Citrix announced their Q3 2008 results today and, whilst revenue growth is impressive ($399 million compared to $350 million and therefore 14% up on Q3 last year), profits have taken a bit of a hit. It has not gone unnoticed that what previously was a seemingly endless stream of acquisitions has come to a complete stop lately. The last two announcements that I can think of involving 3rd party companies, Sepago and Marathon, have been, in Sepago's case, a technology purchase rather than a full-blown company purchase and, in Marathon's case, an OEM agreement.
This isn't meant as a criticism, quite the contrary. I feel Citrix have enough on their plate for the time being getting the Delivery Centre up and running properly (integration of NetScaler, live release of Workflow Studio, ironing out of XenDesktop imperfections etc.), so adding yet further technologies this year might be pushing the boat out slightly too far. Added to that, after the not inconsiderable investments over the past few years (NetScaler, XenSource et al) a period of consolidation, which I presume we are now in, was certainly to be expected.
Good to see, however, that both Citrix and VMWare are bucking the economic trends and posting pretty solid results, all considered. I certainly have an optimistic outlook for the rest of this year. Full details on Citrix's performance here.
Thursday 23 October 2008
Monday 20 October 2008
Bad eggs
Last week I attended a successful event staged by one of our key customers, Nebulas Solutions, in London. They recently formed a division called Nebulas Virtualise, which focusses, as you might expect, on virtualisation and related technologies. Nebulas also employ what they call a "Technology Incubator" to help them decide which products should be incorporated into their corporate portfolio of "fully" approved offerings. Essentially, they thoroughly test a specific product themselves, then introduce it to their early adopter type customers and, if all goes well, they transfer it to the mainstream. RES Software, one of the vendors I am responsible for at COMPUTERLINKS, has just been included in this, alongside RTO Software, which many readers might already know of, plus, in the security space, Tufin.
The event was based mainly around delivering Virtual Desktops and was therefore headlined by VMWare. Citrix was also mentioned quite a bit throughout, but of course only in terms of their server-based computing solution and, rather unimaginatively, in the context of what Citrix XenApp CAN'T do. (I must admit it took some self-control not to point out to the VMWare speaker that Citrix have spent the last 2 years telling customers that, yes, of course XenApp is not the ideal solution for every scenario, hence the evolution of XenDesktop to solve some of those problems, but that it is without doubt the lowest cost option. I kept my trap shut...)
What did strike me, however, is that the VMWare pitch around VDI was exactly the same, and I mean almost a carbon copy, of what Citrix are preaching. I don't mean that is a bad thing, quite the opposite actually, with two companies pushing the same messaging, it means the market may grow that much quicker. Which solution a customer ultimately then goes with will be decided by a load of other factors but, if the concept of virtual desktops itself is a quantifiably sound investment, at least my personal future is safe(ish).
So VMWare and Citrix are saying the same thing and, as I heard at the above event, an analyst from Gartner predicted a couple of years back that every single new desktop will be virtualised by the end of 2010 (!), why are they currently the only two companies in the world capable of providing this? OK, OK, I'm sure there are one or two others such as the perennial Ericom, Quest or even Symantec (and probably Microsoft in the future) who will, perhaps justifiably, claim they can do it too, but in all honesty, VMWare and Citrix are the two vendors that immediately spring to most educated minds on the mention of virtual desktops.
So why on earth, and this is actually the main point of this article, are the Citrix and VMWare channels probably the least profitable, in terms of margin retention for distributors and resellers, of just about any software product there is?
Citrix and VMWare develop highly complex infrastructure-level software solutions yet it seems some of the channel are happy to sell licenses at about the same margin levels as they retain on hardware. Any Tom, Dick or Harry can assemble a PC these days, my brother-in-law made one for my parents last Christmas, yet when it comes to revolutionising the way a company actually accesses applications, and therefore, ultimately, how they do business, why are we happy to "knock out" the licenses as though they are PCs? And, added to that, there are only perhaps 3 or 4 companies who can do this! Compare that to the amount of PC makers there are.
The reasons, in my opinion, all boil down to the same thing - bad eggs. I suspect there are many fickle end users, quite happy to let one reseller do all the preparatory work (sometimes free of charge) and then just buy the licenses off the company who eventually submits the lowest bid, often one who has had absolutely nothing to do with the project (so no cost of sale) and probably never will. Secondly, the reseller community adopt the same approach with the distributors and, thirdly, the one or two distributors who let this happen.
In the current economic climate, perhaps some acceptance of pricing pressure is necessary, but it seems to me that there are certain organisations (and believe me, I really wish I could name them here but I'm sure I'd be sued if I did so please Do Not Sue me), who defy any sort of sensible, long-term thinking for the industry as a whole. They are quite happy to offer ridiculous pricing to both resellers and end users who do not deserve it, in the vain hope of meeting this month's revenue target, come hell or high water.
We work in a competitive industry, sure, and I suppose that, in a sense, it's every man for himself when the proverbial hits the fan, but I think we also have a responsibility to ourselves and to our chosen career paths and specific areas of technology, to ensure that some modicum of value remains. Citrix and VMWare are market-leading, "best-of-breed" solutions and are therefore expensive to buy - rightly so. In the same way as Mercedes-Benz and BMW cars are market-leadingly expensive.
Whilst the vendors carry some responsibility to protect their brand and prevent it becoming yet another commodity item, their hands are tied to a point - certainly from a legal point of view, so surely the buck stops with the channel. (On the other hand, don't the vendors have the option to pick and choose which organisations are accepted into their channels?) Please don't think I am advocating a market where price-fixing becomes acceptable, we need only look at British Airways to see the ramifications of that sort of behaviour, all I'm calling for is that the prices charged for those software solutions that a) have a high cost of sale in terms of training, staffing levels, up-front investment etc. and b) provide answers to problems only a handful of companies are skilled enough and experienced enough to do, are fair, appropriate to effort and at a level that ensures everyone's futures.
Currently, I'm afraid, I get the distinct feeling those few bad eggs are spoiling things for all of us, the market is degenerating into a smash n' grab fest and for those of us actually serious about these technologies, the desire to further invest is evaporating quickly.
The event was based mainly around delivering Virtual Desktops and was therefore headlined by VMWare. Citrix was also mentioned quite a bit throughout, but of course only in terms of their server-based computing solution and, rather unimaginatively, in the context of what Citrix XenApp CAN'T do. (I must admit it took some self-control not to point out to the VMWare speaker that Citrix have spent the last 2 years telling customers that, yes, of course XenApp is not the ideal solution for every scenario, hence the evolution of XenDesktop to solve some of those problems, but that it is without doubt the lowest cost option. I kept my trap shut...)
What did strike me, however, is that the VMWare pitch around VDI was exactly the same, and I mean almost a carbon copy, of what Citrix are preaching. I don't mean that is a bad thing, quite the opposite actually, with two companies pushing the same messaging, it means the market may grow that much quicker. Which solution a customer ultimately then goes with will be decided by a load of other factors but, if the concept of virtual desktops itself is a quantifiably sound investment, at least my personal future is safe(ish).
So VMWare and Citrix are saying the same thing and, as I heard at the above event, an analyst from Gartner predicted a couple of years back that every single new desktop will be virtualised by the end of 2010 (!), why are they currently the only two companies in the world capable of providing this? OK, OK, I'm sure there are one or two others such as the perennial Ericom, Quest or even Symantec (and probably Microsoft in the future) who will, perhaps justifiably, claim they can do it too, but in all honesty, VMWare and Citrix are the two vendors that immediately spring to most educated minds on the mention of virtual desktops.
So why on earth, and this is actually the main point of this article, are the Citrix and VMWare channels probably the least profitable, in terms of margin retention for distributors and resellers, of just about any software product there is?
Citrix and VMWare develop highly complex infrastructure-level software solutions yet it seems some of the channel are happy to sell licenses at about the same margin levels as they retain on hardware. Any Tom, Dick or Harry can assemble a PC these days, my brother-in-law made one for my parents last Christmas, yet when it comes to revolutionising the way a company actually accesses applications, and therefore, ultimately, how they do business, why are we happy to "knock out" the licenses as though they are PCs? And, added to that, there are only perhaps 3 or 4 companies who can do this! Compare that to the amount of PC makers there are.
The reasons, in my opinion, all boil down to the same thing - bad eggs. I suspect there are many fickle end users, quite happy to let one reseller do all the preparatory work (sometimes free of charge) and then just buy the licenses off the company who eventually submits the lowest bid, often one who has had absolutely nothing to do with the project (so no cost of sale) and probably never will. Secondly, the reseller community adopt the same approach with the distributors and, thirdly, the one or two distributors who let this happen.
In the current economic climate, perhaps some acceptance of pricing pressure is necessary, but it seems to me that there are certain organisations (and believe me, I really wish I could name them here but I'm sure I'd be sued if I did so please Do Not Sue me), who defy any sort of sensible, long-term thinking for the industry as a whole. They are quite happy to offer ridiculous pricing to both resellers and end users who do not deserve it, in the vain hope of meeting this month's revenue target, come hell or high water.
We work in a competitive industry, sure, and I suppose that, in a sense, it's every man for himself when the proverbial hits the fan, but I think we also have a responsibility to ourselves and to our chosen career paths and specific areas of technology, to ensure that some modicum of value remains. Citrix and VMWare are market-leading, "best-of-breed" solutions and are therefore expensive to buy - rightly so. In the same way as Mercedes-Benz and BMW cars are market-leadingly expensive.
Whilst the vendors carry some responsibility to protect their brand and prevent it becoming yet another commodity item, their hands are tied to a point - certainly from a legal point of view, so surely the buck stops with the channel. (On the other hand, don't the vendors have the option to pick and choose which organisations are accepted into their channels?) Please don't think I am advocating a market where price-fixing becomes acceptable, we need only look at British Airways to see the ramifications of that sort of behaviour, all I'm calling for is that the prices charged for those software solutions that a) have a high cost of sale in terms of training, staffing levels, up-front investment etc. and b) provide answers to problems only a handful of companies are skilled enough and experienced enough to do, are fair, appropriate to effort and at a level that ensures everyone's futures.
Currently, I'm afraid, I get the distinct feeling those few bad eggs are spoiling things for all of us, the market is degenerating into a smash n' grab fest and for those of us actually serious about these technologies, the desire to further invest is evaporating quickly.
Friday 3 October 2008
Citrix lives! (Albeit in a cloud)
Returning, as I do, with a glistening wedding ring on my finger, I must now live up to my new status as a mature, upstanding, married member of the community. Losing my phone on honeymoon wasn't the best start but I'll put it down to teething problems.
When I (temporarily) signed off a couple of weeks ago, it was a matter of days before VMWorld and I was utterly convinced that Citrix would announce an acquisition of the leading HA and fault tolerance vendor Marathon. In the end it turned out not to be a full takeover but, almost as good, a tight OEM agreement, building Marathon's utterly brilliant technology (I saw this running a while back and was gobsmacked) into the synchronised release of XenServer v5.0.
It just goes to show that Citrix's claims of continued openness to partnership and upholding the DNA of industry co-operation that existed at XenSource before they were snapped up, do indeed ring very true. VMWare, as usual, have been developing their own HA solution, which will surely be hard-pushed to match the might of the XenServer/Marathon solution. HA with XenServer is now available in three flavours ("dialable" is the latest irritating IT buzzword for this):
1) automatic re-start of VMs (which VMWare have had for some time),
2) component level fault tolerance (e.g. a disk or network card goes down and Marathon moves everything across instantaneously to the back-up server with little to no impact), effective within a radius of about 50km - depending on the speed of the connection obviously,
3) global full system "five nines" availability providing as good as zero downtime (Marathon has a customer who have been running EverRun for 9 years and they have had just 11 seconds downtime in that period). This is available now for physical servers, Q1 09 in a virtual environment.
So my prognosis below that Citrix would upstage VMWare yet again wasn't quite borne out to the extent I had hoped but I still think there was almost as much coverage from VMWorld about them as there was VMWare.
Which leads me to another topic that hit the headlines whilst I was away. Apparently Citrix was to be bought by Microsoft. There have been several references to this, e.g. here, here and here, the latter of which led to two industry heavyweights, Brian Madden and Doug Brown, rather amusingly having a bit of a tiff about it, but, as we now know, it has all fizzled out to nothing. Again.
Microsoft buying Citrix must be one of the oldest rumours in the industry and it never seems to go away. Surely we must only ask ourselves the question why? What on earth would Microsoft get from buying Citrix? Sure, Citrix have better technology in most areas but would MS's shareholders really agree to a CapEx of what would probably amount to around 5-6 billion dollars for a slight improvement on what they already have? I doubt it, even if they do have pots of cash to spend.
And others? Brian even suggested VMWare as a potential suitor (and got completely lambasted for it in the responses - entirely unfairly in my opinion). Other names I've heard thrown into the hat are Symantec, IBM, Cisco, Google, Oracle and just about anyone else that could feasibly afford them.
