For evidence of how seriously Microsoft is starting to take the market for virtualisation software, take a look at its acquisition today of Calista Technologies. This is a company that was launched as recently as 2006. It has raised only one round of venture capital (around $7m) and it has yet to ship any products.

Yet Calista got prominent billing today as Microsoft put some of the pieces in place for its attack on a market that represents both huge potential and a sizeable threat for its server and desktop businesses. No price for Calista was disclosed but when we spoke to Barry Eggers of Lightspeed Ventures, one of the company’s backers, he left no doubt that Microsoft is paying up in its efforts to catch up with VMWare (latest profile here):

We’re not in the business of selling good technologies early. Obviously it has to be a good deal for everybody all around.

Calista’s software is meant to make rich media work better on virtualised desktops - for instance, the graphics in Windows Vista could be made to work smoothly on a PC which does not run an instance of the software, but which is drawing it from a remote server.

Yet while Microsoft is racing to buy component technologies, it has yet to put the most important building block in pace. It still seems that a hypervisor for Windows - the key piece of software that lets multiple operating systems run on a single machine - will not be available in its server software until the second half of this year.

As happened with search technology, Microsoft has fallen well behind a competitor (in this case VMWare) that is moving fast to tighten its grip on a new market. Unlike search, though, Microsoft may be able to apply some of its most effective competitive weapons - "bundling" the software with its server products, using its control of desktop and server licensing - to make a dent.

January 21st, 2008 in Software | Permalink