At its annual VMworld conference in San Francisco this week, VMware executives maintained that Microsoft’s “good enough” approach with virtualization flies in the face of evolving customer needs. VMware claims that it retains a significant technology lead over Microsoft.

“In the virtualization space, [Microsoft’s] strategy for the last seven years has been to say, ‘our product is good enough’,” outgoing VMware CEO and former Microsoft executive Paul Maritz said. “This is the third or fourth product release that they say is good enough. The reality is that people’s expectations of what is needed are rapidly changing.”

Although virtualization has been around for a long time, it’s become big business in recent years with the move to cloud-based infrastructures. And as these usage scenarios evolve, Maritz claims that VMware’s lengthy industry experience continues to outpace and outclass what Microsoft has accomplished with Hyper-V and its other virtualization solutions.

In more concrete terms, the latest rendition of VMware’s “more comprehensive and reliable” virtualization toolset includes vCloud Suite 5.1, which combines updated versions of various VMware solutions into more easily and inexpensively digested packages. The base version of vCloud Suite includes vSphere Enterprise Plus, vCloud Director, vCloud Connector, and vCloud Networking and Security, while higher-end versions provide further functionality. Together, these solutions enable what VMware calls “the virtual data center.”

But the big change, really, is the licensing: With this generation of solutions, VMware is doing away with its so-called VRAM-based pricing model, which Microsoft derisively called “the VMware tax” since it was overly complex and expensive. VMware admits this was “the wrong model” and is returning to per-CPU pricing. Pricing of vCloud Suite 5.1 ranges from $5,000 per CPU for the Standard SKU, to $7,500 per CPU for Advanced, to $11,495 for Enteprise.

Meanwhile, Microsoft is set to release the third major version of Hyper-V alongside Windows Server 2012 early next month. But despite an industry understanding that Microsoft often gets a product “right” on the third version, the software giant refuses to call this solution Hyper-V 3.0. Instead, it will simply be called Windows Server 2012 Hyper-V.

Whereas previous Hyper-V versions were essentially playing catch-up with VMware, this new version includes at least one new feature—cross-host live migration of VMs—that VMware lacked. So, for the first time, the market leader found itself playing catch-up to a Microsoft product. Server 2012 Hyper-V can also scale beyond VMware’s products in certain categories, such as supported virtual CPUs and virtual RAM.

More problematic for VMware, Microsoft essentially gives away Hyper-V for free. That said, Microsoft—like VMware—charges for the management and automation layers that sit on top of its virtualization stack. “You cannot compete against Microsoft on price,” VMware Chief Marketing Oficer Rick Jackson admitted during a VMworld press conference. “They are the world’s most profitable for-free company ever. You compete against Microsoft on value.”

Various members of the Windows IT Pro family are in San Francisco this week, covering VMworld from the show. Be sure to check in with the Windows IT Pro website for more information throughout the week.