"It's shaping up to be a very interesting battle," Wolf says.

In pursuit of VMotion VMware's ace up its sleeve is a piece of "live migration" technology, called VMotion, which basically allows users to move a virtual machine on the fly from one physical server to another without interrupting running applications. Live migration is the apex feature for high-availability systems. By contrast, with Hyper-V, such a move requires suspending the virtual machine for a few seconds or minutes and disrupting applications, says Kennedy.

Neither Kennedy nor Wolf thinks live migration is a critical feature for small and midsized businesses, and so Hyper-V can gobble up market share on the low end. VMware's Gilmartin, though, counters that 60 percent of VMware's more than 100,000 customers use VMotion in production applications. "A lot of midmarket companies are looking for cost-effective business-continuity and high-availability solutions," he says.

Microsoft's Hyper-V lacks other features, too, particularly in areas of stability and support. For instance, there's a serious risk that a faulty device driver will crash a Hyper-V server, says Kennedy. Hyper-V also supports Microsoft operating systems and Suse Linux as guests, but not much else. VMware's ESX Server, on the other hand, supports dozens of Linux distributions and Unix variants.

Patrick O'Rourke, a Microsoft group product manager, responded to these Hyper-V criticisms. He told InfoWorld that Microsoft will have live migration in the next version of Hyper-V. And discussions are already under way about how to support Red Hat Enterprise Linux on Windows Server 2008 Hyper-V.

A head start in technology likely won't save VMware from the Microsoft offensive, says Kennedy. "VMware has pushed their technology pretty far," he says, "but I don't see on the horizon the silver-bullet technology that VMware can achieve to put them light years ahead of Microsoft again."

VMware's best chance While Microsoft busily develops catch-up features for Hyper-V, the server virtualization market is moving toward management of a virtualized environment. Virtual servers can quickly become a nightmare to control, which is why IT shops need such tools. "The end game is in management of the virtual infrastructure," says Burton Group's Wolf. "Hypervisors will eventually become a free commodity."

To this end, Microsoft will offer its System Center Virtual Machine Manager 2008, which only recently entered public beta. Kennedy says the management tool shows promise but has limitations, such as its inability to manage live migrations. Wolf, though, was impressed with a Microsoft demo that showed an operations manager quickly provisioning a new virtual machine to handle a problem.