Operating systems vendors who jump on the bandwagon have missed the point, according to VMware’s president, Diane Greene.

Vendors including Microsoft and Red Hat, who are integrating virtualisation functionality into their operating systems, are sacrificing the value proposition of a hypervisor independent of the operating system, she said at the Morgan Stanley Technology Conference in San Francisco, yesterday.

VMware, a subsidiary of storage vendor EMC, doubled revenue in EMC's latest quarterly report, as enterprises embrace the vendor’s virtualisation software to make more efficient use of the servers in their datacentres.

Rivals such as Red Hat and Microsoft have responded to VMware's dominance by integrating virtualisation into coming new operating systems. Red Hat is introducing Red Hat Enterprise Linux 5 next week and Microsoft's new Windows server OS is due later this year.

But Greene said she wonders how effective the competition's virtualisation features can be. "Traditionally, the operating system manages the hardware and manages the application. Once you virtualise with a hypervisor, that is now what is managing the hardware, not the OS," Greene said. "Now the operating system is just managing the application. So certainly Windows and Red Hat are moving to integrate virtualisation into their OS, but part of the value proposition seems to be lost when you do that."

Spokespeople for Red Hat did not respond to a request for comment, but a spokesman for Microsoft said its OS easily supports virtualisation.

"Resource management has always been part of operating systems. Today, vendors such as Sun, Novell and Red Hat incorporate virtualisation into their operating systems," wrote Patrick O'Rourke, a senior product manager for Windows Server, in a prepared statement. "We are making investments across Microsoft to offer our customers a complete set of virtualisation products from the desktop to the datacentre. All assets, both virtual and physical, [are] managed from a single platform."

VMware is a strong contributor to the earnings of parent company EMC, which also sells storage hardware and security software. Greene also is executive vice-president of EMC.

Revenue for VMware increased to $232 million (£120m) in the fourth quarter of 2006, 101 per cent more than a year prior. The growth comes from increased demand for VMware Infrastructure 3, a virtualisation software suite for servers and storage networks.

VMware's growth prompted EMC to recently announce plans to spin off 10 per cent of VMware in an initial public offering of stock. EMC executives said they anticipate releasing the prospectus later this month for the IPO, expected about midyear.

Greene noted the stock sale will benefit VMware employees as well as potential shareholders. "Our stock-based compensation will track our performance and that is the ideal model," she said.

Also at the Morgan Stanley conference, Greene acknowledged that virtualising servers, which helps them use more of their designed capacity, may suppress server sales growth. But she said many customers are upgrading servers as they introduce virtualisation into their operations. Those new servers are more high-end products, with greater processing power and should yield higher margins for server vendors.