As Brain Babineau, senior analyst with the Enterprise Strategy Group put it: Sun better not mess this up, or they risk being another SanDisk or Yahoo. To refresh your memory, SanDisk was courted for a time by Samsung, while Microsoft contemplated snatching up Yahoo. Both deals fell through, and both SanDisk and Yahoo are struggling.
Analysts have been speculating about how mergers or acquisitions could shake up the virtualization landscape, with rumors swirling about the possibility of VMware becoming part of Cisco. Remember, though, VMware has already been acquired once. EMC owns about 85% of the company, while Cisco has invested $150 million plus into VMware.
While pondering how a Sun-IBM or Cisco-VMware alignment would change the competitive landscape, its worth looking back to the last major virtualization deal for guidance: Citrixs acquisition of XenSource.
Citrix finalized its $500-million acquisition of XenSource in October 2007. Of course, a $500-million acquisition pales compared to the multi-billion-dollar price tags that both Sun and VMware would command.
However, one of the big questions with any acquisition, regardless of its size, is how well the organizations integrate.
By this measure, the XenSource acquisition has been a success. Citrix has rolled out an enterprise-class virtualization portfolio based on Xen and changed its pricing model, giving away XenServer and focusing on selling virtualization management capabilities.
There are two ways to measure any acquisition. The first is pure revenue growth. The second is how much incremental growth it adds to the entire product portfolio, Babineau said. With Citrix its tough to measure. Xen certainly fits well in their portfolio, but how much growth is it driving? Its hard to say.
Even so, Enterprise Strategy Group believes this was a smart acquisition. Virtualization blends well with Citrixs other product offerings, and server virtualization as a technology gets a boost by having someone well versed in the enterprise software market championing it.
When Citrix started giving away XenServer, there were plenty of critics claiming this was a desperate move. Babineau believes the opposite is true. When we see a vendor stop investing in technology from an acquisition, we know the acquisition failed. You dont see that with Citrix and Xen. Theyre committed.
How risky, though, is it to invest so much into open source, into something that anyone can build on?
First off, Citrix notes that only the core Xen engine is open source. Weve released many things back to the Xen community, but most of XenServer is proprietary, Wes Wasson, senior VP and chief marketing officer for Citrix said.
Plenty of other vendors are building around Xen, including Virtual Iron, Sun and Novell.
That makes it easier for a third-party support ecosystem to emerge, said Chris Wolf, senior analyst, Burton Group. Compare that to Red Hat going down the KVM path alone. Its great that they have a solution, but where is the rest of the stack and how do you integrate with other solutions?
According to Wasson, integration is indeed one of the advantages of Xen.
We believe that the power of virtualization is in helping customers extend their existing investments. We dont intend to take over the data center, he said. Instead, well help you extend the lifecycle of your servers. Well make managing PCs simple. We intend to transform data centers into delivery centers. Its very much a systems-based approach, but one that builds on the systems you already have.
Reading between the lines, Citrix has set its competitive sights squarely on VMware, which requires more systemic changes, and isnt worrying much about competition from other open-source vendors.