Volume 4, Number 27 -- July 26, 2007

IDC Expects Virtualization Services Market to Double by 2011

Published: July 26, 2007

by Timothy Prickett Morgan

Back in the stone age of computing technology, whenever a new technology came to market, customers spent a fortune acquiring it and then vendors eagerly helped customers install it as part of the product's acquisition cost. In the modern computing era, products are relatively inexpensive and wickedly complex, and customers have to pay a fortune to get a vendor or a third party to help wrangle with the installation and configuration of the products they buy. So it will be, according to IDC, with virtualization products.

Generally speaking, virtualization involves taking servers or storage and slicing them up into virtualized pools of resources that make them easier to manage, more resilient, and allows higher utilization of resources than is possible with standalone, physical servers and storage arrays. With data centers running out of space, power, and cooling, virtualization is being heralded as a panacea for the problems that data center managers face.

According to IDC's estimates, the market for services tied to various kinds of virtualization in the data center will rise from $5.5 billion in 2006 to $11.7 billion in 2011. The interesting bit is that virtualization services are making a lot more money for vendors than the virtualization products themselves. VMware, which still owns most of the money generated by server virtualization, has a run rate that is coming up on $1 billion annually. It is hard to say how much of this is services and how much of it is profit, but it is safe to estimate that server virtualization products probably account for $1 billion or so in sales across all server product lines worldwide right now. Most servers do not have virtualization hypervisors, although bigger servers do as a standard feature.

"Currently, the majority of the services opportunity lies in supporting customers' initial implementations of virtualization," says Matt Healey, senior research analyst for software and hardware support services at IDC. "However, over the next several years, IT consulting and systems integration will begin to become the dominant opportunity as the technology becomes much more mainstream."

Healey expects that the market for virtualization services on so-called volume servers--which means boxes that cost less than $25,000 and which is nearly synonymous with an X64 box these days--will experience "tremendous growth" between 2006 and 2011. Healey also believes that the traditional services providers, which know how to manage facilities, update and extend applications, and adapt business processes, are going to have to build up their skills in the virtualization area to chase the money that IDC expects customers will shell out for virtualization services in the coming years. Right now, IDC is tracking services for supporting virtualization hypervisors on servers and similar products on storage arrays as well as training in how to use these products account for most of the services in this niche market. However IT consulting and systems integration services relating to virtualization is a faster-growing part of the market.

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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik,
Shannon O'Donnell, Timothy Prickett Morgan
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