Virtual Iron and XenSource will both introduce new virtualisation software this week aimed at undercutting market leader VMware.

Virtual Iron has version 3.1 of its enterprise-class platform for $499 per socket - less than 20 percent of the $2,875 per socket price for a comparable VMware licence, according to Virtual Iron. Meanwhile, XenSource will also bring out new and upgraded virtualisation products, also at sub-$1,000 prices.

VMware faces rivals from Virtual Iron and XenSource

Virtual Iron argues that VMware's pricing is a barrier to more widespread adoption of virtualisation in data centres, citing IDC research that only six percent of data centre operators deploy any type of virtualisation.

Both XenSource and Virtual Iron build their proprietary products on top of the open-source Xen platform for virtualisation hypervisors. A hypervisor is technology that makes it possible for one computer to run multiple operating systems at the same time. VMware's products are not based on open source.

Revenue at VMware, a wholly owned subsidiary of storage vendor EMC, grew 86 percent in the third quarter to $188.5 million. Virtual Iron and XenSource intend to slow that pace. "We are taking a very aggressive stand on pricing," said Mike Grandinetti, chief marketing officer at Virtual Iron.

The Charlotte Observer newspaper in North Carolina uses Virtual Iron. It took 45 minutes to run a particular job on its legacy Unix-based servers, said Geoff Shorter, IT infrastructure manager. VMware completed the same job in 11 to 13 minutes, but so did the less expensive Virtual Iron.

The licence for the high-end VMware product costs $5,750 to run on a dual-socket server, Shorter said. Virtual Iron's license is $499 per socket, so the total cost for a dual-socket machine licence would be $998.

Pricing for XenSource's XenEnterprise starts at for $488 for an annual subscription licence for a dual-socket server or $750 for a perpetual licence. XenServer for Windows, introduced Monday, sells for $99 per dual-socket server, per year. It has fewer features than XenEnterprise. "Our intention is to dramatically shift the landscape under VMware," said Simon Crosby, XenSource's CTO.

Virtualisation is following a classic economic model of an early mover dominating a market and charging a premium, soon followed by challengers competing on price, said Gordon Haff, principal IT advisor at Illuminata. Haff said enterprises that have deployed VMware are seeing a positive return on their investment despite the price and he doesn't think price alone is keeping enterprises from adopting virtualisation.

"Even if virtualisation software were free, it wouldn't become ubiquitous because of the complexity of the implementation," he said.