Microsoft is set to launch R2, its long-awaited interim update to Windows Server.

The update, which will be available to customers in about 60 days, should be 100 percent compatible with applications running on the current release of Windows Server 2003, said Bob Muglia, senior vice president for server and tools at Microsoft. "If you have deployed Windows 2003 today you can feel confident deploying this without a long test cycle," he said.

Microsoft released the first preview of Windows Server 2003 R2 in August and another preview in October.

Virtualisation is a key focus of the update, which is designed to work closely with Virtual Server 2005, Microsoft Operations Manager (MOM) and Systems Management Server (SMS) as part of Microsoft's Dynamic Systems initiative, Muglia said.

Microsoft recently simplified its virtualisation licensing for Windows Server System, of which Windows Server, MOM and SMS are a part. The company no longer requires a customer to pay for inactive or stored virtual images of Windows Server System on a network. Instead, Microsoft now only charges for the virtual images of Windows Server System products actually running on a customer network.

Microsoft also enables customers to have four virtual machines running on top of Windows Server 2003 R2 Enterprise Edition and Windows Server "Longhorn" Datacenter Edition at no extra cost.

As part of its continued focus "to take a leadership role in virtualisation," Muglia said Microsoft is offering a special promotion for Windows Server 2003 R2. Customers who purchase the enterprise edition of the update with get Virtual Server 2005 R2 Enterprise Edition for US$99 until June 30, 2006, he said.

Virtual Server 2005 R2 is expected to be available at the same time as Windows Server 2003 R2, said Jeff Price, a senior director in the Windows Server division at Microsoft.

Windows Server 2003 R2 comes in several differently priced versions. Prices for the update will be in line with current Windows Server prices, Price said. Windows Server licences range from $399 for a Web edition, to $3,999 for the enterprise edition, according to Microsoft.

Microsoft has also updated customers on plans to release Small Business Server (SBS) 2003 R2 in the beginning of 2006. That update to Microsoft's Windows server targeted at small-business customers is on schedule to be available either toward the end of the first calendar quarter or beginning of the second calendar quarter of next year, Price said.

SBS 2003 R2 will include technology from the most recent release of SQL Server 2005, which was launched last month, he added.

The new Windows Server release also includes a key identity management technology for the company, Active Directory Federation Services (ADFS), which introduces the idea of federated network identity into the OS, Muglia said. This enables companies to securely provide distributed identification, authentication and authorisation for users across organizational and platform boundaries.

In addition, Windows Server 2003 R2 also promises new branch-management capabilities; better Unix interoperability through the inclusion of the Unix subsystem within Windows; and a new version of the .Net framework, .Net 2.0, Muglia said