Services, not software, chew up bulk of virtualization spend

Server-level virtualization is fast becoming a necessity, but companies should be prepared to spend three times as much on service as they do on software

Organizations deploying virtualization will spend three times more on services than software, according to a Springboard Research report released today.

The virtualization software and services market in Asia Pacific will grow at an estimated compound annual growth rate of 42 percent to reach $1.35 billion by 2010.

Virtualization services will grow to $1 billion by 2010, making up the bulk of market spend.

More than 50 percent of CIOs surveyed in Australia, China, India, and Singapore planning to deploy virtualization solutions over the next 18-24 months said the main drivers were to address issues like low system capacity utilization, poor performance, and other challenges associated with managing growing IT infrastructure.

Springboard Research vice president of software research, Michael Barnes, said virtualization, at least at the server level, is becoming an imperative and most companies will implement the technology at a server level in 2008.

"The complex nature of engagements with vendors while implementing virtualization solutions is a prime reason for services taking a larger share of the market," he said.

Barnes also believes there is a need for more customer education on the benefits of virtualization as the research revealed many organizations were unsure about how to approach deployment.

He said some CIOs view virtualization technologies as immature and feel that implementing it could introduce new management and security challenges.

"Virtualization is also primarily viewed from a technical perspective, and most CIOs do not link virtualization to solving business problems," Barnes added.

Springboard Research senior analyst, Ravi Shekhar Pandey, said vendors need to share case studies that link virtualization with direct business benefits. On the software side, Pandey said VMware is the Asia Pacific virtualization market leader with an estimated 70 percent market share.

This is followed by Microsoft, Parallels, Virtual Iron, and XenSource who also have a significant presence.

Pandey said the virtualization services market is dominated by several key players, including IBM, HP, Dell, and Sun.

"Australia and Korea lead the virtualization marketplace in Asia Pacific due to their well-built infrastructure, while Taiwan, Hong Kong, China, and India are high growth potential markets," he said.

"To tap the emerging opportunities in virtualization, system integrators across the region are making significant investments in people and skills development.

"In the past year, many system integrators, especially multinational vendors, have doubled the number of people in their virtualization practice or are investing in building the services capabilities of their partners."

When deploying virtualization late last year, Wingham IT services manager, Chad Larka, said his biggest challenge was sourcing skilled staff.

"This may be one contributor to the high services spend; organizations having to invest in skills and support provided by vendors and system integrators," he said.

"It is always best to take a piecemeal approach to deploying a new technology, not a big bang approach. This can make all the difference."

This story, "Services, not software, chew up bulk of virtualization spend" was originally published by Computerworld.