Virtualization Software Market Size, Share, Growth & Industry Analysis, By Type (Server Virtualization, Storage Virtualization, Application Virtualization & Others), By Deployment (On-Premise, Cloud), By Size (Small and Medium Sized Enterprises, Large Enterprises), and Regional Analysis, 2024-2031

Virtualization Software Market Size

The global Virtualization Software Market size was valued at USD 90.12 billion in 2023 and is projected to grow from USD 98.11 billion in 2024 to USD 193.03 billion by 2031, exhibiting a CAGR of 10.15% during the forecast period. The market is experiencing substantial growth due to advancements in automation and the rising complexity of IT environments.

Virtualization is becoming increasingly integral for optimizing operations and supporting hybrid cloud strategies, fueled by advancements in artificial intelligence and machine learning. The expansion of the market is further bolstered by the increased demand for scalable, flexible IT solutions that align with evolving business needs and digital transformation initiatives.

In the scope of work, the report includes solutions offered by companies such as Broadcom, Cloud Software Group, Inc., Oracle, Microsoft Corporation, Red Hat Inc. (IBM Corporation), Huawei Technologies Co. Ltd., Google LLC., NComupting Co. Ltd., Parallels International GmbH, Datadog, and others.

The virtualization software market is experiencing robust growth, largely attributed to the increasing need for cost-effective IT infrastructure solutions and enhanced data security. As organizations seek to optimize their resources and improve efficiency, virtualization offers an effective means of reducing hardware costs and streamlining management processes. The rising adoption of cloud-based solutions and the widespread implementation of 5G technology further propel market expansion.

• For instance, in July 2022, ABB and Red Hat collaborated to deliver scalable digital solutions for the industrial edge and hybrid cloud environments. This partnership facilitated the virtualization and containerization of automation software using Red Hat OpenShift, providing enhanced flexibility in hardware deployment and optimization based on specific application needs.

Additionally, network virtualization and advanced storage solutions are gaining immense traction, thus addressing the growing demand for scalable, secure data management. With continuous technological advancements and a rising focus on digital transformation, the market is poised to witness sustained growth in the coming years.

Virtualization software is a technology that enables the creation of multiple virtual instances or environments on a single physical hardware system. By abstracting the underlying hardware, it allows the simultaneous operation of multiple virtual machines (VMs) or containers, each of which runs its own operating system and applications independently.

This technology optimizes resource utilization, enhances scalability, and simplifies IT management by consolidating hardware resources and enabling dynamic allocation based on workload demands. Virtualization software improves operational efficiency, reduces hardware costs, and supports flexible deployment strategies, making it a critical component in modern IT infrastructure and the cloud computing environments.

Analyst’s Review

Increased investments by key industry players are anticipated to boost market growth through the forecast period.

• For instance, in May 2022, Hewlett Packard Enterprise assisted KDDI, a prominent Japanese telecommunications operator, in the deployment of the HPE ProLiant DL110 Gen10 -Telco server. This server was utilized to support the operation of O-RAN compliant 5G standalone base stations.
• Furthermore, in May 2022, Microsoft introduced DCsv3-series virtual machines (VMs) in various regions, including Australia East, Japan East, and Southeast Asia. These VMs, powered by the latest 3rd Generation Intel Xeon Scalable processors, feature advanced security measures such as Intel Software Guard Extensions and Intel Total Memory Encryption - Multi Key for robust data protection. Additionally. they offer enhanced performance with Intel Turbo Boost Max Technology 3.0, reaching speeds of up to 3.5 GHz.

These strategic advancements and increased investments underscore the robust growth trajectory of the virtualization software market, supported by technological innovations and enhanced security features. As key players continue to introduce cutting-edge solutions, the market is expected to showcase significant expansion, meeting the evolving demands of modern IT infrastructures.

Virtualization Software Market Growth Factors

The rising usage of cloud-based solutions is expected to foster industry growth through the forecast period. Cloud-based solutions offer unparalleled scalability, flexibility, and accessibility, enabling businesses to manage their operations more efficiently and cost-effectively. As organizations increasingly transition their workloads to the cloud, there is a growing demand for virtualization software to ensure seamless integration and optimal resource utilization.

