HPE: Only 5 Percent of Enterprises Are Ready for the Great Virtualization Reset

The enterprise virtualization market is entering a decisive moment. Years of incremental change have collided with rapid AI adoption, rising operational complexity, and unpredictable cloud economics. New research from Hewlett Packard Enterprise reveals that while most organizations know their virtualization strategy must evolve, very few are actually prepared to execute.

According to the survey of nearly 400 global enterprises, more than two thirds plan to make material changes to their virtualization strategy within the next two years. Yet only 5 percent say they are fully ready for what HPE calls the Great Virtualization Reset. The gap between intent and readiness highlights how deeply virtualization has become entangled with broader questions about operating models, skills, and AI infrastructure.

A reset driven by complexity, not just cost

Licensing changes and price increases may have triggered renewed scrutiny of virtualization platforms, but the data shows they are not the core issue. Fewer than one in ten enterprises, just 4 percent, cite licensing costs as the single biggest catalyst for change. Instead, leaders are confronting a more fundamental challenge: whether their current infrastructure can support hybrid operations and AI workloads at scale.

Budget constraints remain the top barrier slowing progress, cited by 28 percent of respondents. Technical complexity follows closely at 24 percent, with migration risk at 21 percent and skills gaps at 20 percent. Together, these pressures suggest that virtualization has outgrown its role as a background infrastructure choice and has become a strategic concern tied directly to business agility.

Hybrid cloud becomes the default path

Rather than rushing into wholesale replacements, enterprises are moving cautiously. More than half, 57 percent, say they are taking a phased approach to modernizing virtualization. Hybrid cloud has emerged as the preferred destination, reflecting a need to balance performance, control, and flexibility as AI workloads expand.

Today’s enterprise environments are already fragmented. The survey finds that 78 percent of workloads are provisioned in the public cloud, 61 percent in virtualized clusters, 48 percent in private cloud environments, and 32 percent at the edge. That sprawl is forcing organizations to rethink how virtualization fits into an operating model that spans data centers, hyperscalers, and increasingly intelligent edge systems.

AI readiness reshapes virtualization priorities

AI has become the lens through which virtualization decisions are now evaluated. More than a quarter of IT decision makers rank AI readiness as their top priority when planning future infrastructure. That focus is shifting attention away from the hypervisor itself and toward the operational capabilities that sit above it.

Enterprises say the most critical features for next generation virtualized environments include unified backup and cyber recovery, rated very important or business critical by 70 percent of respondents. Cross platform governance follows at 61 percent, while integrated observability and AIOps ranks close behind at 55 percent. These capabilities reflect a need to manage complexity automatically as AI driven workloads scale and change rapidly.

“We’re seeing enterprise leaders reassess longstanding IT assumptions to balance cost predictability, AI readiness and performance. This isn’t just a rush to rip and replace, but a deliberate shift toward a more flexible and simplified operating model,” said Brian Gruttadauria, CTO of Hybrid Cloud at HPE. “What the data makes clear is that AI readiness now depends on how well virtualization evolves. Our role is to help customers modernize in ways that close the gap between AI ambition and operational reality.”

Customers frame virtualization as a foundation, not a swap

Enterprise customers echo the idea that the reset is about future proofing, not vendor churn. “From the outset, we saw a change in virtualization strategy as a chance to future-proof our operations both for simplified cloud operations and the AI era,” said Sune T. Baastrup, CIO at Danfoss. He pointed to the role of HPE Private Cloud Enterprise and HPE

Morpheus Software in enabling consistent operations from data centers to factory floors.

Service providers see similar pressures from their customers. “Control and predictability in virtualization now matter more than ever,” said Scott Steele, COO at Thrive. He emphasized that enterprises are looking for architectures that can absorb change, while maintaining visibility, cost control, and operational confidence as hybrid environments expand.

Beyond the hypervisor

The Great Virtualization Reset, as described in HPE’s research, is less about switching platforms and more about redefining how infrastructure is run. Rising VM costs may have exposed weaknesses, but the underlying issue is an operating model that has not kept pace with hybrid complexity and AI driven demand.

For enterprises, readiness now means having the governance, automation, and resilience to decide where workloads live and how reliably they can be operated. For many, that realization has arrived faster than their ability to act.

As the survey makes clear, the reset is already underway. The challenge is no longer recognizing the need for change, but closing the widening gap between ambition and execution before AI workloads make today’s virtualization assumptions obsolete.