VMware won't lower price, says exec. Does pride go before a fall?

The link will take you to the whole interview, but the point is made in the headline.

VMware won't lower price, says exec

The executive, senior director of product marketing Bogomil Balkansky goes on to explain,

"...The objective is to make sure that we have the right products at the right prices for all types of customers. I don't think that principle is going to change.

I would argue that right now, we have the right product packages with prices that allow the customer to do whatever it is they need to do with our technology. Whether it's something simple like partitioning a server for test and development, a single server consolidation, production server consolidation for a larger environment or if they want to reap the other benefits of virtualization, such as business continuity, disaster recovery and dynamic resource management, they can do that at a price that affords a tremendous ROI. Virtualization is one of those technologies where the ROI is quick, undeniable and easy to see. "

The interview then goes on to address the competitive challenges that VMware is facing, denying that the competitors will have any immediate impact on VMware and in that though Microsoft will become a formidable competitor, they're years away from being even close to VMware in delivering a server virtualization platform with the management functionality enterprises expect.

Mr. Balkansky makes very good points about the strengths VMware brings to the table, and is essentially correct in his assessment of the current server virtualization landscape. The viewpoint is in most essentials that offered by any market leader who has also created the market. In marketing, being first to market with a successful product and sticking with it until the product gets accepted and becomes a de facto standard is the place to be.

Our analysis of server virtualization, including the early work we did in developing tile based virtualization capacity benchmarks, has all centered on VMware. Our research on competing hypervisor and virtualization management not only has looked to VMware as the leader, but has recognized the overall superiority of VMware's products.

There's just this one thing: market leader arrogance. As I said, the viewpoint expressed in the interview is that offered by other market leaders. I'm concerned though about the arrogant tone: no one out there is a real competitor, so we're not really worried about them. We'll watch Microsoft, but Citrix? Xen? non-issues.

Nothing wrong with the assertions. The facts bear them out. But Citrix release of XenDesktop will have an impact, and just because Microsoft hasn't delivered a full management and deployment model for Server 2008 with Hyper-V doesn't mean the immanent release won't be important in the marketplace.

Mr. Balansky may not be willing to express concern in an interview (though I'd be surprise if the filings for the stock market will be so sanguine), but he should be looking over his shoulder. A free, fairly strong offering from Microsoft will have tremendous impact. Especially in the smaller businesses where the costs for ESX and Infrastructure III are perceived as prohibitive. Sure, a company buying two or three or four VMware licenses is not to important VMware. Most vendors don't think about these small sales too often. But there are tens of thousands of companies with a half dozen or so under utilized X86 servers looking at virtualization. Microsoft's offering will be very attractive to these folks. The lack of a full suite of management tools will probably not matter too much since these companies are probably not using that much in the way of sophisticated management platforms anyway.

Hopefully, VMware is investing in following the success of its competitors and looking closely at how their products actually deliver rather than only at the market numbers. Otherwise, a year or two from now, they might be surprised to see their market share shrinking. And shrinking in their existing customer base, where it hurts.