Cloud-based virtualization allows businesses to dynamically scale their IT infrastructure in response to fluctuating demands, thereby reducing the need for substantial upfront investments in hardware. This trend is further fueled by the growing adoption of remote work and digital transformation initiatives, thereby aiding the growth of the virtualization software market.

The market faces significant challenges, particularly in the management and integration of diverse virtual environments, which lead to increased costs and inefficiencies in deployment and maintenance. Additionally, data security and compliance concerns in virtualized environments pose substantial risks, potentially hindering market growth. To counter these issues, key players are investing heavily in advanced management tools and automation technologies designed to streamline the integration and operation of virtual environments.

They are further incorporating enhanced security features, such as robust encryption and comprehensive compliance frameworks, to address data protection concerns. These strategies are designed to simplify deployment, reduce costs, and improve overall efficiency, thereby mitigating the adverse impact of these challenges on market expansion.

Virtualization Software Market Trends

The growing demand for extremely secure data and consolidated storage infrastructure is projected to fuel the demand for virtualization in the forthcoming years. As organizations increasingly prioritize data security and integrity, virtualization offers robust solutions for protecting sensitive information. Virtualization enables the creation of isolated environments, thereby reducing the risk of data breaches and enhancing compliance with regulatory standards.

Additionally, it allows for the consolidation of storage resources, thus streamlining data management and improving efficiency. By centralizing storage infrastructure, virtualization simplifies backup and disaster recovery processes, ensuring business continuity.

• For instance, in October 2022, Microsoft and Meta teamed up to develop immersive experiences for both work and play. Announced at Meta Connect 2022, their collaboration integrated Mesh for Microsoft Teams with Meta Quest devices, facilitating virtual meetings across a range of devices, including laptops, smartphones, and mixed-reality headsets. This integration allowed users to connect and collaborate seamlessly using Meta Quest Pro and Meta Quest 2 devices, simulating an in-person experience.

These benefits make virtualization a critical component in modern IT strategies, leading to its widespread adoption across various industries.

The growing shift toward network virtualization is propelled by the global deployment of 5G technology, which requires advanced, flexible network infrastructures to support higher speeds and lower latency. As providers integrate 5G, the demand for network virtualization solutions increases, allowing for more efficient management and deployment of network resources.

This transition enables service providers to optimize their operations, reduce costs, and enhance service delivery. Additionally, broadband and fiber networks, which are crucial for supporting the expanded capabilities of 5G, create additional opportunities for virtualization, thereby stimulating market growth and fostering innovation.

Segmentation Analysis

The global market is segmented based on type, deployment, size, and geography.

By Type

Based on type, the market is categorized into server virtualization, storage virtualization, application virtualization, desktop virtualization, and network virtualization. The server virtualization segment led the virtualization software market in 2023, reaching a valuation of USD 41.26 billion. By allowing multiple virtual servers to operate on a single physical server, it enhances scalability, enabling organizations to efficiently manage and expand their IT infrastructure without extensive hardware investments.

This technology improves operational efficiency through better resource allocation and centralized management, while also supporting cloud computing by providing a flexible and scalable virtual environment. These advantages streamline IT operations, reduce overhead, and support business growth, thereby boosting the demand for server virtualization solutions.

By Deployment

Based on deployment, the market is categorized into on premise and cloud. The cloud segment captured the largest virtualization software market share of 87.44% in 2023. Businesses are increasingly transitioning their computing resources to cloud environments, allowing them to scale their IT infrastructure as needed while reducing the requirement for extensive on-premises hardware investments.

Cloud virtualization supports remote access and collaboration, thus enhancing productivity and enabling flexible work arrangements. It further provides robust disaster recovery and business continuity solutions, minimizing downtime and ensuring data protection. Additionally, its integration with advanced technologies, such as AI and machine learning, is continuously fostering innovation and adoption, thereby aiding segmental expansion.

