As server virtualization has matured, along with facing competition from many cloud competitors, VMware’s core hypervisor market is threatened by emerging commoditation trends.

Wikibon Senior Analyst Stu Miniman explains that virtualization has really matured and is now being regarded as a commodity.  Unfortunately for VMware, the company is no longer at the center of virtualization, as the enterprise is now looking for alternatives in the hypervisor market.  Nevertheless, VMware’s performance remains strong.

“There’s kind of a gaining buzz around the industry that server virtualization is really becoming a commodity.  VMware’s days of really owning the market place and being dominant with huge market share numbers are over,” Miniman explained in a recent appearance on our Live NewsDesk Show.  “VMware not only comes out with good earnings and good predictions for their revenue going forward, and all of a sudden Wall Street’s happy, stocks way up.

“What I would caution is that, while VMware is definitely doing well and from all checks that I have and users that I’ve talked to, is people like them.  VMware is going through a lot of challenges.  On the positive side, VMware, one of the big things we heard from the earnings is that their enterprise license agreement are way up.   This is always really good because these are customers that are fully in on VMware.  They’re not going to be trying to decide when they buy a new server whether they use VMware or competitor — since they have an enterprise license, every server they put it, they’re going to use VMware.  However, for those customers that don’t have enterprise licenses, we definitely know the companies are looking at other hypervisor  environments,” Miniman explained.

Though VMware may no longer be one of the only choices for virtualization, it’s not about to give up its seat at the top.

In May, VMware unveiled the vCloud Hybrid Service, an Infrastructure-as-a-Service (IaaS) solution meant to compete with Amazon Web Services and Microsoft Azure.

The subscription-based service allows customers to integrate the service into their VMware-virtualized private clouds to create a consistent, albeit complicated, hybrid environment, and it would be sold directly instead of via their service provider partners.  Though this is expected to create friction with partners, but it also gives VMware the space it needs to develop on its own.

For more of Miniman’s Breaking Analysis, check out the NewsDesk video below: