"VMware is about to experience some very serious competition from a vendor with deep pockets, with a massive worldwide marketing and sales organization, with major market penetration across Fortune 500 and small and medium business markets," wrote Clabby.
The analyst noted that there are at least half a dozen fields in which VMware finds itself at a disadvantage. Particularly, the company lacks experience as a major hardware and systems vendor.
Clabby sees the virtualization market moving further into the areas of virtualising multiple systems and components, an area in which Microsoft has long held sway.
"To play in the x86 infrastructure and management markets, VMware needs to directly compete with some very large and well established vendors including Microsoft, Symantec, IBM, Hewlett-Packard, Sun, BEA and others," Clabby explained.
"Many of these vendors already have very deep infrastructure and management offerings, and several of them particularly the systems hardware vendors have one very huge, distinct advantage over VMware; they can do a far better job of managing physical as well as virtual resources."
Clabby also cites Microsoft's larger install base and ability to bundle Hyper-V with Windows Server 2008, as well as a greater array of systems management tools.
Ultimately, the analyst concludes that though tardy, Hyper-V will be a formidable force in the virtualization market. Meanwhile, VMware could see its position in the market shrink at the hands of Microsoft and other larger competitors entering the field.
"As these vendors become more aggressive in the virtualization marketplace, VMware will see not only increased market pressure but also significant margin pressure," Clabby wrote.
"VMware will not go away in the near term, but IT buyers will soon find that other, more comprehensive alternative offerings are available for less than VMware."