Is virtualization bad for hardware sales?

The other day I was reading this article: http://blogs.zdnet.com/BTL/?p=4324 which proposes that virtualization is going to cause troubles for hardware vendors.  It is certainly a logical conclusion to come to, I mean if you can run more operating systems on a single piece of hardware that means less money for the hardware vendors, right?

Well, this may be the case but I’m not quite convinced.  The reason for my skepticism is because of two trends I’ve noticed:

  1. People buy new hardware for server consolidation projects.

    In single user environments (development, testing, consultancy) most users of virtualization just run the software on their existing hardware.  But for large scale production server consolidation projects, people tend to buy new hardware to perform the consolidation on.  Indeed, I have seen many cases where companies who would not otherwise have bought new server hardware in order to consolidate older server hardware.
  2. People buy larger hardware for server consolidation projects.

    If a company is going to consolidate a lot of light load servers using virtualization, they are much more likely to buy higher end computers (four or more processors) than if they were not consolidating servers.  Hardware manufacturers make a larger profit on these bigger computers.  Indeed, we work with many hardware vendors who recognize the potential for virtualization to enable them to sell these larger computers.

Anyway, that’s just my take on the situation.

Cheers,
Ben