XenSource will today ramp up its challenge to VMware's ESX Server with an update to its XenEnterprise virtualisation software, just as its larger rival looks set to reap the financial benefits of a huge floatation.

XenEnterprise v4 is designed to provide firms with an alternative to ESX, offering scalability, a native 64bit hypervisor and 64bit guest support, and automated pooling of server and storage resources. Other additions include live migration of guest virtual machines to another host server, dynamic resource management and the XenCenter virtualisation management console.

XenSource argued that the release will also give customers an open architecture and an alternative to VMware for partners in areas such as management, backup and disaster recovery, as well as offering a lower price.

"Customers are worried about VMware creating the new Microsoft so they'll be stuck in [VMware's] box forever," said Simon Crosby, XenSource chief technology officer. "We want to be like [car manufacturer] Lexus and offer a high-end product at mid-market price."

Red Hat and Novell Suse already fold Xen code into their respective distributions, and XenSource recently signed an agreement with Symantec for the security and storage giant to build storage management, data protection and backup on Xen later this year. Also, XenSource is working closely with Microsoft on a project called Enlightened Longhorn to ensure that Windows Server 2008 is optimised for the code, despite Microsoft's plans to bring out its own hypervisor next year.

However, VMware's market lead could be helped as early as this week when the firm is due to float on the public markets with a valuation of about $10bn. VMware also has the backing of a huge parent in storage giant EMC.

Some watchers believe XenSource is beginning to offer an interesting alternative, however. "The feature set is getting closer to ESX," said James Staten of Forrester Research. "Where they are still catching up is in the maturity of its feature set, management suite and support infrastructure. None of these will impede its use by the sophisticated users they have the ear of. The non-early adopters will still wait for them to mature."

Jonathan Eunice of analyst firm Illuminate said XenSource is close to achieving "essential feature parity" with ESX, but warned that this might have an impact on cost. "Prices won't hit VMware levels but the gross feature differences will no longer demand such an enormous delta in pricing," he added.