After years of lagging behind VMware in virtualization technology, Microsoft is positioned to attract customers transitioning from VMware with a strategy that includes enhancements in the soon-to-be-released Windows Server.
In November 2023, Broadcom’s purchase of VMware for $61 billion shocked the technology sector, causing concern among many VMware clients as Broadcom initiated its integration efforts. For Microsoft, the timing is ideal. The company is set to introduce Windows Server 2025 later this year, boasting significant improvements in its Hyper-V virtualization technology.
Additionally, Microsoft is enticing VMware users with substantial discounts to switch their setups to the Azure cloud through its new VMware Rapid Migration Plan. Microsoft also promotes its Azure Stack HCI platform as an alternative for businesses needing to maintain on-premises operations while exploring hybrid cloud capabilities. This blend of market moves, technological developments, and evolving customer attitudes could mark a significant turning point in favor of Microsoft.
“Since the Broadcom acquisition, my phone has been ringing off the hook with customers asking about newer alternatives to VMware,” said Paul Delory, a Gartner analyst. “And Hyper-V is coming up a lot on these calls. It does have some built-in advantages, and it is the number two hypervisor on the market.”
Historically, VMware has been the gold standard in virtualization since it essentially founded the x86 server virtualization market in 2001 with the release of the VMWare ESX hypervisor. But it was VMware’s continuous stream of ground-breaking innovations — live migration of VMs, distributed resource scheduler and high availability — and comprehensive management tools that cemented the company’s status in the enterprise.
Microsoft’s first foray into server virtualization was Microsoft Virtual Server in 2004. It offered basic virtualization capabilities but was discontinued in favor of the more advanced Hyper-V in 2008. In the meantime, VMware parlayed its first-mover advantage to build a community for users and partners as well as forged strategic partnerships with software developers, service providers, and hardware vendors to build a far-reaching ecosystem.
While Hyper-V initially struggled to measure up to VMware’s feature-rich offerings, Microsoft has steadily improved its virtualization platform with a series of enhancements to give customers a viable alternative to VMware. One of the most notable additions coming in the upcoming Windows Server 2025 operating system is the revised GPU partitioning capability, which Microsoft calls GPU-P. This feature is key for organizations that run high-performance computing workloads and AI-driven applications in areas related to engineering and data analytics.
“GPU partitioning is essentially GPU virtualization. It’s a feature they need to better compete in the virtualization space,” Delory said. “What you’re doing is presenting a virtual GPU that can be shared. It brings them on par with VMware feature for feature. It’s not groundbreaking, but it is important.”
Keith Townsend, chief technology advisor with the Futurum Group, said this is one example where VMware’s deep relationships with vendors gave it a head start with innovative features to help it stay ahead and maintain its dominance.
“Many of the Nvidia virtualization capabilities have come directly from their partnership with VMware,” he said. “They have equal … or greater capabilities for virtualizing GPUs already on the market. It’s one of the few areas where a competitor is well ahead of Microsoft.”
Microsoft addressed another pain point in its upcoming Windows Server release for enterprises related to live migrations of VMs between two hosts. If the source and destination hosts did not have identical CPUs, then VM performance could suffer by not using the full capabilities of the newer model CPU on the destination server. Microsoft will introduce dynamic compatibility in Windows Server 2025. Hyper-V will automatically compare CPUs across hosts and use the CPU functionality that supports both processors, even if those processors are not identical.
Security is a major focus in the latest Windows Server 2025, especially with enhanced virtualization-based security (VBS) and broadened hotpatching features. Originally introduced in Windows Server 2022 Datacenter Azure Edition, hotpatching will now also be accessible as an additional subscription option in both the Standard and Datacenter versions of Windows Server 2025. This feature is likely to attract VMware clients who are hesitant to switch platforms due to security concerns.
“From a cybersecurity perspective, many of my clients feel stuck in a continuous cycle as they dedicate all their efforts to security, leaving no room for other initiatives. Innovation has become a secondary concern,” noted Dave Kawula, principal consultant at TriCon Elite Consulting. “At recent conferences, the patching enhancements are what most users are eager to discuss.”
In addition to these security measures, Windows Server 2025 will introduce workgroup clusters that allow for the creation of failover clusters without requiring an Active Directory domain. This feature simplifies the setup and management, making it ideal for smaller businesses or edge environments.
Despite these advancements, Microsoft continues to strive to reduce VMware’s solid market presence and its comprehensive ecosystem. Despite several efforts including partnerships, acquisitions, and innovations, Microsoft has struggled to significantly penetrate VMware’s market share and has often entered into a cooperative competition relationship, as seen in their recent initiatives for hybrid cloud enhancements.
“Between 2012 and 2016, Microsoft attempted to overtake VMware in the virtualization market,” Townsend noted. “However, by 2016, they gradually started yielding the market back to VMware. Since that time, they have maintained a cooperative relationship, supporting each other’s technologies. VMware still depends significantly on Windows Server for much of their management software.”
With Broadcom’s acquisition of VMware, there emerges an opportunity for Microsoft to reclaim territories it had previously conceded to VMware. Considering Broadcom’s history with previous software acquisitions, Microsoft may perceive an opportunity to capitalize.”
If past actions are any indication, Broadcom is likely to follow its usual strategy, as seen with its acquisitions of Symantec and CA Technologies: they may divest poorly performing segments or those challenging to integrate into their existing portfolio, or simply diminish investment in low-margin offerings.
