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Virtual Appliance Marketplace

Virtual Appliance Marketplace. MGP 296 - Competitive Strategy in Network and Information Industries Amit Bhatnagar Dave Lasley David Wong. Virtualization Concepts. What is Virtualization? Allows creating multiple machines on a single computer. What is a Virtual Machine?

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Virtual Appliance Marketplace

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  1. Virtual Appliance Marketplace MGP 296 - Competitive Strategy in Network and Information Industries Amit Bhatnagar Dave Lasley David Wong

  2. Virtualization Concepts • What is Virtualization? • Allows creating multiple machines on a single computer • What is a Virtual Machine? • Isolated software container that runs its own operating system and applications • Contains its own virtual CPU, RAM, hard disk, Network card

  3. Virtual Appliance • Pre-build software solution that is comprised of one or more virtual machines • Contains application and integrated thin OS

  4. Virtual Appliance Marketplace • Online platform for distributing virtual appliances • ISVs (sellers of virtual appliances) on one side and enterprise customers (buyers of virtual appliance) on other side (2-sided network) • Expanding to become a place for online review and discussion forums for virtual appliances

  5. Platform Structure Independent Software Vendors Virtual App Marketplace Buyers VMware provides Virtual App Marketplace at http://vam.vmware.com Independent Software Vendors may market Commercial, Evaluation and Free Virtual Applications Buyers may download virtual appliances to evaluate and potentially purchase Platform enjoys strong cross-side network effects

  6. Subsidization and Revenue • VMware subsidizes buyer side by providing free VMware Server and ESXi softwares for deploying Appliances. • VMware’s seller side revenues are on “VMware Ready” certification and education fees. • VMware’s buyer side revenues are on upgrades to vSphere cloud environment and support contracts

  7. Winner Takes All • Heavy subsidization and present 78% market share indicates VMware is playing a WTA strategy: • Multi-homing costs are high • Cross-side network effects are positive and strong • Neither side has strong preference for special features

  8. Business Model

  9. Revenue Generation Model • On Seller-Side (ISVs) • Free VMware Studio for developing Virtual Appliance • VMware studio allow developers to create VA in industry standard OVF format • Free listing of evaluation or community version • Charges for listing commercial version • $2,500 for certifying the Virtual Appliance • $3,170 for certification and education fees

  10. Revenue Generation Model • On Customer-Side • Free Marketplace • Free online discussion forum • Free online reviews of virtual appliances • Offer free basic products such VMware Server, Free VMware ESXi products to deploy virtual appliances • Charges customers for VMware Product Support (per incident or per processor), for Professional Services (certification, training) and for Premium products (vSphere – Cloud OS)

  11. Industry Trends and VMware • Open Virtualization Format (OVF) • Format for packaging and distribution of software in virtual machines • Just Enough Operating System (JeOS) • Include only base elements that are needed to support application • Cloud Computing and Software-as-a-Service (Saas) • Increased demand of cloud computing is driving the demand for virtual appliances

  12. VMware’s Strategy - Marketplace • Doesn’t facilitate any financial transaction • Generate modest revenues from ISVs • Provides a central repository of certified as well as non-certified virtual appliances • Ease in finding virtual appliances as well as ease in deploying them is creating a spillover effect of increased demand for virtualization and for VMware products • Virtual Appliances - Complementary products for VMware products. • More Virtual Appliance Sales -> Potentially more VMware product sales

  13. Feasibility of Business Model • For existing VMware customers, the switching costs are high, so the customers are more likely to buy virtual appliances in order to leverage existing virtualization infrastructure. • Since Virtual Appliances support OVF format, same appliances will work on non-VMware products if they support OVF format. So, in case of better alternatives (price and support), new customers can choose non-VMware products.

  14. Feasibility of Business Model • Virtual Appliance Marketplace model is not sustainable in itself • Modest revenues from ISVs • No direct revenues from customers

  15. Recommendations • Keep the focus on building community through this marketplace • Educate the market (Software Vendors, Customers) • Provide quantity discounts to ISVs who list more than a certain number of virtual appliances on marketplace • Make partnerships with Operating System providers so that more number of JeOS are available • Keep the evaluation and community based virtual appliances free to list and browse

  16. Questions?

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