Hypervisor Pricing Wars -- Get Ready

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

I recently came across an interesting article on a war being waged between VMware and Microsoft. According to RW Baird, more than 25 percent of VARs expect the hypervisor category to be the scene of the most aggressive price pressure within IT in 2012.?

? Below are a few things to consider -- especially if you are renewing your Microsoft EA or VMware licensing agreement, or purchasing a hypervisor for the first time:

• The climate in the hypervisor category is tense. VMware's vSphere used to be the best game in town, but advances in Microsoft's Hyper-V offering have leveled the playing field. And, if that weren't enough, RedHat is throwing its hat into the ring as well.
• Microsoft is aggressively pursuing market share for Hyper-V. Traditionally, they've given it away for free in volume EAs. Now, they're highly motivated to discount management tools and other offerings in the EA just to make sure VMware and others stay out of Microsoft shops.
• VMware's losing ground. VMware is feeling the backlash of recent changes in their pricing model. Customers are peeved, and many are considering Microsoft's Hyper-V solution.

This means IT sourcing professionals have more negotiation leverage than ever before on hypervisor purchases and renewals. Microsoft is more compelled to reduce pricing and increase discounts within large EAs, while VMware -- their fiercest competitor -- is trying to do anything they can to keep Microsoft from gaining market share. Leveraging both solutions within your IT infrastructure will keep pricing and terms competitive from both parties. Additionally, if your MSEA or VMware agreement is up for renewal, this is the time for heavy negotiations.

Who's made a new hypervisor purchase lately? How would you describe the flexibility of your vendor of choice? I'd like to hear from you in the comments section, or directly at jmuscarella (at) npifinancial (dot) com.

-- Jeff Muscarella, EVP of IT, NPI