I bet you've heard all about how cloud computing and virtualization will overthrow the old guard of information technology in the coming years. Microsoft
But just how large is the opportunity before us? Virtualization has been around for a long time -- wouldn't most of the companies that need this fantastic technology already be using it?
From the horse's mouth
Speaking at the Goldman Sachs Technology Conference this week, VMware's senior VP of virtualization and cloud platforms, Ragu Raghuram, shed some light on that vital question.
According to Mr. Raghuram, something like 90% of all functions performed by a dedicated traditional server from Dell
That move makes more efficient use of your hardware resources, reduces the physical footprint of your IT infrastructure in the data center, and even comes with eco-friendly benefits like lower power usage and cooling requirements.
And the IT staff will have an easier time taking care of a handful of physical machines with tons of virtual server installations than tons of machines with parts that break and wear out. I should know -- I've spent six years in the trenches of system administration.
Are we there yet?
So that's the fully realized opportunity: 90% of the old all-hardware market. Server sales were worth $10.7 billion in the third quarter of 2009 according to Gartner, and nearly every one of those 1.9 million machines represents a potential sale for virtualization experts like VMware. And once you sell a software license, there are training and support contracts that help the company milk revenue out of its customers. Don't feel sorry for the clients, though -- virtualization usually leads to direct and indirect cost savings, despite the costs of software and services.
But VMware's customers -- who clearly have taken the important first step of getting into virtualization in the first place -- typically only have 25% of their servers moved into the virtual space. And they're still installing about half of their new hardware as stand-alone machines, with no plans of virtualizing them. Small, nimble customers typically have a higher proportion of virtual servers than elephantine enterprises, but that shouldn't surprise anyone.
In other words, VMware could theoretically more than triple its sales without signing a single new customer, simply by helping existing clients reap the full benefits of a virtual computing strategy.
But wait -- there's more!
VMware isn't the only horse in this race, but its technology is head and shoulders above anything Microsoft or Citrix Systems
So VMware isn't even done making the most of its existing customers. Even when it has finished there, it can continue to convert the remaining Luddites, while also stealing contracts from Microsoft. Sure sounds like the good kind of Rule Breaker to me.
Did I leave any stone unturned? Fire away with questions in the comment box below, and I'll do my best to fill in any remaining gaps.
Fool contributor Anders Bylund owns shares in Google and Akamai, but he holds no other position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value recommendation. Akamai Technologies, Google, and VMware are Motley Fool Rule Breakers selections. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.