The virtualization market is expected to heat up this year as Microsoft and the open source Xen project challenge VMware, which has been the only game in town when it comes to virtualizing x86 servers.

"Both have been talking up their plans and efforts for months, as well as their proposed superiority over competing solutions -- namely VMware. In 2007, customers will finally be able to tell for themselves," says Charles King, analyst at Pund-IT Research.

Don't expect Microsoft or Xen to leapfrog VMware right away. After all, VMware has been selling its products since 2001. In addition, it has evolved beyond a simple way to partition a server into multiple operating-system instances into a broad systems infrastructure tool that lets customers pool virtual resources and allocate them as business needs demand.

Customers can expect virtualization vendors to start heading in that direction as the focus moves beyond the hypervisor into the management realm. VMware, Microsoft, XenSource and Virtual Iron offer low-level virtualization capabilities for free. But IDC expects North American software revenue in the virtual machine market to continue to grow from US$324 million in 2005 to more than US$1 billion by 2010, as companies spend money on virtualization-management tools.

For example, Art Beane, IT enterprise architect at Aegis Mortgage in Houston, is moving VMware out of test and development and into production environments this year. He plans to use VMware to support business continuity and disaster recovery. "For 2007, we're going to be putting most of our effort into moving production [servers] to virtual [environments], and that will more than likely drive us to enhancing the management environment," he says.

As such companies as Aegis consider virtualizing their production servers, they will have a growing number of options from vendors that include Microsoft, XenSource, Virtual Iron, SWsoft and Parallels. But those vendors still are chasing the incumbent, VMware. Ed Baldwin, senior network engineer at a major oil and gas company, puts it this way: "We have looked at what Microsoft has to offer and feel that it does not meet high-availability production needs at this time. As for XenSource, we have found better performance and support from the VMware products at this time and see no reason to switch."

While the challengers to VMware have some catching up to do, they are making strides. In Xen's case, Novell ships its SUSE Linux Enterprise Server with Xen technology. Red Hat included Xen in Red Hat Enterprise Linux 5. Egenera chose Xen as the basis for its newest virtualization-management tools, and Sun says it will embed the Xen hypervisor in Solaris sometime this year. XenSource, the commercial front for Xen, partnered with Microsoft last year to make Linux run better in Windows Virtual Server environments. Finally, Virtual Iron uses Xen technology as the basis for its virtualization products.

"Xen won't have the maturity of VMware in 2007, but it might be a cheaper alternative, if that's a major consideration," says Gordon Haff, an analyst at Illuminata.

For its part, Microsoft has been slow in making its virtualization promises reality. The company offers a free version of Virtual Server but doesn't plan to ship its hypervisor, code-named Viridian, until after it ships Longhorn. That means Windows customers won't see Viridian until year-end or early 2008.