Our last prediction for 2011: Microsoft’s Hyper-V opens a virtual door for Small and Mid-Size Enterprises [SMEs].

Prediction 3The industry at large has been telling us for some time about the proliferation of virtualization into every area of business and consumer life, yet evidence suggests that thus far virtualization has not progressed much beyond the large enterprise market.

As with every good technology, mass adoption means all businesses need to buy into it, not just the Fortune 500. Remember when mid-size firms and “mom and pop” stores started buying fax machines and cell phones? That’s when those technologies truly became mainstream and indispensible. We believe 2011 is the year when virtualization technology follows suit. And as the SME sector wakes up to the benefits of virtualization, we believe Microsoft – the sleeping giant in the industry – will as well.

The entire server virtualization landscape has been reshaped in the last three years by the arrival of Microsoft’s Hyper-V product, the first viable and competitive mission-critical virtualization platform from the Windows maker.

Microsoft’s latest effort to produce a scalable virtualization product has received widespread critical acclaim as well as impressive levels of high-end adoption. At the time of its launch in June 2008, Hyper-V was considered a disruptive technology thanks in part to its bargain standalone price tag of $28 per license and the option of pre-bundling with Windows Server 2008. The ability to deliver to a mid-size business a pre-packaged server with a virtualization platform already in place has provided Microsoft with a great opportunity to build market share, as well as to obtain a sleeping installed user base that can be activated at any time. And that time is now.

In contrast, market leader VMware has addressed this new strain of competition by bringing new SKUs of its products to market, and challenging Microsoft on price, particularly in the low end of the market and among SMEs. VMware repackaged its barebones ESXi hypervisor as a free download to draw users to its more advanced, paid options, realizing from Microsoft’s success that the SME market was ready for an introduction to server virtualization. Microsoft’s subsequent decision to make Hyper-V a free product was unsurprising, and removed the last major barrier to deployment among smaller, cost and resource-conscious organizations.

But why will 2011 bring with it such a major uplift in Hyper-V adoption in the mid market? As companies emerge from the worst of the recent economic downturn, attention turns to refreshing IT equipment and investing in new technologies to streamline the business, cut longer-term costs, and deliver new services. Microsoft already has a strong installed base for Hyper-V. Many installations are in active use, but many more are waiting to be pressed into service by a pre-packaged virtual machine instance – an increasingly popular way of selling enterprise back-office software.

New virtualization-ready servers will also form the nucleus of this new investment.

This theory is supported by analyst firm IDC, which forecasts that more than 23% of all servers shipped by 2014 will be actively supporting virtual machine technology out-of-the-box. In addition, more than 70% of all server workloads installed on new shipments in 2014 will reside in a virtual machine.

According to IDC, more than $19 billion will be spent on server hardware in support of virtualized applications, with shipments of virtual servers growing twice as fast as the overall server market between 2010 to 2014.

This growth is not just coming from hardware refreshes and a desire to modernize the way new software is served. The mid-market also has to contend with the challenge of deploying new technology while also retaining working, productive legacy solutions. Solutions such as Hyper-V provide a straightforward and cost-effective way for these organizations to keep running legacy applications that still do the job, without the burden of support costs for aging and obsolete hardware.

Supporting Hyper-V virtual server deployments is a major and growing part of DataCore’s activity. Cost aside, Microsoft, along with the likes of VMware and Citrix, have helped bring attention to the virtualization market and have built confidence in virtual infrastructure.

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