Broadcom has already caused upset within the VMware community by discontinuing the VMware IT Academy and Academic Software Licensing programs as of August 15, which provided discounts on VMware licenses and training to students. Educators were given until August 31 to make final purchases of services and licenses before these programs were terminated.
“Ending free licensing kills our ability to teach VMware in the classroom,” said Brian Kirsch, an IT architect and Milwaukee Area Technical College instructor. “The VMware class is such a key part of our program that many students have benefitted from. Without [free licensing], our ability to offer the class will be done in a year. Already, the people running the Academy are all gone. RIP VMware Academy.”
The chain reaction of this decision could adversely affect VMware in the commercial markets. Many of its competitors, such as IBM, Microsoft and Cisco, continue to support universities financially via generous discounts on software taught in the classroom.
“Cisco has always gone the other way, pouring a lot of money into their education programs,” Kirsch said. “They have dedicated people at these companies and universities that bleed green. VMware approach is probably not going to pay off.”
VMware customers are already reevaluating their long-term options after Broadcom introduced subscription-based licensing, consolidation of products and price increases for some customers.
In June, Broadcom consolidated numerous offerings into two primary suites: VMware Cloud Foundation and the VMware vSphere Foundation, compelling customers to buy these packages regardless of whether they needed every included tool. According to Forrester Research, it’s estimated that 20% of VMware’s 300,000+ customer base will eventually switch to different platforms.
This shifting customer sentiment presents a prime opportunity for Microsoft to draw in VMware users seeking both stability and innovation. Microsoft’s approach is comprehensive, including not only Hyper-V but also targeting VMware clientele with solutions like Azure VMware Solution for seamless cloud transitions and Azure Stack HCI for those interested in utilizing hyper-converged infrastructure.
The Azure VMware Solution allows businesses to run the VMware stack on Azure infrastructure, benefiting from the cloud’s scalability and flexibility. This could appeal to businesses looking to modernize without a full-scale overhaul.
In May, Microsoft unveiled its VMware Rapid Migration program, enhancing the appeal of the Azure VMware Solution with various incentives. These incentives include fixed pricing for one to five year reserved instances as opposed to standard pay-as-you-go fees, and offering up to $120,000 in Azure credits with the purchase of a new reserved instance. Several of these promotions are set to expire on Dec. 31, 2024.
Mike Stump operates an IT infrastructure consulting firm that mainly serves the federal government.
“In the last two months, I have phased out about two-thirds of our VMware environment, and we are aggressively moving forward with the transition to Azure — and not the Azure-VMware solution, but purely Azure,” Stump commented. “It doesn’t matter if it’s Windows Server 2025 or [2022 or 2019], the version is irrelevant. We are looking to move away from VMware products because there’s widespread disillusionment with the recent changes.”
Azure Stack HCI is a hyper-converged infrastructure solution that is integrated with Azure services suited for organizations interested in a hybrid cloud approach. This infrastructure requires an Azure subscription, with Microsoft billing based on the physical cores utilized. A key benefit of this system is that Microsoft frequently introduces new features, which supports enterprises in maintaining a competitive edge through continuous innovation.
Microsoft presents Azure Stack HCI as an alternative to vSphere for organizations searching for a virtualization platform that can be managed through the integrated Azure Arc. For organizations that possess Software Assurance and Windows Server Datacenter licenses, Microsoft offers reductions in both Azure Stack HCI host service fees and Windows Server guest subscriptions.
“You’re going to see a turning away from the big three cloud providers,” said Stump. “VMware is no longer going to be the de facto, on-prem virtualization platform. So we need to be ready to live in a non-VMware, on-prem world. Users will be running on Hyper-V, which will get rebranded at some point to be an Azure Stack-like product, which means going to bare metal installs.”
User optimism about the new security features in Windows Server 2025 shows Microsoft is aware that many enterprises still have Windows Server workloads that run on-premises. Some of those customers might have felt the company was focused too much on Azure and neglected its Windows Server base. Particularly with the last few Windows Server releases, the company focused on security, baking in protections into the default configuration, such as enabling TLS 1.3 and Windows Firewall. These small moves lift some of the pressure off the IT staff to hunt down every possible vulnerability across a Windows Server domain.
“Microsoft now has a brand-new development team fully dedicated to the product,” Kawula said. “It’s good to see they’ve come to the realization that about 99% of customers are still using the on-prem version of Active Directory, for instance. They’re trying to go with a ‘start secure’ model, not just cheap security. It’s a pretty good decision.”
Microsoft began easing admins into the cloud in Windows Server 2016 with its Nano Server for running containers in Azure and connecting on-premises workloads to Azure for backup and storage needs. In the Windows Server 2025 version, Microsoft has improved the way users can use the product in hybrid, cloud, and edge environments, such as removing the need for an Active Directory domain controller to run a failover cluster in a remote office. The company has also made it easier to use Azure services, such as monitoring and policy application, with on-premises servers via the Azure Arc management tool.
Windows Server 2025 offers a compelling choice for businesses reassessing their virtualization strategies. The potential for financial savings, advanced functionalities, and enhanced security makes it an appealing alternative for companies deciding to move away from VMware to solidify their IT infrastructure.
“I’m receiving positive feedback from users that the ability to deploy Hyper-V in various settings is crucial,” Kawula mentioned. “Many are seriously thinking about phasing out their VMware licenses to switch directly to Microsoft. This might be a pivotal moment for Windows Server 2025.”
Ed Scannell is a freelance writer and journalist located in Needham, Mass. He covers a broad spectrum of technology and corporate IT-related topics. He can be contacted via email.