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An article in today’s New York Times raises an interesting question about the virtualization market: While we know virtualization software represents paradigm-changing technology, will it in the end constitute a successful business to be in?

The question pops up as VMware gets set to kick off its VMworld conference in San Francisco this week, flush with 80 percent market share in the virtualization space and a highly profitable balance sheet. The company’s closest competitor is distantly second place Microsoft, with Citrix and some smaller players including Virtual Iron (now owned by Oracle) in the mix.

Here’s the interesting point in the article, which asks you to consider the trajectory of the browser market. Just as with virtualization, Microsoft was late to the browser game in the 1990s, lagging trailblazer Netscape by a wide margin. But Microsoft eventually trumped Netscape when it controversially bundled its Internet Explorer browser in with the Windows operating system, essentially turning a product into a free feature. We all know what happened from there. Netscape’s no longer with us, and browsers, well, browsers are all free now. They have become essential enabling technology, but not a revenue generator per se.

Might that same fate await virtualization technology? Microsoft’s Hyper-V virtual machine software is currently bundled with Windows Server 2008, another free element of Microsoft’s ubiquitous operating system. By nearly all accounts, however, solution providers report that VMware’s server virtual machine software is technically superior to Microsoft’s and can make the case to customers who want to know why they should pay for something that elsewhere is offered for free. Here’s the thing though: This fall, Hyper-V will be upgraded in the server OS to include new features such as Live Migration of virtual machines that will put its capabilities on or closer to a par with VMware’s–oh, and still free.

VMware’s sitting in a nice position today, but the company will have to ask itself whether it can continue to bank solid business on a technology that will eventually be offered widely as a feature inside core infrastructure.

Is there such a thing as the browser effect?