Springboard Research has identified Citrix, Virtual Iron and SWSoft as prime candidates for acquisition in 2008 as part of its list of hot predictions for the new year.
Consolidation in the software industry is set to continue in 2008 despite all of the buyout activity that occurred this year for business intelligence vendors.
For example, Oracle acquired Hyperion, while SAP picked up Business Objects and IBM secured Cognos.
Springboard senior market analyst, Ravi Shekhar Pandey, believes this activity will extend to collaboration and virtualisation companies in the coming 12 months.
This fits with the emergence of Software as a Service (SaaS), Service Oriented Architecture (SOA) and virtualisation as the biggest trends of the year.
The other hot issue was Green IT. But while a large number of IT professionals believe environmental factors are important in planning their operations, Pandey said only a small proportion actually have clear green purchase criteria currently in place.
"Social Networking" was elected the IT buzzword of the year with SAP's $6.8bn purchase of Business Objects voted acquisition of the year.
CIOs agree 2008 is set to be an interesting year if the research firm's acquisition predictions go ahead.
Virtualisation software vendor, Virtual Iron (VI), has been a thorn in the side of VMware since it began in January 2005.
The company's marketing manager, Mike Grandinetti, said the single biggest barrier to virtualisation technology adoption is VMware pricing. "It is too expensive. VMware's approach is puzzling to us," he said.
VI makes hardware virtualisation software that requires CPU hardware assist in the form of Intel's VT or AMD's equivalent.
Target for acquisition
The next company Springboard Research says is a target for acquisition in 2008 is Citrix Systems which has completed its recent acquisition of XenSource, a virtual machine infrastructure provider, that puts the company squarely in competition with VMware.
And finally, there is SWSoft, a company well known among virtualisation aficionados, and responsible for the highly succesful Parallels virtualisation software for Intel Macs. The company's Virtuozzo software is also used on several hundred thousand servers, mostly by remote data centers and hosting providers, according to CEO Serguei Beloussov.
It's best-known product is its Parallels desktop virtualization software, the popularity of which exploded a year and a half ago after it became the first software to allow Intel Mac owners to run Windows simultaneously with Mac OS X.
That and other versions of Parallels are used on more than 700,000 PCs, Beloussov said.
The company has doubled its revenue every year for the past eight years, and its head count doubled to 900 over the past year - and rather than running development out of Silicon Valley, does it halfway around the world in the frozen Siberian city of Novosibirsk.
But as the virtualization market heats up, SWsoft wants to step out of the long shadow cast by its closest rival, VMware.
In the past week the company announced it will drop the SWsoft name in favour of its youngest but fastest-rising division, Parallels.
Moreover, while it plans to continue developing and marketing its desktop and server virtualization software, the company also plans to start emphasizing its management and automation software - already popular among hosting providers - toward mainstream corporations.
For instance, SWsoft's software already offers collaborative management features to the hosting market that allow multiple parties - everyone from the service provider to the reseller to the customer IT administrator - to manage a given application.
Based around a technology the company calls "container-based virtualization," Virtuozzo creates smaller virtual machines that ride on top of the operating system, rather than conventional hypervisors from VMware and other vendors whose VMs simulate the PC environment all the way down to the hardware level.
That allows Virtuozzo to create many more VMs than a typical hypervisor while using less memory and CPU.
A final version of Virtuozzo 4.0 is expected next year.
Maverick Strategies IT infrastructure manager, Victor Dolffo, expects more activity in this area of the market as virtualization technology adoption rates continue to skyrocket.
"Of course everyone will want a piece of the action but I think the real battle will be in the area of hypervisor technology," Dolffo said.
"VMware isn't likely to be topped by anyone in the near future but I think there will be a lot more activity around server hardware that ships with embedded hypervisor technology."
Dolffo said the first sign of this battle emerged earlier this year when Citrix announced its XenSource acquisition.
He said the choices today are VMware and Xen-based hypervisors - including derivatives from XenSource, Oracle Red Hat and Novell.
Despite concerns about the US economy next year, the Asia Pacific IT market is likely to maintain its momentum of growth.
Regional economies set to lead this growth are India, China, Australia, Singapore and Korea, according to Springboard Research.
Also topping the list of 2008 trends is a serious skills shortage with Pendar claiming the talent crisis will hit vendors, IT management and the investment plans of many organizations.
"A substantial portion of new IT investments will come from organizations scaling up their IT systems or building entirely new ones to drive business," he said.
"While on a macro level, there are several factors driving IT investment, it is on the micro level where we are seeing the real action.
"In 2008, CIOs will be concerned with challenges like reducing the cost of IT operations, improving business application performance, finding and retaining skilled technical people, and identifying technologies that integrate closely with the enterprise's business goals."
with Eric Lai, Ephraim Schwartz and Manek Dubash