Today VMware hit another major step towards the hypervisor’s commoditization by releasing its bare-metal hypervisor ESX for free.
And this move, planned long time by the former CEO Diane Greene, is clearly a move to counter the raising menace of Microsoft and its new free hypervisor Hyper-V.

Now that both players are targeting the SMB market (while Citrix is fully busy challenging VMware in the Enterprise space), one interesting question to answer is: which product is better?

As the history tells us better doesn’t necessarily means with most features, as the product positioning involves the sales channel capability to win the customers, the total cost of ownership, the capability to scale up with the company, the hardware and software support for the ecosystem, etc.

While these factors are hard to measure, the TCO has a special appeal and no company cannot avoid the temptation to calculate the hidden costs of the competing offerings.

The first attempt comes from VMware, thanks to Mike DiPetrillo, the now popular Specialist System Engineer of Industry Research and Competitive Analysis department, that uses his personal blog to detail a pretty interesting analysis:

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Everyone out there has a different view on what the SMB space is made up of but pretty much everyone agrees that they have fewer than 50 servers and a minimal IT staff that's mostly educated on Microsoft products. I know there are exceptions but I'm going for the larger group here.

With any of today's virtualization solutions and a half way decent 2 socket system you should be able to get at least a 10:1 consolidation ratio and probably closer to 15:1.

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ESXi 3.5 is completely free. The Hyper-V role is completely free. The major difference is Hyper-V requires a Windows Server 2008 host to run and ESXi 3.5 does not. Most SMBs out there do not pay for Software Assurance (Microsoft's upgrade program) for their server software. I don't have any hard stats so if someone does please reply in the comments section. I'm just going off my experience of selling to this space for a very long time. This means that you have a lot of SMBs out there running Windows Server 2003 or even Windows Server 2000 or Windows NT. Since you need Windows Server 2008 in order to run Hyper-V this means you have to go out and pay for the cost of a Windows server license just to get Hyper-V.

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Let's say you decide after adding the 3 hosts it would take for your 30 VM environment that you want to have some centralized management capabilities. In the Hyper-V world that means Systems Center Virtual Machine Manager. In the VMware world that means Virtual Center Server. Again, this is not a feature comparison article. Both solutions at their basics allow for the same things - create and manage a VM, manage a library, one pane of glass, etc.

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So, just to recap on the 3 host, centralized management solution - Microsoft SCVMM = $3,300 buying a la carte or $499 for the Workgroup Edition (we'll use Workgroup for our final tally numbers); VMware VI Foundation = $2,995.

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It's worth mentioning that when you buy VMware Foundation you get some nice advanced features in the bundle such as VMware Update Manager (patching of hosts and VMs) and VMware Consolidated Backup. If you wanted similar features for Hyper-V you would need to buy the Systems Center Systems Management Suite Enterprise (SMSE) which costs $1,290 per host.

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Now we're looking at the advanced features such as patch management and backup for our 3 host solution - Microsoft with SMSE = $4,260; VMware VI Foundation = $2,995.

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DiPetrillo closes with a comparison table:

Some of the points in this analysis may be arguable.
For example the virtual infrastructure patching can be achieved through the great WSUS, a product that Microsoft releases totally free or charge.

Nonetheless this analysis highlights an important point: to perform a basic and critical feature like virtual machines backup, Microsoft today obliges the customers to buy Data Protection Manager (no matter if it’s included in the SMSE bundle).
This happens because NTBackup, which is included in every copy of Windows and it’s ready to do the much wanted live snapshot through the Volume Shadow Service (VSS), can’t run the job.
Microsoft had the opportunity to use NTBackup as a competitive advantage against VMware and didn’t use it.

As usual we’ll update the post with any relevant answer from Microsoft and others.

Update: While Microsoft still refrains from arguing this cost analysis, at least a couple of prominent figures in the virtualization world have something to say about it.

Chris Wolf, Senior Analyst at Burton Group, changed the requirements to include high-availability (a much savvy choice) and extended the comparison to Citrix and Virtual Iron. He found out that Microsoft is significantly less expensive than VMware.

Massimo Re Ferrè, IT Architect at IBM, proceeded exactly in the same way, adding high-availabiliy as a mandatory requirement, and found out the same thing: Microsoft is less expensive than VMware.