Virtual Discourse

Opinions, questions and thoughts on server virtualization - from Tony Asaro, Chief Strategy Officer at Virtual Iron.

Tony Asaro

VMware Pricing - Virtually Sky High

Blogger Kieth Ward's recent blog - "Feedback: Dead Wrong on VMware Pricing" (http://virtualizationreview.com/blogs/weblog.aspx?blog=2712) debates whether VMware pricing is too high. The interesting thing about the blog is that Jason Boche, a VMware customer disagrees.

Keith said the following:

"Ask 100 VMware customers what their greatest complaints about the company are, and 99 of them are likely to list price at the top. VMware recently took a step in the right direction when it made ESXi free, but there's more to do. It's still the most expensive solution out there -- by a mile."

One important point that I don't think that Keith emphasized enough: ESXi is just a free hypervisor with limited use cases. If you want to do anything of substance with VMware you still need Virtual Center and VI3 - which is still the same high price as it ever was. See my blog - Free ESXi is Pie in the Sky for more detail.

But Jason Boche - an end user customer happily using VMware disagrees with Kieth. He thinks that asking VMware to lower its price will impact their ability to innovate and I quote:

"I challenge those to propose a model on how a company like VMware can continue producing their market leading innovation without collecting revenue on products."

I think the major point that is overlooked in Jason's position is that not everyone can afford VMware's pricing. Not everyone can afford a BMW or a Mercedes. That is why Honda and Toyota are so successful. However, the problem is that VMware is selling at BMW prices to customers who really can only afford a Honda. And that negatively impacts everything else that they do.

I contend that if VMware isn't challenged on every level including pricing - that dynamic will kill innovation and not foster it.

That is why it is important to have competition. That is why Virtual Iron (and others) play a vital role in the market.

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Posted by Tony A. on September 4, 2008 11:19 AM | Permalink | Comments (2)

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Comments (2)

David Roden:

When I go on a business trip that requires air travel I generally have two options: Buy a first class ticket or buy a standard coach ticket. In reality, the only option I have is to buy the coach ticket, because businesses understand that this is the best solution for the lowest cost. Although flying first class might make me personally feel more comfortable, it doesn't get me to my destination any sooner. Also, my employer understands that travel itself is not the purpose of the journey - it just gets me where I need to go so that I can do real work. The majority of business travelers do not fly first class because their employers won't pay the extra expense when a less expensive, equally effective alternative is available. Businesses understand travel expenses.

At a conference I recently attended there was a panel discussion on virtualization. All of the panel members were using VMware in their shops. When asked about this, all of them gave similar explanations as to why: "It's the market leader", and, "it's well known", etc. Or to put it another way, they each see VMware as the product that gave them personal comfort. Which is not the same thing as saying that it is a better solution. They just find it to be personally more comfortable.

As businesses become more familiar with virtualization, bean-counters will begin to ask why the most expensive solution is being selected when equally effective alternatives are available. Eventually the bean-counters will insist on the lower cost alternatives. When a product like Virtual Iron delivers nearly all of the same benefits as VMware but at a fraction of the cost, who could argue with the bean-counters?

Posted by David Roden | September 8, 2008 11:03 AM

Posted on September 8, 2008 11:03

Tony Asaro:

David,

I think your analogy is a great one. I would add to that - at some point VMware will probably provide tiered pricing and on some level they are attempting this with some its packaging - which for limited environments does provide some cost relief. However if your environment is growing you will wind up paying the higher cost for VI3 and Virtual Center. Also this pricing adds to the confusion for the end users and channel. I expect that VMware will do more of this type of thing - very analogous to what the legacy airlines have done. All of the big airlines (United, American, US Air, etc) provide pricing tiers that are confusing as hell and often not very cost effective. However, there is a big market for the innovators such as Southwest and Jet Blue - so it isn't just offering a coach option - which VMware is attempting to offer on a very limited basis today - but a business model that provides an alternative to the leader.

Posted by Tony Asaro | September 8, 2008 5:41 PM

Posted on September 8, 2008 17:41