Honestly? I think Citrix's stock is well down at the moment (just over $22 at the time of writing), as are many companies', so it would certainly be a reasonably good time to launch even a hostile takeover, however it's not the first time it's been down in the 20's and nothing happened the last few times. Perhaps the difference now is that, where Citrix were a delectable little canape a few years ago, they are rapidly becoming quite a mouthful these days. Their relentless attempts to establish themselves as an infrastructure player (alongside some of those names mentioned above) and an industry standard in application delivery and virtualisation has been quite a ride for us distributors. For this reason, I don't think they are anywhere near the finished article yet and I can't see a glaringly obvious candidate out there at the moment for whom they would provide a fully rounded, market-beating solution, even in an "embellishment" role. Not yet anyway.
Apparently, the next step on this journey is the "Cloud" - otherwise known as the Internet. (How on earth did we manage to re-brand the humble T'interweb and turn it into a new market area by the way?) Both VMWare and Citrix announced some cloudy stuff at VMWorld and I need to get my head around it before I blog with any authority on it, but I will say this. Mention applications and data in the same sentence as the word Internet to most security people and they will shudder. Never heard of TK Maxx, Marks & Spencer, British Military, [enter your favourite household name]?
When I (temporarily) signed off a couple of weeks ago, it was a matter of days before VMWorld and I was utterly convinced that Citrix would announce an acquisition of the leading HA and fault tolerance vendor Marathon. In the end it turned out not to be a full takeover but, almost as good, a tight OEM agreement, building Marathon's utterly brilliant technology (I saw this running a while back and was gobsmacked) into the synchronised release of XenServer v5.0.
It just goes to show that Citrix's claims of continued openness to partnership and upholding the DNA of industry co-operation that existed at XenSource before they were snapped up, do indeed ring very true. VMWare, as usual, have been developing their own HA solution, which will surely be hard-pushed to match the might of the XenServer/Marathon solution. HA with XenServer is now available in three flavours ("dialable" is the latest irritating IT buzzword for this):
1) automatic re-start of VMs (which VMWare have had for some time),
2) component level fault tolerance (e.g. a disk or network card goes down and Marathon moves everything across instantaneously to the back-up server with little to no impact), effective within a radius of about 50km - depending on the speed of the connection obviously,
3) global full system "five nines" availability providing as good as zero downtime (Marathon has a customer who have been running EverRun for 9 years and they have had just 11 seconds downtime in that period). This is available now for physical servers, Q1 09 in a virtual environment.
So my prognosis below that Citrix would upstage VMWare yet again wasn't quite borne out to the extent I had hoped but I still think there was almost as much coverage from VMWorld about them as there was VMWare.
Which leads me to another topic that hit the headlines whilst I was away. Apparently Citrix was to be bought by Microsoft. There have been several references to this, e.g. here, here and here, the latter of which led to two industry heavyweights, Brian Madden and Doug Brown, rather amusingly having a bit of a tiff about it, but, as we now know, it has all fizzled out to nothing. Again.
Microsoft buying Citrix must be one of the oldest rumours in the industry and it never seems to go away. Surely we must only ask ourselves the question why? What on earth would Microsoft get from buying Citrix? Sure, Citrix have better technology in most areas but would MS's shareholders really agree to a CapEx of what would probably amount to around 5-6 billion dollars for a slight improvement on what they already have? I doubt it, even if they do have pots of cash to spend.
And others? Brian even suggested VMWare as a potential suitor (and got completely lambasted for it in the responses - entirely unfairly in my opinion). Other names I've heard thrown into the hat are Symantec, IBM, Cisco, Google, Oracle and just about anyone else that could feasibly afford them.
Honestly? I think Citrix's stock is well down at the moment (just over $22 at the time of writing), as are many companies', so it would certainly be a reasonably good time to launch even a hostile takeover, however it's not the first time it's been down in the 20's and nothing happened the last few times. Perhaps the difference now is that, where Citrix were a delectable little canape a few years ago, they are rapidly becoming quite a mouthful these days. Their relentless attempts to establish themselves as an infrastructure player (alongside some of those names mentioned above) and an industry standard in application delivery and virtualisation has been quite a ride for us distributors. For this reason, I don't think they are anywhere near the finished article yet and I can't see a glaringly obvious candidate out there at the moment for whom they would provide a fully rounded, market-beating solution, even in an "embellishment" role. Not yet anyway.
Apparently, the next step on this journey is the "Cloud" - otherwise known as the Internet. (How on earth did we manage to re-brand the humble T'interweb and turn it into a new market area by the way?) Both VMWare and Citrix announced some cloudy stuff at VMWorld and I need to get my head around it before I blog with any authority on it, but I will say this. Mention applications and data in the same sentence as the word Internet to most security people and they will shudder. Never heard of TK Maxx, Marks & Spencer, British Military, [enter your favourite household name]?
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