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On the eve of VMware’s San Francisco love fest around its virtualization technologies, VMworld, Microsoft is spreading the word of a big customer win away from the virtualization giant.

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Microsoft has announced that Fortune 500 company, CH2M Hill, has switched to Microsoft’s virtualization and management software from its previous VMware implementation, citing costs as a major driving factor. The global engineering firm says it expects the move to save it more than $3.2 million in the next three to five years. In addition, the firm expects to reduce server administration work by 30 percent, allowing it focus on more strategic work such as branch office virtualizing, infrastructure upgrading and architecture planning.

"The company was cutting costs across the board, and we wanted to push forward with virtualizing more servers, especially in our field offices, but we just couldn’t do it with VMware," said Greg Barton, senior analyst, Enterprise Systems Group, CH2M Hill, in a statement. "By switching to Microsoft from VMware, we will save $280,000 in software fees. Plus, we can now afford to tackle our 600 field servers and are aiming to virtualize 20 percent of these computers each year. At $5,000 a server, that’s a savings of $3 million over the next three to five years."

Getting CH2M Hill as a server virtualization customer is a big win for Microsoft. Microsoft came late to market with its Hyper-V product in a field already absolutely dominated by VMware.

IT solution providers have told Channel Insider that the sure bet is still on VMware, although many customers are doing small proof-of-concept projects on Microsoft’s Hyper-V, and some small businesses have been dipping their feet in the server virtualization waters for the first time using Microsoft’s software. That’s because it ships for free with Microsoft’s server software. But gaining inroads to production-level servers at big companies has been more of a challenge for Microsoft. That’s why the CH2M deal represents such a big win.

CH2M Hill has more than 25,000 employees in regional offices that “require agile, high availability IT services to serve their customers’ needs and in a cost-effective manner.”

According to Microsoft, CH2M Hill was an early adopter of virtualization technology. Between 2005 and 2007, the company used VMware ESX to virtualize 350 servers in its datacenter and 100 servers in regional offices. But as the economy crumbled in late 2007, CH2M Hill looked towards a more cost-effective virtualization solution.

So far, CH2M Hill has migrated 30 VMware virtual machines to Microsoft Hyper-V and plans to have all its virtual machines, at headquarters and in the field, migrated over the next three years. Microsoft said CH2M Hill is using its Hyper-V virtual machines for development and test servers and to run applications such as SharePoint, SQL Server, IIS, Web, and, soon, Microsoft Exchange Server 2010. The company uses Microsoft System Center to create virtual machines and give business groups the ability to create virtual machines.

"Virtualization is a critical element that lets customers run all their applications across traditional datacenters, private and public clouds," said David Greschler, director of virtualization strategy, Server and Tools Business at Microsoft, said in a statement. "By putting virtualization into our platform, we have made it easier and more cost-effective for customers to adopt cloud computing without major disruption or change in infrastructure."