VMware made a long-anticipated move 22 July when it announced that its ESXi hypervisor would be free. That doesn't mean VMware customers can avoid pricey fees for support and management tools, though.

In this FAQ we answer some key questions about VMware's newly free hypervisor.

What spurred VMware to give its hypervisor away?

Microsoft began shipping its virtualisation software, Hyper-V, in June, for free. (That is, it's free if you've already paid for a Windows Server 2008 license).

The EMC-owned VMware made its own move just two weeks after replacing founder and CEO Diane Greene with Paul Maritz, a former Microsoft executive. Greene had long denied that VMware would be forced to lower its prices.

"If the hypervisor is already commoditised and most of your competitors have a free version, then Paul Maritz did the right thing," says Laura DiDio, a Yankee Group analyst. "You saw how fast he moved. Diane Greene wasn't out of there two weeks."

VMware denies that competition from Microsoft had anything to do with the decision to make ESXi free.

"We're focusing our efforts on the 20-plus products we sell on top of the hypervisor. This is a continuation for us of a long-term strategy," says VMware product marketing manager John Gilmartin.

Gilmartin points to February 2006, when VMware made a similar move, offering its first free hypervisor.

VMware already offers a free hypervisor?

Yes, the VMware Server , which is basically a beginner's kit for VMware's virtualisation technology, has been available at no charge for more than two years.

So what's new?

VMware is now giving away ESXi, the "bare-metal" hypervisor that installs directly onto the server hardware. The VMware Server, on the other hand, is installed as an application on top of the operating system. ESXi previously cost US$495.

Is the VMware Server now obsolete?

Not quite, but there are now fewer reasons to use it. Some hardware devices might work with VMware Server but not ESXi, Gilmartin says. New servers have support for virtualisation built into the chip, but some older platforms may not work with ESXi. VMware Server, since it's not running directly on the server hardware, will be compatible with a greater range of systems. So calling VMware Server obsolete may be too strong a statement, but "in terms of the pure hypervisor, clearly ESXi is more appealing," Forrester analyst Frank Gillett says.

Who should use the free version of ESXi?

The free ESXi is good in limited-use cases, such as consolidating two physical servers into one, Gillett says. You might also use the free hypervisor on an aging server that you plan to upgrade, just to make it easier to move the workload from one box to another when you do replace that server.

But if you're in a large enterprise with dozens or hundreds of virtual servers, and want the flexibility to quickly move workloads in response to changing needs, the free ESXi just isn't going to cut it. ESXi is perfect for a single server, Gilmartin says, but not when you are using multiple virtualised servers that need to be managed simultaneously with features like live migration of workloads, patch management, centralised backup and guarantees of high availability. The management tools cost money - even Microsoft charges extra for hypervisor management tools. But those management tools are what make virtualisation worthwhile in a complicated IT environment.

"Hypervisors by themselves aren't very interesting, bottom line," Gillett says.

Did VMware change the price of any other products?

No. The hypervisor license is free, but only if you don't get any extra management tools. The VMware Infrastructure Foundation, designed for small businesses and branch offices , has a list price of $995. For the price of $2,995 you can get VMware Infrastructure Standard, a "high-availability infrastructure virtualisation suite for any workload."

And for $5,750, the most demanding customers can choose the top-of-the-line VMware Infrastructure Enterprise. All three of these versions contain the basic hypervisor and management tools that aren't available with the free edition. Only VMware Infrastructure Enterprise has VMotion, which moves virtual machines from one server to another with zero downtime, a key feature that differentiates VMware's technology from Microsoft's.

While list prices haven't changed, the actual prices enterprises pay vary depending on the size of deployment and private negotiations between the customer and VMware. The fact that ESXi is now free could make it easier for individual customers to argue that the premium products - which contain the hypervisor, after all - should cost less.

If an enterprise can't get a more favourable licensing deal even now that VMware has made the hypervisor free, "I would postulate that they don't have good negotiators in their organisation," DiDio says.

Forrester analyst James Staten doesn't see much of a benefit to enterprises, though. He notes that "support is not included with the free ESXi; if you want that, it starts at $495 per server per year."

"This doesn't really address the typical enterprise's cost of VMware deployment - just the marketing threat of the low Hyper-V starting price," Staten writes in a blog post.

Now that VMware and Microsoft both offer the hypervisor free, is there any reason to use Microsoft virtualisation?

Sure. If you're a big Microsoft shop, enjoy getting support from a single source and don't need VMware's extra features, Hyper-V can be a good fit. "If Virtual Machine Manager [Microsoft's management suite] and Hyper-V together meet your needs, and the price is lower, why not?" Gillett says.

"It's a matter of personal preference," DiDio says. "If you have a lot of VMware installed and you love VMware, wow, the choice just got easier. On the other hand, yeah, there are reasons to go with Hyper-V. A lot of it comes down to licensing."

The question of whether it's cheaper to go with VMware or Microsoft isn't always cut-and-dry. The Microsoft Virtual Machine Manager list price is $499 for five physical servers, which seems to give Microsoft the edge. But VMware argues that it can deliver more virtual servers without a performance hit than Hyper-V, resulting in a lower "cost per virtual machine." Each enterprise will have to perform its own cost-benefit analysis.

"It comes back to your needs," Gillett notes.

Will this move help VMware?

Time will tell, but analysts think it's the right decision. Gartner analyst Thomas Bittman had urged VMware to give the hypervisor away for free and focus on making money off management tools.

VMware's stock prices have dropped significantly this year. The CEO change and move on pricing could be seen as initial steps toward regaining the trust of investors.

"It looks like in the short term Paul Maritz is willing to sacrifice revenue . . . in order to go up the stack, because where they're really going to make their money is the [VMware Infrastructure] platform," DiDio says. "Paul Maritz has his eye on the prize. He's taking a very long-term strategic view of things, which is the right thing to do, and not just looking for short-term profits."