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As VMware, Microsoft square off, Citrix VARs hang tough

In the battle of the virtualization titans, VMware and Microsoft are duking it out. But Citrix will retain a piece of the market, say loyal, Xen-focused VARs.

With VMworld 2009 kicking off this week and Microsoft honing its Hyper-V R2 push, one might wonder whether Citrix will get trampled in the virtualization battlefield.

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It's evident that VMware Inc. reigns as the king of server virtualization, with Microsoft intent on stealing the throne. What's less clear is how Citrix Systems, sometimes seen as the third wheel in this virtualization scenario, will fare. Microsoft's long-standing alliance with Citrix is viewed as an opportunistic attempt by Microsoft to strengthen its own position. Cynics say that once Microsoft doesn't need Citrix's expertise anymore, all bets are off.

Still, Citrix can count on loyal partners, and these VARs feel secure even as Microsoft broadens its own virtualization portfolio in areas that compete with Citrix.

Confidence in Citrix could have something to do with its foothold in application and desktop virtualization and its enterprise-focused products. The advanced features that VMware provides are great for big companies with complex needs, but Citrix partners that also support VMware and Hyper-V say small and medium-sized businesses (SMBs) don't need the extra frills. Those SMBs, many of which have not deployed virtualization at all yet, represent a huge, if fragmented, opportunity. And while Microsoft Hyper-V is a good fit for certain Microsoft-centric shops, VARs say it still lacks robust features.

"If a customer is running a Linux environment with 2003 and 2008 and all their technology is new technology, [then] nine times out of 10 [Citrix] XenServer is the better fit. If the customer needs advanced features, VMware is probably the better choice. If a customer has no skills other than Microsoft skills and they're not asking for a lot of functionality, then Hyper-V could be a test lab environment for them," said Francis Poeta, president of P & M Computers Inc., a Citrix partner in Cliffside Park, N.J., that also supports VMware and Hyper-V.

Microsoft-Citrix partnership: A marriage of convenience

Although Microsoft is formidable, Citrix partners say that Microsoft will remain aligned with Citrix for the foreseeable future. For one thing, Citrix is viewed as a master at surviving a Microsoft partnership. Its server, desktop and application products all complement Microsoft's stack, and that is no coincidence.

Citrix bought its way into the server virtualization market with its $500 million acquisition of XenSource in 2007, and many partners privately view the buyout as almost a proxy move by Microsoft. They suspect that Microsoft itself would have liked to have bought open source fan favorite XenSource to jump start its own virtualization efforts, but its Windows orientation prevented that. And, they argue that Microsoft still needs Citrix.

"It's not an accident that XenSource was bought by the most Microsoft-friendly company on the planet for 500 times their sales," said an anonymous partner.

A venture capitalist who follows virtualization closely said he always viewed Citrix's buyout of XenSource as a "backhanded Microsoft deal. [Microsoft] just couldn't [go out] and acquire an open source play," he said.

The Microsoft-Citrix partnership remains united by a common enemy. "I think the biggest concern for both [Microsoft and Citrix] is VMware, and that should keep them close for a while," said Peter Anderson, president of Bayshore Technologies, a Tampa-based solutions provider that works with all three vendors.

Citrix won't get lost in the shuffle because it's actually a key player in server virtualization. The question is, how long can VMware maintain its dominance. Citrix has already opted out of the hypervisor scuffle by offering XenServer for free. The company could use StorageLink storage management and Essentials automation and management tools with Hyper-V to create its own niche. Doing so would build up Hyper-V, but it would also make Hyper-V the more resilient enterprise server and solidify the Citrix-Microsoft partnership.

"There's a bigger case for selling Citrix than for [selling] VMware or Hyper-V by nature of the market. VMware has great features that customers can't utilize. Midmarket customers with 40 to 100 servers aren't going spend the money [for] VMware when they can just go with Citrix or Microsoft," Poeta said.

Citrix also has a pretty good virtual desktop story, and many partners see that as a potentially hot market.

Citrix: The most channel-friendly virtual machine play

But perhaps most important for VARs is that many see Citrix as a better vendor partner than even Microsoft.

Solutions providers, like Bayshore Technologies' Anderson, say it's hard to make money on Microsoft software sales because there are too many channel players already on the ground. Many a VAR will spend time with a customer doing pre-sales support and education, explaining the benefits of Hyper-V and Windows Server only to see the license sale go to a Large Account Reseller that can offer better pricing. They bemoan losing deals all the time to CDW or even Dell, which will cut huge discounts on software to get the server sale.

That does not happen with Citrix, Anderson said.

Barbara Darrow contributed to this article.

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