The software maker has finished development work on Virtual Server 2005 and a representative said the final version should be generally available by Oct. 1. The company is pitching the program as a way for companies to reduce the number of servers they have to maintain, noting that companies typically use just a fraction of their servers' capacity.
In particular, Microsoft has long touted the software as an option for companies that have been holding off upgrading to newer server operating systems such as Windows Server 2003 because they still have programs that require an older operating system. With Virtual Server, those programs can run on the older operating system, while the rest of the server's workload runs on the newer system. Fast-food chain Jack in the Box has been an early customer using Virtual Server for such a purpose.
But the company now sees customers like that as the minority. "It's not as big as an opportunity as we initially scoped it to be," said Eric Berg, a group product manager in Microsoft's Windows and Enterprise Management division.
An area that has emerged as potentially bigger for Microsoft, Berg said, is test and development, where companies need to test multiple versions of software to settle on which software eventually makes into production.
Virtual Server 2005 has been a long time coming. Microsoft originally hoped to release the product last year, but delayed it to this year for further testing.
Connectix had been testing the software when the company--along with Virtual PC--to Microsoft in February 2003. Microsoft began its own reworked version in February of this year. The company in June.
The view from VMware
Microsoft enters a growing segment with competitors already firmly in place, most notably VMware, which is now a part of storage giant EMC. The VMware unit is expected to generate $175 million to $200 million in revenue this year, roughly twice as much as it had last year, said Michael Mullany, VMware's vice president of marketing.
One big advantage for Microsoft is its price, relative to VMware and others. Virtual Server comes in two flavors--a standard edition that supports up to four processors and sells for $499 per server and an enterprise edition that supports up to 32 processors and sells for $999.
"It's substantially cheaper to buy Virtual Server because it simply doesn't have the approach or strategy we have," Mullany said. "There's a whole base of enterprise-ready features that Virtual Server lacks."
Not that VMware doesn't take its large, new rival seriously.
"You've always got to be concerned when Microsoft comes into your market and you've got to pay attention," he said.
Analysts and competitors note that other products such as VMware have more high-end features today, including support for such things as a virtual dual-processor machine. And although one can run Linux using Virtual Server, it is clearly not a first-class citizen with Microsoft as it is on competing programs.
Microsoft is focusing its pitch on wooing new customers on the potential cost-savings of using virtualization technology. The company quotes Gartner analyst Tom Bittman as predicting that enterprises that use virtualization will save as much as 25 percent more on servers as those who don't.
While Microsoft is today creating Virtual Server as a separate product, analysts expect basic virtualization capabilities to soon be part of Windows and also be built into the chips that power servers.
"Over time, base-level virtualization is going to become part of the operating system, even part of the hardware," Illuminata analyst Gordon Haff said.
As a result, companies like VMware are shifting their efforts to software that can manage such systems. "Really where VMware's energy is focused," Haff said, is "the ability to manage and use those virtual machines rather than merely create them."
Mullany pointed to Citrix as a company that has managed to maintain a leading market position even though a basic version of terminal services now comes built into Windows.
"The companies that fall behind Microsoft are the companies that don't keep their innovation edge," Mullany said.
Intel has two related virtualization features planned that will give its Pentium, Xeon and Itanium chips some of the ability to host multiple operating systems. For desktop chips, it's called, and for servers, it's called .
Silvervale and Vanderpool will provide similar interface features, such as a mechanism that lets operating systems know about hardware interruptions such as incoming network data, said Abhi Talkwalkar, vice president of Intel's Enterprise Platforms Group. Intel expects the features will help companies like VMware. Those things will come with Longhorn, the next version of Windows, in 2006.
"VMware should be able to take full advantage of these interfaces. VMware will look to add value above and beyond what they're providing today," Talwalkar said in a meeting at the Intel Developer Forum on Wednesday.CNET News.com's Stephen Shankland contributed to this report.