It’s not quite the “Poker Chip Incident” of 2008, but Microsoft made its presence known at this year’s show with a full-page ad in USA Today, which was delivered directly to hotel rooms belonging to attendees at the show.

Photo after the jump.

The ad reads, in part:

Dear VMware customers,

VMware is asking many of you to sign 3-year license agreements for your virtualization projects. But with the arrival of cloud computing, signing up for a 3-year virtualization commitment may lock you into a vendor that cannot provide you with the breadth of technology, flexibility or scale that you’ll need to vuild a complete cloud computing environment.

[...]

If you’re evaluating a new licensing agreement with VMware, talk to us first. You have nothing to lose and plenty to gain. Not only is Microsoft’s server virtualization solution approximately one-third the cost of a comparable solution from VMware, but also a recent Microsoft study of 150 large companies showed those running Microsoft virtualization spent 24% less on IT labor on an ongoing basis…Most importantly, as you build out the next generation of your IT environment, we can providee you with scalable worldwide public cloud computing services that VMware does not offer.

VMware was secure in the world it had created for itself in the Moscone Center this week, but this ad was a reminder of the wolves still outside the door.

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SAN FRANCISCO — In IT, a trend isn’t really a trend until vendors get behind it.

Case in point: mixed virtual environments. We’ve done a lot of talking about organizations running VMware and Hyper-V together. But I’ve been asking vendors about it since last VMworld, and their answers are always the same: “We’ll support it when there’s demand, and we don’t see enough demand.”

Now that’s at least starting to change. As senior news writer Beth Pariseau reported last month, the number of Hyper-V ISVs is growing. Now we can add another to the list: virtualization management vendor Embotics, which will demonstrate Hyper-V support on the VMworld 2010 show floor and make it available by the end of the year.

I sat down with David Lynch, Embotics’ vice president of marketing, earlier today. He said more customers are starting to explore multiple platforms.

“We don’t have any customers yet who have both VMware and Hyper-V in production, but we have lot who are playing with [Hyper-V] in labs, and they’re telling us it’s growing up,” he said.

Mixed virtual environments are still a ways off — Lynch said most customers won’t deploy in production until next year at the earliest — but they are definitely becoming more prevalent. In our Virtualization Decisions survey last year, 56% of respondents said they’d prefer a standardized virtualization environment, but 54% said they’d at least consider using multiple hypervisors.

Cost is an obvious factor, and it seems Microsoft’s strategy of bundling Hyper-V with Windows Server is also paying off.

“It’s one of those things, ‘I’ve got it, I might as well use it,’” Lynch said.

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VMware revealed on last night’s earnings conference call that revenues from its low-end Essentials license SKU grew 100% from the first quarter of this year to the second.

This is an interesting data point given VMware’s recent moves to lower pricing and add features such as VMotion to Essentials Plus and Standard editions of its licenses. However, while Microsoft is offering HA and Live Migration free (along with the free Hyper-V hypervisor that’s part of Windows), VMware raised the price of those licenses with the addition of VMotion.

Meanwhile, VMware also permanently lowered the list price of Essentials to $495, saying less than $500 is a kind of ‘magic’ number below which IT managers may have a less extensive purchasing process. From my view, this is a clear acknowledgement of the “experimentation” factor some industry-watchers say will help Hyper-V gain penetration in the market.

Now, VMware says Essentials is booming, and some Wall Street analysts are excited about what seems to be growing traction in the SMB market based on the essentials figure. According to a note circulated this morning by Wedbush analyst Kaushik Roy,

We were positively surprised that the low-end SKUs targeted towards SMBs grew 100% [quarter over quarter]. This is probably because [VMware] has done a good job in building a strong VAR and partner network over the last couple of years. Going forward we expect VMware to gain further traction in the SMB space as they have recently moved the VMotion feature in the low-end SKU (Essentials-Plus).

While clearly a 100% change is a positive for VMware, which is acquiring a reputation as a premium, enterprise-oriented product in contrast to Hyper-V’s virtualization for the masses, I can’t help but wonder what the absolute numbers are. VMware didn’t break out whether a 100% increase means it sold two licenses in the first quarter and four in the second, or two hundred to four hundred, or two thousand to four thousand, and so on.

When asked directly by an analyst on the call whether the moves with Essentials and Essentials-Plus in vSphere 4.1 were in direct response to Microsoft, COO Tod Nielsen responded (per a transcript of the call):

as far as market share gains, we look at the reports and where it goes. If, what we’re seeing, you know, you assume Microsoft is seeing similar stuff. It’s a great opportunity for us to continue to grow and expand our reach, and with this move that we have made with 4.1 we expect good things in the future.

Curiouser and curiouser.