By Size

Based on size, the market is categorized into small and medium sized enterprises, and large enterprises. The large enterprises segment is expected to garner the highest revenue of USD 139.39 billion by 2031. Large organizations are increasingly adopting virtualization to optimize extensive IT infrastructures, improve hardware efficiency, and reduce operational costs.

This segment benefits from centralized management, which streamlines operations and reduces administrative overhead. Moroever, virtualization provides crucial disaster recovery and security features to ensure business continuity and data protection. Additionally, the integration of virtualization with advanced technologies such as cloud computing and AI bolsters innovation, thereby aiding the growth of the segment.

Virtualization Software Market Regional Analysis

Based on region, the global market is classified into North America, Europe, Asia-Pacific, MEA, and Latin America.

North America virtualization software market share stood around 36.78% in 2023 in the global market, with a valuation of USD 33.15 billion. The presence of major technology hubs and leading IT service providers is contributing to this notable expansion. A significant focus on digital transformation initiatives and the integration of virtualization with emerging technologies such as edge computing and advanced data analytics are further supporting this growth.

Additionally, organizations in North America are increasingly prioritizing the optimization of data centers and enhancing operational efficiency, which is creating strong demand for virtualization software. These factors collectively position North America as a key region for virtualization software.

Asia-Pacific is anticipated to witness robust growth at a staggering CAGR of 11.69% over the forecast period. The expanding economy, rising IT infrastructure investments, and a surge in government and commercial projects focusing on IoT and artificial intelligence (AI) are key factors fueling this growth. Japan, in particular, is expected to witness substantial expansion due to its increasing use of modern technologies and digitization initiatives.

The growth of IT, telecommunications, and banking, financial services, and insurance (BFSI) sectors, along with the rising adoption of virtual desktop interfaces (VDI) and software virtualization solutions, further supports this upward trend in large-scale IT companies, thereby fueling regional market growth.

Competitive Landscape

The global virtualization software market report will provide valuable insight with an emphasis on the fragmented nature of the industry. Prominent players are focusing on several key business strategies such as partnerships, mergers and acquisitions, product innovations, and joint ventures to expand their product portfolio and increase their market shares across different regions.

Companies are implementing impactful strategic initiatives, such as expanding services, investing in research and development (R&D), establishing new service delivery centers, and optimizing their service delivery processes, which are likely to create new opportunities for market growth.

List of Key Companies in Virtualization Software Market

• Cloud Software Group, Inc.
• Oracle
• Microsoft Corporation
• Red Hat Inc. (IBM Corporation)
• Huawei Technologies Co. Ltd.
• Google LLC.
• NComupting Co. Ltd.
• Parallels International GmbH
• Datadog

Key Industry Developments

• May 2024 (Expansion): Hewlett Packard Enterprise announced the expansion of its HPE GreenLake for File Storage capabilities, specifically designed to support large-scale enterprise AI and data lake workloads. This latest update features 100% high-density all-flash options, positioning the company at the forefront of AI storage innovation.
• August 2022 (Partnership): NetApp and VMware strengthened their global partnership to support multicloud modernization. VMware Cloud Foundation with Tanzu allowed IT teams to manage virtual machines (VMs) and container orchestration from a single unified platform. This integration utilized NetApp ONTAP-based storage arrays, to facilitate the creation of a flexible data fabric for both traditional VMs and modern containerized applications.

The global virtualization software market is segmented as:

By Type

• Server Virtualization
• Storage Virtualization
• Application Virtualization
• Desktop Virtualization
• Network Virtualization

By Deployment

• On-Premise
• Cloud

By Size

• Small and Medium Sized Enterprises
• Large Enterprises

By Region

• North America
  • U.S.
  • Canada
  • Mexico
• Europe
  • France
  • U.K.
  • Spain
  • Germany
  • Italy
  • Russia
  • Rest of Europe
• Asia-Pacific
  • China
  • Japan
  • India
  • South Korea
  • Rest of Asia-Pacific
• Middle East & Africa
  • GCC
  • North Africa
  • South Africa
  • Rest of Middle East & Africa
• Latin America
  • Brazil
  • Argentina
  • Rest of Latin America