Startup Of The Week: Virtual IronStartup Of The Week: Virtual Iron

It's hard to point to a hotter IT market than server virtualization. The technology promises to transform the data center and unseat the operating system as the foundation of server software. For Virtual Iron Software, a 4-year-old startup, the heat is on to transition from an emerging player to a market mover.
--Andrew Conry-Murray VIRTUAL IRON SOFTWARE FUNDING $31.5 million

PRODUCT Virtual Iron Version 4

PRINCIPALS Ed Walsh, president and CEO; and Zoran Cakeljic, VP and CTO

INVESTORS Highland Capital, Matrix Partners, Goldman Sachs, Intel Capital, SAP Ventures

EARLY CUSTOMERS PGA Tour Superstore, XCalibre Communications

WHY TAKE A CHANCE ON YOU? CEO Walsh believes companies are looking for an alternative to VMware's ESX virtualization platform. "VMware has kept prices high," he says. Providing the same advanced features, such as live migration, Virtual Iron is more cost effective, Walsh contends. As to the company's viability, he points to its high-profile investors and recent OEM deals. BUSINESS MODEL Virtual Iron is based on the open source Xen hypervisor. The company builds proprietary management and provisioning capabilities on top. Virtual Iron relies on resellers to deliver its software to market, and it's pursuing an OEM strategy. It recently announced that Hewlett-Packard and IBM will preload Virtual Iron software on several hardware platforms. The company is beefing up its overseas presence. Says Walsh: "Forty percent of our business came from outside the U.S.". THE COMPETITION VMware dominates the server virtualization market. XenSource, which also builds on top of the open source Xen hypervisor, was recently acquired by Citrix. Microsoft's Viridian will compete, too. OPPORTUNITY Companies are embracing virtualization to make their data centers more efficient and reduce operational costs. While VMware is the clear leader in server virtualization, the market is nowhere near saturation. Virtual Iron has the opportunity to claim enough server real estate with its hypervisor to be a contender in the market. It's forging alliances with software vendors in critical areas such as management and storage. These partnerships will make Virtual Iron more palatable to customers. TIMELINE