Citrix-XenSource acquisition falls short of some partners' hopes

Complaints that Citrix hasn't taken advantage of the XenSource acquisition -- and worries that Microsoft may take advantage of Citrix -- hit the channel.

The Citrix Systems-XenSource acquisition has brought disappointment and frustration to some Citrix partners, who said the vendor isn't being aggressive enough with its server virtualization strategy.

Citrix Systems Inc. was known mostly for its application virtualization products before the $500 million XenSource Inc. acquisition in October 2007. At the time, partners hoped the deal would make Citrix a serious competitor to VMware in the server virtualization market. But that hasn't really happened; and worse, another big-name vendor -- Microsoft -- has emerged.

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"They have missed the window with Microsoft's new virtualization offering now available," said a Citrix partner on the West Coast who spoke on the condition of anonymity. "I believe there was more momentum around Xen when it was XenSource, and now that they have been purchased by Citrix, they have lost that and now are being relegated to the third player."

An East Coast partner, who also spoke on the condition of anonymity, questioned why the Citrix-XenSource acquisition happened in the first place, if Citrix still hasn't fully utilized the technology. VMware's business is vulnerable because the hypervisor, a key revenue source for VMware, is becoming more of a commodity, said the partner, and the buzz around Microsoft Hyper-V hasn't really materialized into sales. Still, he said, Citrix hasn't taken advantage of these opportunities.

"They don't want to compete," he added. "For whatever reason, they have chosen not to aggressively attack the marketplace."

Citrix has made strong investments in XenSource technology since the acquisition, but not in marketing or channel support, and that has further stunted the company's growth in the server virtualization market, this partner said.

"The sales guys are nonexistent," he said. "If I don't pursue it, there's no interaction between me and the sales force."

The role of the Citrix-Microsoft partnership

The East Coast partner also said he has spoken to some former XenSource employees who are still at Citrix, and "they're all looking around saying, 'We don't understand.'"

"We can't tell if it's because of Microsoft, if they don't want to ruffle feathers at Microsoft," the partner said.

Microsoft and Citrix have had a longstanding relationship, which has split opinion in the channel. Some, including Shannon Snowden, associate consulting partner for Citrix partner New Age Technologies Inc. in Louisville, Ky., see the partnership as a positive.

"Citrix is very comfortable with positioning XenServer as a more robust, enterprise version of something that Microsoft has as a basic offering," Snowden said. "Microsoft is helping that, because they have a common opponent in VMware. They'll use each other to give each other a leg up where they can."

Kathy Vogler, marketing manager for Citrix partner SMS ProTech in Sidney, Ohio, said she doesn't fear the Citrix-Microsoft partnership either.

"Each brings their own knowledge and their own technology to the table, and it's a solid combination," she said.

But others fear that Microsoft, as it has done several times before with other companies, will only use the partnership to boost its own standing in the market, and then kick Citrix to the curb. And VMware is trying to take advantage of those fears.

Last year, an internal VMware memo gave these instructions to salespeople whose customers were considering a move to Citrix: "Tell (them) that MSFT will soon cut Citrix out of the loop … and Citrix is allowing it to happen."

When it comes to responding to such moves, Microsoft has taken a more visible lead -- including a memorable guerrilla marketing campaign at VMworld last year. And that has led some observers to see the server virtualization market as a two-horse race, with Citrix on the outside looking in.

Too much focus on desktop virtualization?

Most Citrix partners agree that desktop and application virtualization is the company's strong suit, but some think the focus there is misplaced.

"Citrix does have a strong story around the delivery of applications, but I am not sure how that is really resonating with the prospects these days," the West Coast partner said.

David Lynch, vice president of marketing for Embotics Corp., a Citrix technology partner in Ottawa, defended this focus on desktop virtualization.

"They could burn up a lot of resources trying to catch up and compete on the server side," Lynch said. "Whereas on the desktop side, if they do it right, it's theirs to command."

Snowden, on the other hand, said server virtualization has been a priority ever since Citrix acquired XenSource. A lot of his customers run Citrix Presentation Server, Citrix's older application virtualization offering, and they're looking to upgrade to XenApp. XenApp is optimized to run on XenServer, Citrix's hypervisor that uses technology from the XenSource acquisition, so those customers are also considering XenServer purchases.

"The way they're positioning XenServer is really smart," Snowden said.

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