VMware is to roll out a new service aimed at service providers. The new offering, vCloud Express will enable an Amazon-like pay-as-you-go cloud service to be offered to service provider customers.

Using VMware's vSphere virtualisation software, the managed hosting providers will allow customers to configure virtual servers over the web and pay for the computing capacity they use on an hourly basis with a credit card,.

The first companies that have signed up to offer the services are Terremark, Melbourne IT, BlueLock, Hosting.com and Logica. Those companies' services are in beta today or will be shortly, VMware said.

VMware CEO Paul Maritz introduced vCloud Express in his keynote at the start of VMworld. The services are designed to let companies provision virtual server environments quickly and cheaply for test and development work, or to run applications that don't have stringent performance and security requirements.

"When you see the vCloud Express logo you know it means fast and cheap - or rather I should say, fast and cost-effective," Maritz said.

Amazon has a long lead in the market for such services. VMware and its partners hope to attract customers by supporting a wider choice of operating systems and, in some cases, lower starting prices. Terremark's pricing starts at less than US$0.04 per hour, for example, for a system with one virtual CPU and a half GB of memory. Amazon's pricing starts at $0.10 per CPU hour.

Terremark CEO Manny Medina said the most significant difference is that the services will be hosted on VMware's vSphere platform, allowing customers who use that software to move applications and workloads between their internal data centres and an external provider.

Other service providers are buying into the message. Verizon Business, AT&T and Savvis were also at VMworld to promote application hosting services based on vSphere, although they have not signed onto vCloud Express.

Verizon Business and AT&T said they are aiming at the higher end of the market, where customers require service level agreements for critical business applications, while Savvis said it will offer multiple tiers of service for different types of workloads.

The services build on the vCloud vision that VMworld announced a year ago, in which companies can move workloads between their own data centers and those of service providers as demand for computing capacity fluctuates. But it is not without competition.

On Monday, developers of the Xen hypervisor announced the Xen Cloud Platform, an effort to create interoperability among virtualization platforms, so that customers would be able to move workloads from external cloud services to internal data centers without having to worry about which hypervisor is being used.

VMware will also have to overcome concerns that enterprises have about security and performance. Those are the first two issues customers ask about when discussing cloud services, said Savvis CTO Bryan Doerr.

Savvis launched a pay-as-you-go computing service , based on vSphere, that it calls Project Spirit. Similar to Terremark's offering, customers will go to a web portal and be able to provision servers, storage and firewalls with a drag-and-drop interface. Savvis will offer three levels of service depending on the levels of security and performance customers want to pay for, Doerr said. It posted a video about the service on the Web and said a beta would launch later this year.

IDC analyst Jean Bozman said vendors are eyeing cloud services because they are a bright spot in an otherwise bleak IT spending environment. They are also important to VMware as it tries to maintain its technology lead against rivals Microsoft and Citrix Systems, she said.