While Wall Street and the IT industry remain ga-ga over VMware, the company has some serious challenges ahead. According to ESG Research, large organizations are embracing server virtualization technology for workload consolidation, but continue to struggle with more sophisticated server virtualization implementation issues like:

1. Performance management. Server virtualization creates numerous integrated “moving parts” when applications running on dedicated servers suddenly move to shared hardware.
2. Complex multi-tiered application deployment. Server virtualization is fine for discrete workloads controlled by IT but application owners are much more cautious. This is especially true when it comes to applications that depend upon multiple horizontal and vertical tiers. Furthermore, middleware is particularly dicey since it anchors all application-to-application communications.

Given these complexities, many firms simply eschew server virtualization for complex mission-critical applications and point VMware and Xen at more basic workloads. This helps cut capital costs and optimizes hardware but it doesn’t really change IT fundamentals.

It is these very complex application workloads where Oracle has a distinct advantage. Rather than starting with server virtualization and looking up the technology stack, Oracle starts at the business application and looks down. In this way, Oracle can align its portfolio of business applications, development tools, and middleware with tight integration for server virtualization. Oracle is already doing this with WebLogic Server Virtualization Option and Oracle Virtual Assembly Builder. Oracle also tightly integrates these suites on its virtualization technology without the need for an operating system. Finally, Oracle is plugging its application and infrastructure management tools into server virtualization as well.

Server virtualization and cloud nirvana comes down to simple and automated provisioning and configuration of an application “stack” that includes business apps, middleware, databases, operating systems, networks, and storage. Once deployed, real-time management kicks in to ensure availability, security, and high performance. Oracle hasn’t got all of these pieces but it appears to me that it has more of them than others.

In my view, Oracle has one other distinct advantage. Server virtualization is a deployment option as far as Oracle is concerned so Oracle’s server virtualization market share won’t make or break the company or its multitude of business units. VMware on the other hand is anchored to virtualization so it must evolve its technology from its hypervisor roots into an enterprise and cloud computing platform in order to drive further growth and scale. VMware may be up to this task but Oracle has a much more straightforward server virtualization path ahead.