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What is a virtual appliance?

Wikipedia defines a virtual appliance as:

a fully pre-installed and pre-configured application and operating system environment

CIO.com calls a virtual appliance:

an application is designed, certified and delivered, with its own little OS, to run as a virtual machine on your existing physical server, or to run in a VM via a “cloud computing” service like Amazon’s.

Benefits:

The allure of a virtual appliance  is the re-packaging of an application for ease of deployment and distribution

By packaging, say, a database as a virtual appliance, the software manufacturer no longer needs to be concerned about what hardware, drivers and OS version the application is being installed upon. The manufacturer’s best practices are already incorporated into the virtual machine ensuring that it is configured correctly. Complexity is reduced while reliability is improved.

• Promotes a download and deploy model – very little to no configuration necessary
• A self serve Demo/Evaluation permits the customer to try and buy without an onsite presence by the vendor.
• Pre-built applications can be configured correctly, tuned and thoroughly tested on the OS they are shipped, improving availability for the customer.
• Replacing virtual appliances is also much quicker and easier.
• The virtual appliance can even be replicated off site for disaster recovery.

This simplifies the deployment process and yields substantial development, testing and support cost benefits to the manufacturer and operational costs savings to the customer.

What is the market activity?

• VMWare has set up a Virtual Appliance Marketplace with nearly 500 virtual appliances
• Microsoft offers try and buy licenses for Pre-configured VHD’s  for Windows Server 2008, System Center Configuration Manager, SharePoint Server 2007, Exchange Server 2007, and more.that run on Windows only.
• Citrix has announced the first XenServer virtual appliance

Mayank Sharma has compiled a broad survey of virtual appliances and companies that offer them.

Business Model Challenges for Software Vendors:

There are licensing challenges :

• License management for individual activations of a virtual appliance.
• Licensing for crossVM-platform use, e.g.,  customers are not permitted to convert a pre-configured Microsoft vhd to a VMWare vmdk.
• Enforcing export license restrictions on software components packaged within a virtual appliance, e.g., if OpenSSL is packaged.

Ensuring Security and conformance with compliance standards is another challenge .

• The pre-configured virtual appliances may not run anti-virus or other security software because they were not designed to support them
• They may require certain  firewall ports to remain open, which violates the corporate standard

Licensing : a structural barrier for growth

A dominant majority of the appliances seem to involve open source software on Linux, primarily because the software licensing considerations do not pose a barrier for the early adopters. The obvious side-effect of this is that there is not much revenue tied to this market today.  Until the major software vendors, e.g., Microsoft, Oracle, SAP, etc., rationalize their licensing, the growth in unit deployments will be driven by open source stacks.

Best Practices

rPath has published Best Practices for building a virtual appliance. They are summarized below:

• No command line interaction should be required
• Appliance management should be web-based
• There must be a rollback mechanism for update failures
• The appliance must have the minimum possible install size
• The appliance must be secure by default
• There must be an automated method for updating both the appliance image and the field unit

Conclusion

It seems to me that VMWare, Microsoft and Citrix consider this technology to be strategic, i.e., they are investing in anticipation of growth and are evangelizing, although no one seems to have made any money so far. VMWare opened the Virtual Appliance Marketplace in 2006 but the downalods for their most popular appliances number a few hundred, they have not yet crossed the magical threshold of 1000 downloads. I had read somwhere that IDC had predicted  this market will be worth $680 million in 2011 prior to the economic meltdown of 2008 – that’s a respectable number.