Last week VMware intro­duced vSphere 5 with a very pro­fes­sional, Web-based launch (best Paul Maritz talk I’ve ever heard). The reac­tion has been min­i­mal… Why?  I think there are two reasons:

1. VMware doesn’t really have any com­pe­ti­tion any more.
2. The adop­tion of Cloud solu­tions in the Enter­prise is lim­ited more by the rate at which the cus­tomers can evolve than by the state of the prod­uct offer­ing (VMware is nicely ahead of the customers).

Two years ago, my the­sis was that Microsoft would catch up with VMware in terms of vir­tu­al­iza­tion func­tion­al­ity, and then bring the sig­nif­i­cant assets of Sys­tem Cen­ter to bear com­pet­i­tively. But that just hasn’t hap­pened. Microsoft talks proudly of their share gain in hyper­vi­sors, but my friends at IDC say that really isn’t gain against VMware in the data cen­ter. Sys­tem Cen­ter is still a fine offer­ing but Microsoft has noth­ing like vSphere as a plat­form offer­ing on which to build pri­vate clouds (as you know, where I think the busi­ness is today). Microsoft is sand­wiched between a VMware hyper­vi­sor and VMware ser­vice management. If that flank­ing con­tin­ues, I don’t Microsoft will thrive. 

This week both VMware and Microsoft announced earn­ings. VMware announced a very healthy 40% Y-o-Y growth rate. It’s harder to parse out exactly what Sys­tem Cen­ter rev­enue growth was but my best guess is that it’s some­thing in the 15+% range, not bad, but cer­tainly not keep­ing up with VMW. A cou­ple of years ago Microsoft argued that VMware and Sys­tem Cen­ter were the only parts of the sys­tems man­age­ment seg­ment that were grow­ing, and that each was grow­ing about the same rate. As you can see from the chart before, for a while VMware wasn’t really grow­ing license rev­enues: the over­all growth came from a increas­ing ser­vice line with a grow­ing installed base. But license rev­enue growth is back up.

 
Maybe there is another way to view the data, but it looks to me like VMware has sort of won this bat­tle over the last year.