Microsoft Thursday said its forthcoming Windows Server Virtualization technology would ship without a key performance feature designed to help it compete with rival VMware.

In addition, Microsoft said the first public beta of Windows Server Virtualization (WSV), code-named Viridian, will ship when Longhorn Server is released to manufacturing (RTM) in the second half of 2007. The RTM designation means development is complete and all that remains is to create media for distribution of the bits.

The bigger news, however, is that to meet the WSV timeline Microsoft is eliminating three features, including Live Migration, which lets users move virtual machines between individual WSV instances without any down time.

“An important point is that we are postponing these features until a future release,” says Patrick O'Rourke, senior product manger in the Windows Server division at Microsoft.

The other two cut features are the ability to hot-add resources, such as storage and memory, and a reduction to the limit of the number of processers supported from 64 to 16.

The Live Migration feature, however, stands out because it provides performance guarantees for dynamic workloads and helps balance loads to minimize the number of active servers.

Critics of Microsoft’s current Virtual Server software often cite its lack of live migration capabilities as one reason it is not ready to support performance sensitive or critical applications.

“Cutting Live Migration is a big deal,” says Peter Pawlak, an analyst with independent research firm Directions on Microsoft. “This is something they have been saying they would be able to do and it was a big feature in order to have parity with VMware and now they are saying they cannot do that. It is one thing they really need to be able to do.”