While VMware pretty much created the virtual machine market on x86 servers and has enjoyed a nearly uncontested leadership position, enterprise customers this year will find a wider variety of options for virtualizing servers, operating systems and applications.

Vendors such as Microsoft and SWsoft and the open source virtualization project Xen are offering alternatives to VMware as interest in the technology grows. In addition, start-up companies, such as Qlusters and Akimbi Systems, are attacking other areas of virtualization with tools to create high-availability clusters or to enhance applications running on top of virtualized environments.

As x86 processors become increasingly powerful, customers are looking for ways to get more out of the low-cost, standards-based platforms they have, analysts say. Virtual machine technology, which creates isolated software containers that include an operating system and applications, is one way to do that.

Interest in virtual machine technology has been growing. IDC says the market reached more than $300 million in 2004 and is on pace to grow at a rate of about 18% over the next few years.

"It's been one of the faster growing technologies that we've encountered," says Galen Schreck, a senior analyst at Forrester Research. "It quickly went from 'You want me to do what?' to 'Hey, that sounds like a really good idea.' The people I speak with at this point are convinced of the technology and convinced of the solidity of the idea."

The growing interest is resulting in a surge in the number of companies rolling out virtualization technologies, says Dan Kusnetzky, a vice president at IDC.

"Expect to see some interesting twists on [virtual machine] technology," he says. "Right now, you could think of this technology as starting at the hardware and looking up - how you encapsulate the operating system and all the software above it. That's not the only way of thinking about it."

Akimbi is building an enterprise application that will leverage virtualization platforms. According to the company's Web site, it appears the product would include management tools that interface with VMware, Microsoft Virtual Server and Solaris partitions.

"We're solving a business problem and it just so happens that we can use virtualization technology as part of our toolkit," says James Phillips, Akimbi president and CEO. "We're really solving business problems by building applications that make clever use of virtualization technology because it's available and it's affordable and it works."

Enterprise users can expect a product from Akimbi, which recently got funding from Hummer Winblad Venture Partners, Partech International and Stanford University, by year-end, he says.

Meanwhile, Xensource, a company founded to provide support and maintenance for the open source Xen virtualization technology, also recently received funding when Sevin Rosen and Kleiner-Perkins added $6 million to the organization's coffers.

"Open source and virtualization marry two fairly powerful trends and Xen is a tour-de-force piece of technology," says Nick Sturiale, general partner for Sevin Rosen.

IBM, HP, Intel and Red Hat are among those working with Xen to improve the open source virtual machine technology.

Rolf Neugebauer, a researcher at Intel Research Cambridge, says the chipmaker has been involved in the Xen project for more than two years. One of the focuses of Intel's work with Xen is to enhance security around the Xen virtual machines, he says.

"Our aim is to support multi-level secure systems, and we plan to extend Xen in a similar way as" Security-Enhanced Linux," Neugebauer says. SELinux is a project backed by the National Security Agency that adds access controls to the Linux kernel.

Xen takes a similar approach to VMware, but analysts say it has a ways to go before it will be a serious contender when it comes to enterprise virtualization. One main hurdle is that Xen requires a modification to the Linux kernel. XenSource CEO Nick Gault says his organization is talking with Red Hat and Novell, which have shown interest in incorporating Xen virtualization into their distributions. However, analysts suspect it will be many months before the commercial distributions include the Xen technology.

"Of course, companies want to keep their eye on technologies that are on the horizon, but realistically open source virtual machines are not something that the average enterprise should be spending a whole lot of time on in 2005," says Gordon Haff, an analyst at Illuminata. "Strictly speaking in the x86 space for the highest end, most efficient, native virtualization, VMware ESX server continues to be the only game in town."