Microsoft's first foray into server virtualisation will come next month with the release of Virtual Server, a key part of its broader management platform for Windows.

The frequently delayed technology allows multiple operating systems to run side-by-side on a single physical machine. The technology will ship on 1 October, according to Microsoft officials, and a 180-day evaluation copy will be available next week.

Virtual Server 2005 runs on Windows Server 2003 - the "host" operating system - and lets users create virtual machines that can run other OSes, called "guest" operating systems, including Windows NT and 2000, Linux, Unix, and OS/2.

While users have been anticipating the release of the technology for more than a year, one burning question has been about the support policy for software running inside the virtual machine. Microsoft said it is only offering support for Windows and that virtual machines within Virtual Server will be optimised for Windows storage and networking performance.

Microsoft is targeting the technology at corporations looking to host legacy applications and migrate operating systems, most notably NT, for which support concludes at the end of this year. Virtual Server 2005 also is targeted at companies looking to consolidate workloads within their infrastructure or in branch offices, such as directory services, DNS or DHCP. The technology also can be used to support development and testing environments.

"What we are seeing in terms of benefits is that customers are reducing their hardware costs by at least 50 percent and they are seeing big improvements from a productivity standpoint mostly around server provisioning time," says Eric Berg, group product manager for Windows at Microsoft. Berg said several big companies are already running Virtual Server 2005 in production environments.

Virtual Server 2005 also is a key element of Microsoft's Dynamic Systems Initiative, a multi-year project to create a self-managing Windows environment.

It is competing with market-leader VMWare with its GSX product, which supports Windows 2000 and 2003 or Linux as the host operating system, and Windows, Linux and Novell NetWare as guest OSes. VMWare also has a high performance virtual server called ESX, which runs on its own host operating system, a highly scalable architecture called Hypervisor.

"The analysts firms consistently say we are anywhere from 18 months to three years ahead of Microsoft," says Michael Mullany, vice president of marketing for VMWare. "There are a lot of features and a lot of work to be added to this virtualisation layer over time to take the technology where it can be and we are trying to push the envelope in terms of technology innovation."

Other people in the market include SW-Soft, which develops a product called Virtuozzo and will deliver a version for Windows this month, the Xen open source project and User-Mode Linux.

Virtual Server 2005 features Multi-threaded Virtual Machine Monitor to isolate virtual machines from each other, CPU and memory resource allocation, virtual networking, Active Directory integration, a Web-based management interface and a COM API, which includes 42 interfaces that let scripts control every aspect of Virtual Server 2005.

Later this year, Microsoft will join Virtual Server 2005 to its management infrastructure with a management pack for Microsoft Operations Manager (MOM) that will ship by the end of the year. Microsoft also will add features within Service Pack 1 for System Management Server (SMS), which is due to ship by the end of this month.

Microsoft said future versions of Virtual Server would bolster reliability with such features as host clustering support and virtual machine failover across physical servers. The company also plans to add 64-bit host server support, support for a multi-processor guest operating system, increase memory per virtual machine to 3.6 GB, and add support for new host hardware and operating systems.

Virtual Server 2005 ships in a Standard Edition that supports up to four processors and is priced at $499. An Enterprise Edition that supports up to 32 processors costs $999. Both versions will be licensed on a per-physical server basis and support an unlimited number of virtual machines.