VMware, which created x86 server virtualization and is the dominant player in the market, is absolutely on fire. When EMC bought the company in 2003, VMware revenues were around US$100 million a year. VMware's final numbers for 2007 aren't out yet, but the company is on pace to hit US$1.5 billion.

In August, EMC engineered an IPO for 10% of VMware. It turned out to be the most successful high-tech IPO since Google, with EMC raising nearly US$1 billion when 33 million shares were snapped up at an opening price of US$29. The stock continued to soar, exceeding US$50 a share on opening day, and soon thereafter cresting at more than US$125 a share. Today, VMware is selling at close to about US$80 a share, which gives the company a market capitalization of around US$30 billion. That's hot.

And the virtualization market is showing no signs of slowing down. In fact, IDC is predicting that worldwide spending on virtualization software and services is expected to jump from US$6.5 billion in 2006 to more than US$15 billion in 2011. (Compare server management products.)

No wonder Citrix shelled out US$500 million in October for open source server virtualization vendor XenSource. (Add your opinion to one of our 50 greatest networking arguments: VMware vs. Xen.)

So, if you've got a room full of x86 servers running at 10% utilization, what are you waiting for? Virtualization can help you consolidate servers, run your data center more efficiently, and make it easier to allocate server resources to match business requirements.

According to a recent survey by Chadwick Martin Bailey, IT decision makers decided to implement server virtualization for the following reasons (in order of importance): improve server virtualization, lower data center operating costs, improve disaster recovery/backup capabilities, create a more effective software development and testing environment and lower IT admin costs.

Virtual servers, real issues

But before you jump into the virtualization, be aware that there are very real management and security issues that you need to address.

Adding a hypervisor layer to a server so you can run multiple instances of an operating system is a great way to get more bang for your hardware buck. But there are still plenty of things you need to think about.

According to Gartner security expert Neil MacDonald most virtual machines deployed today are actually less secure than their physical counterparts. MacDonald points out that the virtualization layer itself constitutes a new attack surface.

Plus, basic security functions like patching and signature updates become more tricky when multiple applications are running on a single physical box. That single box also represents a bigger target for hackers. And it represents a bigger risk in the event of a hardware failure.

Beyond security, there are a host of management issues. If you think event correlation is hard now, imagine trying to do root-cause analysis in a virtual server environment. And, the reality is that tools to manage VM environments are far less mature than VM software itself.

In September, Network World tested virtual server management tools from the three VM machine vendors - VMware, Microsoft and XenSource. We found that while VMware's management platform was the most comprehensive and flexible, none of the management platforms could do it all; meaning there's still plenty of room for third-party vendors to come in and offer additional management functionality.

And that's certainly what's happening. Gartner analyst Cameron Haight has identified roughly 50 companies that are offering virtualization management tools. These companies fall into various categories, including performance management, configuration management, capacity planning, run book automation and data protection.