Technology: Commoditization Strikes Again? — Is Virtualization a Victim?

At some point, all technology eventually becomes either obsolete or commoditized, one or the other.  For vendors of the affected technology, neither outcome is pretty, although commoditization as an outcome is probably better than being totally run out of town as the world moves on past your obsolete product.  Commoditization levels both brands and monopolies, and with that, what once were expensive products become cheap.

Consider this.  38.9% of all servers within all of the enterprises surveyed were virtual and 86.5% of all enterprises are using some amount of virtualization.  Gartner has Virtualization high on it’s list of top 10 technology trends to watch for in 2012.  That doesn’t exactly sound like the description of a technology that’s about to meet the fate of commoditization.  It sounds more like a scenario where you’d expect innovation to be thriving and where quality products would command high prices.  But despite that, there are signs that the virtualization market may be on the brink of a shakeup that’s being driven by rapidly shrinking prices.

The recent V-Index survey results reported by Veeam Software finds that as many as 38 percent of enterprises are planning to dump their current virtual machine software over the next year and switch to lower cost alternatives.  That result has raised some eyebrows.  Swapping virtualization technologies is a huge change in infrastructure and doing something like that comes with risks.  It implies there must be compelling reasons to make the change.

Nearly 60 percent of organizations considering swapping say the main reason for moving to a different technology would be cost.  But this behavior implies that virtualization has become a commidity.  When customers change from a brand-name item to a no-name one or to one from a less well-known maker for reasons of cost, that is commoditization.   Or perhaps more likely, this is the first step of competition in the marketplace that will ultimately lead to commoditization.  But if that’s true, what is truly amazing is the compressed timeline for the life of virtualization technology, going from a relatively unknown technology five years ago to one that saturates IT shops today and is considered to be a commodity.

But some analysts think that it’s easy for customers to say they plan to swap out their VM with another.  Acting on that is another thing.  Bruce Hoard of Virtualization Review for example, , wrote that “It’s not that users can’t just convert a VM, because vendors provide suitable tools for that task. The issue is the operational software–backup, security, capacity management and configuration management–that gets tied into the hypervisor. How do you untie those knots?”

After cost, other reasons cited by customers for wanting to move from current virtualization products are features offered by alternative virtualization software, different licensing models, and increased maturity of the alternative products.