VMware is moving to create a free version of the VMware ESXi hypervisor. The company's new CEO also plans to delve deeper into cloud computing and expand VMware's virtualization technology reach.


VMware is preparing to launch a free version of its ESXi hypervisor, and new CEO Paul Maritz plans to bring the company's virtualization technology deeper into cloud computing, while expanding its reach into the SMBs (small and midsize businesses) market.

The changes to VMware's core business were announced after the virtualization company released its 2008 second-quarter financial results July 22. While the company posted revenues of $456 million and net income of $52 million or 13 cents a share, the numbers were below Wall Street's expectations—VMware executives said the company now faces additional competition from Microsoft, which could impact future sales and revenue.

VMware, which is still the leader in x86 virtualization, is now in a state of flux with new competition looking to take its market share and with the departure of Diane Greene, who helped co-found VMware. It is still not clear whether Greene was forced out of VMware after disagreements with parent company EMC or whether she left on her own accord.

In a call with financial analysts, Maritz, a former Microsoft executive, noted that the majority of VMware's revenues now come from selling its Virtual Infrastructure management suite. The next logical step, he contends, is to make this version of VMware's ESXi hypervisor, which has a footprint of only 32MB, free to its customers.

The free version, officially called ESXi 3.5, will be available to download starting July 28. Maritz believes this approach to virtualization will help bring more customers into the VMware fold and make virtualization technology ubiquitous.

VMware and its OEM partners had already been shipping its ESX 3i Server hypervisor embedded into servers as a way to increase virtualization in the market place. The move toward a free hypervisor will only increase VMware's presence in the market.

"We will continue to invest in the underlying hypervisor as a core enabling technology… ESXi embodies our latest technology. It has the attribute of having a very small footprint, and it's very easy to deploy. We think that there are many more people who can benefit from that technology," Maritz said.

The move toward a free hypervisor comes just a few weeks after Microsoft unveiled its Hyper-V products, and the software giant is now poised to take away market share from VMware, especially within the midmarket space and with SMBs.

Raghu Raghuram, vice president of products and solutions for VMware, said this free version of the hypervisor, when combined with the company's Virtual Infrastructure suite, which underpins features such as disaster recovery and business continuity, will offer customers more virtualization options and capabilities than what is currently offered with Microsoft's Hyper-V.

"There are no strings attached," Raghuram said. "You can just get ESXi and use it, and we don't require you to say you have to move up to Windows 2008 or introduce a new operating system in your data center to get to virtualization. Hypervisors, at the end of the day, are just enabling technologies … but customers want full solutions and they want the benefits of what they can build on top of the hypervisor. The customers who want to do those things buy our Virtual Infrastructure, which helps them build on top of the hypervisor."

While VMware now plans to give away the ESXi hypervisor, Raghuram said there are no plans to open source the software code. VMware is also working on a reimbursement plan for companies that paid for ESXi in July, before Tuesday's announcement.

The free hypervisor announcement also reflects the changing nature of the virtualization market.

"In the last six months, the virtualization field has changed a lot with Citrix Systems buying XenSource and Microsoft coming out with Hyper-V," said Charles King, president of Pund-IT Research. "A few years ago, if customers had the ESX hypervisor for $500, it wasn't a bad deal. Now, we recognize that a bare-metal hypervisor is basically worth zero or close to it. I think VMware realizes that as a bare-metal hypervisor becomes an essentially free commodity and virtualization becomes increasingly ubiquitous, this is how you stay alive."

In addition to the free version of the hypervisor, Maritz said VMware would also work to use its technology to help build out cloud computing infrastructures. VMware is expected to announce a series of cloud computing software products at the 2008 VMworld conference in September.

Maritz also told analysts that VMware needed to reach out to SMBs and bring more virtualization products into that part of the market, especially with Microsoft now selling Hyper-V. The free ESXi server is one step in that direction.