Microsoft has VMware in its sights and there will be blood. Kevin Turner, Microsoft’s COO, gave what reads like a real barn-burner speech at the MS partner’s conference.

He covered a lot of ground, but this stark warning to EMC/VMware was the toughest. He clearly sees that they can beat VMware and knows exactly how to do it. He’s addressing partners, hence the focus on margin and investment.

We launched [Hyper-V] in October of last year. Since October of last year, we’re at over 24 points of market share from the day we put it in the marketplace. . . . The R2 product that we’ve got coming out gives . . . . them live migration with R2 and keeping the same value proposition.

And so I hear a lot about margins, hey, the VMware program’s got higher margins. Well, if I charged you US$58,000, I’d give you higher margins too. That’s not what we charge customers. We charge them US$9600 and that’s why our margins are what they are. So, as you line up to make your bets, if you want to bet against us in this particular space, we’re coming right at you. . . . 100 percent of what we’re putting in our Microsoft datacenters today is virtualized using our product. And so we’re very, very excited about what we do.

. . . we’re going to get this virtualization tax, the VMware tax out there and start driving people crazy with the value proposition. . . .

And I’ve tried to be very, very candid and honest with this comparison so that there’s nobody in the room thinking we have our head in the sand and we don’t understand our opportunity or where they’re better than us. We do. . . . And we’re just going to keep improving the product and keep growing the market share.

But this is a space we’re not going to lose in, ladies and gentlemen, and so as you think about where to put your investments, we encourage you to take a hard look at our value proposition because we want our customers to pay less and get more . . . .

Market vs feature vs benefit
Are virtual machines a market or a feature? Or a benefit required by the steady march of Moore’s Law? (Too bad there’s not a Moore’s Law for applications – forcing them to use 2x the cycles every 18 months.)

Turner is treating virtual machines as a market – and until everyone has roughly feature equivalent implementations – it is. But someday VM capability will be standard on every major server OS. And then what?

The StorageMojo take
I remember when virtual memory helped define a market segment: superminicomputers. Vendors compared VM implementations and helpfully pointed out the problems in the other guy’s architecture.

Today virtual memory is not a differentiator. You have to have it. It operates in the background and 99% of all users have no idea it exists, let alone what it does. (Although with RAM at $10/GB, maybe we don’t need it anymore.)

IF virtual machines become widely used on the desktop for, say, security, then the technology will become a feature, included at no extra charge. If servers remain the focus, then vendors will be able to milk it for at least another decade.

But who will do the milking? If Microsoft can maintain their focus, I’ll bet on them.

Courteous comments welcome, of course.