Speaking exclusively to CIO at its European CIO summit, Barbara Gordon EMEA VP for enterprise sales said that Microsoft sees price as a differentiator in the virtualization market.

"What I hear is that users need to take out cost from their environments and virtualization is the credible approach. You have to ask if virtualization today is delivering cost effective value? And that it justifies the costs that are being charged?" She added, "Price is a differentiator. Existing players are quite expensive. Microsoft can add value to this market with a server play and an application play."

Asked if the Microsoft Hyper V would have different versions that would offer different levels of functionality similar to those offered by VMware Gordon would not be drawn. "The time of individual point products is lessening. Our approach will be take a look at the environment, and make sure that the right virtualization functionality fits that environment. The fact is that it is the technologies that work well together and have good functionality that will let the user spend time adding value. So we've got a very broad offering."

The Microsoft Hyper V hyper visor was Beta released in December 2007. The full launch is expected later this year. The firm faced criticism that Hyper V wasn't available as part of the Windows Server 2008 launch in February. Expectations are that it will launch within six months. A major impact of Hyper V is expected to be on licensing and support. It will launch within as a standalone product and as a Windows Server 2008 with Hyper V editions.

Analyst firm Gartner said: "VMware has been operating in a virtualization market essentially without competition for six years. We expect Microsoft to gain tremendous market share in the midmarket (because VMware already has a strong market lead in large enterprises). Competition is good, and Microsoft's entry will force VMware's pricing to adjust to remain competitive."

Martin Niemer, Senior product marketing manager at VMware told CIO: "We're not seeing any signs that customers don't understand all of the issues associated to moving to virtualization. They understand that what it comes down to is that even the hyper visor is zero cost, which Hyper V won't be, the question is how many virtual machines can you run on a server. If you can't run that many you still have to run it on two servers and that doubles your cost. That's really going to be the decision point. It depends on what users want. If you want basic partitioning you can buy a server with a Vmware ESX 3i integrated hyper visor or buy a foundation version of ESX. And if you want additional functionality such as high availability you can buy a slightly more expensive licence." Niemer said he didn't foresee Vmware being forced to adjust it's pricing when Hyper V came to market.