Virtualization Has Plateaued While China Proves Viable Threat to Market Dominance

Is it possible that we have already arrived at mature status for virtualization? This is the assumption suggested by recent research from Gartner. The biggest indicator: license revenues have plateaued and the remaining supply of unvirtualized host servers is in short supply. As such, the market has been declared as mature.

The findings from the Gartner report, “Market Trends: x86 Server Virtualization Worldwide 2016," were recently featured in an InformationWeek report. The research suggests that some firms have virtualized as much as 90 percent of their servers, hitting the goals they put in place for transforming network infrastructure. Of the total number of firms surveyed, most reported 75 percent of higher virtualization in their data centers, demonstrating a high level of penetration.

According to Michael Warrilow, Gartner research director, the market has experienced rapid maturation over the last few years. Revenues from virtualization are expected to increase to $5.6 billion, an increase of 5.7 percent this year. As these numbers suggest growth in transforming network infrastructure projects, new license revenue actually declined in the first quarter of 2016, the first time.

While vendor revenues weren’t highlighted specifically in the report, VMware did announced on April 19 that new license revenue had declined in the first quarter by 1 percent. Both VMware and Microsoft are key players in this space, yet new virtualization vendors in China are cutting into license revenue growth. Companies now need to look to maintenance revenues to support operations instead of new license revenue. At the same time, Warrilow noted that there is an increasing interest in and the adoption of containers instead of virtualization.

The trend in transforming network infrastructure tends to be the virtual machines that are widely used in public cloud computing. In these scenarios, platforms tend to be open source Hyper-V based on Microsoft Azure or Xen-based running on Amazon Web Services. Users of the Red Hat system tend to adopt KVM on premises and in the cloud.

Overall, the big players are vying for leadership in this space, including Google, which runs its cloud customers’ workloads in its own virtual machines on its cloud platform. Virtual machines aren’t the operation utility of choice as the company has turned instead to containers. In fact, Google launches as many as 2 billion a week without a virtual machine wrapper.

Still, the demand for virtualization exists as companies strive to deliver according to the demands of the customer base. Keeping Chinese competitors at bay will prove to be the biggest challenge as companies look to continue their focus on transforming network infrastructure. After all, the name of the game is assured operations at low cost – winner takes all.

Edited by Stefania Viscusi