Microsoft has further upped the ante in its competition with VMware - the dominant virtualisation vendor for x86 servers - by making its Virtual PC product into a free download, and introducing more permissive licence conditions for Windows Vista.

Virtualisation, the ability to run multiple server instances at the same time on a single hardware system - is taking off, with a recent Forrester survey showing that 60 percent of large North American businesses plan to spend money on the technology over the next year.

The technology has been popularised for x86 servers since 1998 by VMware, which also offers the most mature virtualisation management tools, according to industry analysts.

Microsoft is intent on changing the game, however. Its Virtual Server and Virtual PC, based on technology acquired with Microsoft's purchase of Connectix, don't have the track record or mature tools of VMware and its partners, according to analysts.

But Microsoft believes it can pull off a similar trick with Virtual Server and Virtual PC as it accomplished with Internet Explorer by making them easily available, and ultimately integrating them into the OS.

"We don’t try and be the solution for absolutely everyone," Alfred Biehler, Microsoft UK's product manager for management and virtualisation technologies, told Techworld. "But for the majority of the market, we believe we’ve got a good solution, especially for the cost-sensitive market."

In April Microsoft made Virtual Server 2005 R2, the latest version, free to download; as of Wednesday Virtual PC is also freely downloadable. Microsoft has said it will integrate the technology into Longhorn Server, due next year, within about three months of the product's launch.

Also on Wednesday, Microsoft unveiled some virtualisation-related bonuses for customers who sign up for the company's unpopular Software Assurance volume licensing programme.

Software Assurance customers pay Microsoft a subscription fee to receive any software upgrades released during a set period, but aren't guaranteed that any upgrades will be released - and delays have often mean that the upgrades haven't been released when customers expect.

Microsoft has been adding more features to the programme to convince customers to sign up; it has also announced that the Enterprise version of Windows Vista will only be available under Software Assurance. In February, Microsoft listed the inclusion of Virtual PC as one of the benefits of buying Vista Enterprise, though Wednesday's news effectively removes that benefit.

Vista Enterprise users will, however, be allowed to install up to four copies of the OS in virtual machines for a single user on a single device, Microsoft said on Wednesday. The licence permits competitors' technologies to be used to create the virtual machines. Previously, users would have needed to buy a licence for each copy of Vista running in a virtual machine.

Also on Wednesday, Microsoft announced it's working on Virtual PC 2007, the successor to VPC 2004. The product will support Vista both as host and guest OS, will support 64-bit Windows hosts (but not guests), and will boost performance over VPC 2004.