There is a battle brewing in the IT industry. As I’ve noted before, virtualization is at the core of many of the fundamental changes in today’s data center. Pure virtualization served as the bridge between the old client-server model and new cloud computing, and, in most cases, a hypervisor exists in the cloud stack.

For years, the bulk of the data center was a two horse race between Microsoft Windows Server and one of many Unix or Linux platforms. That battle appears to have calmed down with most environments settling into some mix of these two technologies. Now, the battle is on a new front. It’s not really about hardware, and it’s not totally about software in the sense that we’ve talked about software before. It’s about software that emulates hardware. VMware was first to market and jumped out to a huge lead, primarily because they were a company dedicated to virtualization. Microsoft was a relative latecomer, but they’ve been able to use their considerable resources to play catch-up rather nicely…oh, and the fact that they give their product away for free doesn’t hurt much either!

I think we’ve only seen the beginning of this battle. Today, VMware owns somewhere north of 70% of the hypervisors deployed, but Gartner predicts that Microsoft will have around 27% of the market by the end of 2012. Given that there has to be room for some KVM and Xen, this has to be putting a significant cramp on VMware’s market share.

Even more telling is Gartner’s prediction that 85% of businesses with less than 1,000 employees will be Microsoft Hyper-V virtualization shops. So, that begs an important question: Has VMware ceded small and medium businesses to Microsoft Hyper-V? I assert that they have based on a few observations:

1)     VMware continues to add enterprise-focused capability to their product, most of which will not be used by SMBs.

2)     The additional functionality wouldn’t be a big deal for SMBs except that VMware needs to charge more for licensing to support further development. So, SMBs end up paying more for functionality that they won’t use.

3)     Unlike Microsoft, VMware doesn’t really have a way to profit from customers using a free version of their product, giving us reason to expect that they won’t be a price competitor with Microsoft in the short term.

I’m not suggesting that Hyper-V is better than VMware. As usual, the answer to the question of which one is better is really “it depends.” However, I think Hyper-V is becoming a much more formidable competitor all the way up to the enterprise and is actually dominating the SMB market.

We’ll explore the differences between VMware and Microsoft Hyper-V in depth in a webcast with industry expert Scott Lowe on March 21st at 11:00 AM CDT. If you’re interested in attending, we’d love to have you. Just click the following link to register.