XenSource Enterprise, which already is compatible with the Server 2003 and XP operating systems, can now be more widely deployed in a Windows data center in the new version 3.2, said John Bara, vice president of marketing for XenSource.

"This gives IT managers the ability to preserve and migrate legacy applications from the Windows 2000 era forward," said Bara. "It lets them collapse multiple apps and servers down onto fewer [physical] servers."

XenSource is the commercial entity that sells virtualization software based on the open-source Xen software code. XenSource founder Ian Pratt is also leader of the Xen project, the nonprofit group that shares development of Xen with other technology companies, including Red Hat, Novell, Intel, Dell and Sun Microsystems.

Other upgrades in version 3.2 include support for symmetric multilayer processing, or SMP, Bara said. SMP makes it possible to run a software application across multiple processors or machines simultaneously. Some IT managers have been reluctant to use XenSource to run large programs such as Microsoft Exchange e-mail and SQL databases without SMP.

Also, XenSource now runs on servers in an Internet small computer systems interface (iSCSI) environment, referring to the network connection protocol between servers and storage. Small to midsize businesses and departmental managers in large enterprises are increasingly turning to iSCSI as a more cost-effective alternative to Fibre Channel connections.

XenSource is among those challenging VMWare, the market leader in virtualization hypervisors for servers. VMware's revenue rose by 83 percent in 2006 to US$709 million.

VMware was chosen by 58 percent of U.S. IT managers surveyed as the brand they are most likely to consider as they implement virtualization in their data centers, according to a report from Forrester Research released in early February. Aside from Hewlett-Packard, which was chosen as a preferred vendor by 11 percent, all the other competitors to VMware scored in the single digits.

Virtualization makes it possible for multiple software applications and operating systems to run on the same physical server. It makes for more efficient use of servers because without virtualization, much of a server's capacity is often unused.

Another rival to XenSource, Virtual Iron Software, introduced an upgrade of its hypervisors in March. The upgrade also adds support for iSCSI and for one server installation. With one server installation, the same server that runs the virtualization management program for the enterprise can also act as a virtual server.