Virtualized hosted server offerings are effective if there is a clear, pay-per-use pricing model, according to Graham Penn, IDC's senior storage analyst.
Penn said this type of pricing model is a clear differentiator that sets it apart from current offerings.
Many of the offerings currently available, Penn said, charge customers regardless of resource utlization.
"Rates should only increase when resources are needed like during spikes, not when servers aren't being used," he said.
His warning on pricing was in response to criticism from Macquarie Telecom canning a new virtual dedicated server offering by data hosting company Vigabyte.
The virtual dedicated server is touted as having the functionality of a dedicated hosted storage service for 25 percent less cost, while maintaining the same stability of resource allocation and security.
It allows users to prioritize and allocate resources in real-time using any virtualization software, maintaining a high-end server cluster, fibre channel SAN storage and an extensive hardware pool which gives scalability to the virtual machines on top.
Vigabyte founder and managing director, Anoosh Manzoori, said while the service has been offered before through VMware, the virtual dedicated service improves on speed, useability and cost.
"Getting a dedicated server from any leading hosting provider means waiting about one to two weeks to get the server because the provider doesn't carry stock, facing possible scalability limitations in the motherboard, and experiencing downtime if parts need to be installed," Manzoori said.
"Customers share CPU and RAM in a shared environment meaning resource spikes affect everyone on that machine; however, virtualisation in our solution allocates proportions of server resources, storage and even network cards to users so everyone has a dedicated server.
"The differential is that it comes down to how quickly resources can be allocated, how much expertise is required to do it and the cost, and the virtual dedicated server is better on all counts."
However, Macquarie Telecom's Denis Rowe said the solution is a simple hosted shared service masquerading as new technology.
"Shared hosting is virtualization on a dedicated server; there is simply nothing new about this," Rowe said.
"They're merely using VMware on Sun servers attached to a SAN in order to offer what is essentially cheap shared hosting.
"The real-time scalability is already available using VMware so there isn't a significant differential and enterprises don't go for shared solutions."
Vigabyte's pricing packages allows customers to purchase 256Mb of RAM at $49 per month, or 1Gb at $99, with a standard 40Gb fibre-channel storage built into all server packages.
IDC's Penn said the real-time offering is flawed only in that users have to scale their own servers.
"Resource provisioning should be automatic with users paying a pre-paid," Penn said.