Microsoft last week released their Hyper-V virtualization server for Windows 2008, finally showing all their cards in the latest round of betting against dominant virtualization platform provider VMware.

Microsoft's virtualization products have long lagged behind competitors in flexibility and features, and in some cases performance, which may be the most important factor considering the purpose of the technology: to cram more running systems onto a single hardware platform than ever before.

The performance benchmarks on Hyper-V (cited here by ZDNet's Jason Perlow) are impressive. I/O blocking, a traditional pitfall for virtualized systems, has been reduced such that virtual servers are able to achieve nearly the performance of the base hardware. Further tuning has reportedly optimized Hyper-V for popular Microsoft enterprise products such as SQL and Exchange Server.

This combination of vendor supported virtualization and optimized performance, taken together with a dramatically simplified licensing structure, may open the market up for Microsoft with more conservative IT establishments taking the plunge into virtualization. The sweetener is the licensing, which effectively allows four for one pricing on Windows Server... if it's not free as in Linux, it's a lot closer than it was, and Microsoft shops are sure to take advantage of it.

The product still falls down on a number of important features for the production datacenter, however, including live instance migration and dynamic resource allocation. The support for non-Microsoft products is, as expected, generally weak. Nonetheless, this appears to be a strong product, and VMware will be pressed by the cost-dynamics of the Microsoft licensing model in ways which may not be pleasant in the long run.