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When you’re trying to figure out if virtualization is right for your business, or which platform to choose, it’s crucial to understand virtualization costs.

There are the obvious costs, which include software, hardware and labor. Then there’s the hidden costs: network and storage hardware upgrades, security, management and training.

In its unending pursuit to discredit all things Microsoft, VMware has brought up another important cost to consider: support.

By now you should know the back story. Microsoft says Hyper-V is cheaper than VMware. VMware says Microsoft is using fuzzy math. Microsoft says, “Nuh-uh!” VMware says, “Yuh-huh!” On and on it goes.

In VMware’s latest retort, they take Microsoft to task about its virtualization support costs. Both VMware’s Production SnS and Microsoft’s Software Assurance cost 25% of license price. But, as VMware points out, Software Assurance limits the number of support incidents, while Production SnS offers unlimited support.

Depending on your organization’s needs, Microsoft’s support may be just fine — and cheaper than VMware. Either way, support costs are definitely something you need to consider when you calculate return on investment for virtualization projects.

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The trash talk in the Microsoft vs. VMware feud once reached Reggie Miller vs. Spike Lee heights. The two companies rarely passed up the opportunity to disparage, make fun of or even spread lies about each other.

But things had quieted down lately, and a lot of the more recent trash talk just rehashed old criticisms and insults. That is, until VMware issued its “Competitive News Flash” about Hyper-V R2, which compares “Microsoft myths” to “VMware realities.” (Hmm, where have we heard that before?)

The four-page document, marked “confidential,” is to help VMware resellers “understand VMware’s positioning in regards to Microsoft’s virtualization offerings and to respond to customer questions about Hyper-V R2.”

Much of the myth-busting relies on comparing Hyper-V’s features to VMware’s, or debunking stats that Microsoft has used to promote its own cause. But there are still some good barbs in there, none better than this one:

• Myth: Hyper-V is the “Windows you know.”
  Virtualization is a function of a general purpose operating system — a function of Windows.
• Reality: A hypervisor based on Windows is not a good idea.
  Have you tried using Windows Server Core with Hyper-V? Instead of the “Windows you know,” it’s more like the DOS you used to know.

VMware also highlights its role in the shift to cloud computing — a model that Microsoft is reluctant to adopt, the document says, because of its dominance in on-premise software:

Microsoft is heavily vested in preserving the status quo, protecting its enormous Windows-based revenue stream derived from its dominance in the old client/server mode, and has little interest in helping organizations embrace and benefit from virtualization-based cloud computing.

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VMware’s clause against competitive products at VMworld 2009 annoyed the hell out of Microsoft, and the company doesn’t intend to sit idly by as thousands of potential Hyper-V users convene in San Francisco next week.

Sure, they will follow the show rules; Microsoft Corp. will have a 10-by-10 booth on the show floor and they won’t demonstrate the new features and capabilities in Hyper-V, which will be available in Windows Server 2008 R2 in October. But will they talk to attendees about Hyper-V and undermine VMware’s Stalin-esque policy of keeping the opposition out? You bet.

“When we saw the clause we called [VMware] to check on what we could do. We are only allowed to show products that complement VMware, so we won’t be doing any product demos,” said David Greschler, director of virtualization and management marketing. “But we will be there at the sessions at VMworld and we will be twittering (@MS_Virt) during the show, which is no longer an industry show. It is a VMware show.”

At VMworld 2008 in Las Vegas, Microsoft did some guerrilla marketing to promote Hyper-V 1.0 by handing out poker chips with negative messages about VMware. I’m sure we’ll see more of the same at the Moscone Center next week.

In fact, Microsoft has already started. On Thursday, the company put out a press release listing more than a dozen companies that saved over six-figures by moving from VMware to Windows Server 2008 Hyper-V and other Microsoft virtualization products.

Microsoft’s cost savings case studies will probably catch some attention, especially in a poor economy. But VMware has about a 10-year head start in the virtualization market and companies that invested in VMware won’t abandon that investment.

Knowing that, Microsoft included in Windows Server 2008 R2 Systems Center Virtual Machine Manager the ability to manage VMware ESX, VSphere and Hyper-V - eliminating a big reason VMware users might not try Hyper-V.

Microsoft is also playing the “easy” card. Greschler said adding VMware onto a Windows Server system, which already has Hyper-V built in, “is like having a car with GPS in it, but going out and buying a separate GPS system, and having to learn about that separate system. Hyper-V doesn’t require a separate layer.”

But whether the next version of Hyper-V with live migration and its other management features will be good enough to wow VMware users remains to be seen. At the very least, VMware customers will have another option, and will be able to use Hyper-V as leverage when negotiating prices with VMware.

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