Microsoft last week fleshed out more of its virtualization story, outlining everything from management to migration but leaving out some licensing details it may have to revisit.

The company said development of its System Center Virtual Machine Manager (VMM) is complete and that the software would ship by the end of the year. VMM, which integrates with System Center Configuration Manager for provisioning and Operations Manager for monitoring, is perhaps the strongest virtualization product Microsoft has in its growing arsenal. VMM helps users configure and deploy virtual machines.

The company also said the stand-alone version of Hyper-V – called Hyper-V Server 2008 – would be free when it ships in 30 days. Previously, Microsoft set the price at $28. 

Read our performance test of Hyper-V.

The move was seen as a reaction to VMware’s announcement July 22 that its ESXi server is now a free download. Still, while the versions are free, experts are pointing out that neither includes high-availability features, which doesn’t make them likely candidates for production deployments.

In addition, one other important feature Microsoft needs to compete with VMware could take more than a year to show up. Live Migration, which lets users move virtual machines between servers without any downtime, likely won’t ship for more than a year, Microsoft said.

The features will come in Windows Server 2008 R2. If Microsoft follows its release cycle established in May 2004 that calls for a major operating system upgrade every four years with a lesser “R2” release in between, then Live Migration won’t come until 2010 at the earliest.

Experts say from a competitive standpoint Microsoft cannot wait that long since it is in catch-up mode to VMware and Xen-based hypervisors. Critics of Hyper-V’s predecessor, Virtual Server, often cite its lack of live migration capabilities as one reason it was not ready to support performance sensitive or critical applications

In addition, observers are encouraging Microsoft to again review its virtualization licensing. The company recently lifted a 90-day license transfer restriction on server applications licensed under a volume license agreement, such as Exchange and SQL Server. But the move left out in the cold small and midsize companies that don’t have those agreements.