Why would a server company embrace virtualization?

ZDnet is reporting “Surprise! Virtualization hurts server sales after all” like this is unexpected. Actually, they report it like it should have been obvious but hardware companies are in denial.

That simply isn’t true. The report to which they refer is completely in line with what you would expect. The first important point is that the number of units projected to be sold was knocked down by 10 percent (this is a decrease in the rate of increase; very popular when talking about taxes). That’s the point of virtualization, isn’t it? Fewer servers are needed, so few total units will be sold.

The kicker is that the money spent also decreases, but by a smaller percentage. Again, this is exactly what you would expect. The customers are projected to buy fewer but more powerful servers. Apparently the guys at ZDnet thought that we thought that the customers would end up spending more money than before. Of course not! What makes virtualization compelling is that it saves money, both in acquisition costs and operating costs. It’s a big win for the customers.

So, if it hurts hardware sales, why would the server manufacturers embrace it? Because it saves the customers money! The same argument can apply to faster processors. Why build faster systems, when that decreases the number of systems the customer needs? Because if you don’t somebody else will! Sure, we’d like you to buy two Sun servers, but selling you only one is better than if you bought one IBM server. Get the picture?

The business model changes with technology changes. You can fight the tide, or you can ride the wave. (RIAA, are you listening?)


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