Sometimes news slips under the radar. We missed VMware's announcement that it was introducing a massive price cut to its vSphere Essentials business package. For the next three months, punters will able to buy a three-server package at half-price - well,  if you're going to cut prices, you may as well cut them by a long way.

Cutting prices is something that it's previously not countenanced. It's something that we mentioned a few weeks ago. VMware has got away with premium pricing for so long because it's been the clear market leader - that was not going to last for ever and those prices won't be sustainable for ever either.

It's a bold move but it betrays an uneasiness that lies at the heart of the company. On the face of it, VMware has little to be fearful about. It holds an 80 percent (according to some sources, a 90 percent) share of the enterprise server market. And while it's not quite do dominant in the desktop virtualisation market, it remains a major player in that space too.

So why, if everything is rosy, does VMware feel the need to cut the price of vSphere - and not a measly 10 percent off, the soft of saving a cut-price supermarket.It's announced that there will be the hefty 50 percent slice off its list price?

The answer is that dreaded word Microsoft: there's a real fear that MIcrosoft will own the small to medium-sized space when it comes to virtualisation. It's a segment of the market that the has steadfastly resisted the spurt virtualising the servers and VMware is fully aware that when that sector does get round to looking at virtualisation, the company that's going to be in prime position is the one that already owns the desktop, the applications and the server in that company - and that's not VMware.

Indeed, I was speaking to a VMware executive about this just a couple of months ago and he admitted that Hyper-V would probably get a firmer foothold in the SME space, although, he pointed out, VMware wasn't just about the enterprise but had excellent products for smaller businesses too.

Now, it seems that VMware isn't quite so sanguine about letting Microsoft own the small to medium sized space. Microsoft has been notably more aggressive in the virtualisation arena lately - just last month, Microsoft's Bob Muglia was stridently talking up Hyper-V's gains against vSphere and there are small signs that VMware is not going to have it all its own way.

However, the move is not all that's cut out to be. As author and blogger, David Marshall has made clear, this cut price deal is for vSphere Essentials, a stripped-down version of the vSphere product and as Marshall points out, the move appears to go against VMware's own marketing message "But what I find interesting here is that VMware has decided to strip away much of the cool and useful functionality that has helped separate it from the competition. VMware has maintained all along in this virtualization war that platform consideration shouldn't be about price, but instead about feature and functionality."

The other question is why for such a short time and what's going to happen after the 15 June? Are companies really going to buy a product for twice the price that it was a week earlier? I spoke to a VM representative over here in the UK and he told me that this was nothing significant, it was the sort of promotion that VMware does all the time. Maybe so, but VMware doesn't have that many promotions like this.It's a sign of how competitive the market is going to be in this space.


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