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VMware Propero buy sets up low-end contest with Citrix

Quoting Computer Business Review 

The news had already crept out, buried in the S1 filing for its planned IPO at the end of July. It is interesting that VMware should have maintained a fairly low profile on what, at $25m, was hardly a major acquisition. With the virtual/hosted desktop market still in the early stages of development, the main players in connection brokers that control which virtual desktop machine a remote user is connected to, are all small start-ups. There are Leostream, Dunes, and Provision. Propero was the fourth, and now it becomes part of VMware, which is the main player in providing the virtualization layer that enables hosted desktops.

Given the size of the other competitors, and that the fact that they all rely on good relations with VMware for the success of their business, it seems unlikely that VMware would have felt the need to keep the Propero acquisition quiet, without a press release or formal announcement until now.

Industry sources told Computer Business Review they suspected the motive for VMware's caution lay elsewhere, in the fact that it is ever more entering into competition with Citrix, the 800lb gorilla of server-based computing in the traditional app delivery paradigm, based on its proprietary ICA protocol.

"For a long time, Citrix though virtual desktop was no more than a passing fad," said one observer, "but this year they've launched Desktop Server, which puts them directly in competition with VMware in this space, and they've done it with their own built-in connection broker."

At last week's iForum Citrix user event in Edinburgh, Scotland, the company was careful to paint the desktop virtualization market as no more than nascent where it needed to cooperate rather than compete with the other major player, VMware. "We cooperate with VMware within their Virtual Desktop Infrastructure industry initiative and they are a value add to out Dynamic Desktop Initiative," said Mick Hollison, VP and product line executive for desktop delivery at Citrix. "We will be in 'coopetition' with them in future, but their value is in the ESX hypervisor server, whereas we provide value on top."

David Roussain, VP of product marketing for its virtualization systems group, said that over time, hypervisors such as ESX, Virtual Server from Microsoft, Xen from XenSource, and the VirtualIron open source product will all commoditize. "Microsoft has a deal with [Linux-based] Xen to make sure that its next-generation hypervisor, called Veridian, will run in Linux environments," he said. Xen also uses the same disk formats as Microsoft.

So what if Citrix decides it is a good idea to buy one of the other virtualization vendors, with Xen the obvious choice, given that, like Citrix itself, it has a close relationship with Microsoft? "Plugged into the Citrix distribution channel, that could have some serious implications for VMware, which puts VMware's hush-hush approach to the Propero acquisition in another light," said the industry observer.

In the S1, VMware talks a lot about the importance of the virtual desktop to its overall business prospects, a move designed to underscore the valuation it is about to announce for the IPO. While server virtualization can be seen as targeting the 6 million or so annual physical servers sold around the world each year, desktop virtualization would appear to have an addressable market of as many as 100 million desktops. "Even if the virtual desktop market only grows to be the same size as VMware's server market, it would still double their market size," the observer commented.

The reason why VMware would buy a connection broker rather than remain neutral and work with them all is that if virtual desktop is to be as big a part of its future as it is suggesting, then it needs to control all the technology that enables VDI. Some sector participants say a lot of deals only go through once the connection broker vendor has delivered the specific functionality the individual customer requires before signing on the dotted line. "However, in buying Propero they're crossing the Rubicon to declare war on Citrix," one sector source said.

As for the other connection broker vendors, David Crosbie, founder and CTO of Leostream, said VMware has told his company "and presumably all the others" that it remains committed to a close working relationship, despite having just snapped up a competitor. As for the probable impact on the market, he predicted that VMware and Citrix will jointly dominate what he termed the lower segment of virtual desktop, the 100-300-seat deals, while he and his competitors in connection broker technology will concentrate on the 3,000-30,000-seat deals.

Putting a positive spin on the Propero deal, Crosbie said it is a good thing for the market overall in that "at least it puts a price on the market."

Read or comment on the original, here.

Published Monday, June 11, 2007 5:50 AM by David Marshall
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