XenSource will launch its first product, XenEnterprise, next week, competing head-to-head with industry leader VMWare.

"XenEnterprise is ready to go. We believe there is a lot of demand for this stuff," said the company's CEO Peter Levine. Levine described it as a soft launch, with a more formal launch to follow later this year. XenSource has set up a sales channel and distributors around Europe and North America, he said.

XenEnterprise is an open-source virtualisation product that helps companies manage a disparate computer network and so reduce costs while given greater control. It allows multiple applications to run on one server but operate independently. Although virtualisation has been the buzzword for over a year, only six percent of enterprises have actually deployed any on their networks. That makes the other 94 percent a wide-open market, said Levine.

XenSource’s open source solution competes against proprietary systems including the leader VMWare, a unit of EMC. Although VMWare last month accused XenSource of undermining its own open source credentials through the terms of a new agreement it signed with Microsoft.

Levine acknowledged VMWare’s role in establishing virtualisation: "VMWare has done a great job of educating the market. As a startup we don’t have to go out and say virtualisation is important because of this or that. VMWare has done that."

XenEnterprise is supported in the new release of Novell’s Suse Enterprise Linux distribution, while Microsoft pledged to support Xen-virtualized Linux with its forthcoming Longhorn server virtualization technology. IBM meanwhile, announced that its low-end servers and middleware will support Xen.

Although the concept of virtualization has been around for years in mainframes, it is now catching on in client-server environments, Levine said, and is changing the industry. "Virtualization is having an amazing global impact. It hasn’t solved hunger, but it is having a significant impact," Levine said.