Now facing stiff competition from Citrix/XenSource and Microsoft, which recently launched its Hyper-V hypervisor, VMware abruptly dropped its $495 ESXi licensing fee in what could be the shape of things to come.
With Citrix touting the open-source Xen hypervisor and Microsoft charging just $28 for its Hyper-V Server, VMware's move highlights the increasingly aggressive nature of the virtualization market.
"This has been a long time coming -- they knew that there would come a time when they couldnt charge for the hypervisor," says Chris Wolf, senior analyst at the Burton Group. "VMware had to ask themselves, 'Do we want to lose out in enterprises where price is a factor?' "
The analyst nonetheless feels that this was hardly a "knee-jerk reaction" from the virtualization giant, explaining that the bulk of the companys revenues come from its myriad software bundles.