of VMware. “This is the third or fourth time they’re coming to market saying, ‘Our product is now good enough.’”

Equifax, which provides credit reports, is using Windows Server 2012 to handle the data that enables lenders to verify the employment status of people applying for credit or buying a home. Next, the company will probably start using Windows Server hypervisor software for virtualized networks and the company plans to turn to Microsoft to build its first private cloud, said Equifax’s Chief Technology Officer Bryan Garcia in an interview.

“This one is really data center quality,” Garcia said.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • MSFT
    (Microsoft Corp)
    • $46.24 USD
    • -0.46
    • -0.98%
  • VMW
    (VMware Inc)
    • $93.7 USD
    • -2.05
    • -2.19%
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