A number of outsourcing providers are still charging customers per physical server in a virtualized environment squeezing customers for additional revenue.
"My outsourcer is charging me the same for a virtual server as a physical server," one customer said.
"Because virtualized servers can be deployed in 10 minutes instead of 10 days it leads to what I call 'virtual rabbits' - servers spring up everywhere so they have to be carefully managed."
According to IT managers, who requested anonymity, some outsourcers are charging per server, regardless of whether it is physical or virtual.
Recognizing that new pricing models are necessary as customers increasingly adopt virtualization technology, the larger outsourcing providers have adjusted their contracts.
VMWare A/NZ managing director Paul Harapin said IBM, EDS and CSC have introduced new virtual pricing models to address the problem.
"However, there are other providers still charging per server but the competitive landscape will knock that on the head," he said.
Interest in virtualization is at an all time high in Australia with IT departments undertaking pilots and introducing plans to increase use of the technology in 2007.
Harapin has been "blown away" by the level of interest with the vendor forced to turn away registrations for a user conference being held this week.
The virtualization forums, which are being held in Sydney and Melbourne, have attracted more than 1,400 attendees.
It is the first time VMWare has ever held customer forums in Australia and Harapin said the company had to close registrations because demand was too high.
The Virtualisation Forum will be held in Sydney on November 30 at the Sydney Convention centre and in Melbourne on December 1 at the Langham Hotel.
The event will showcase the latest virtualisation solutions and will feature presentations as well as a number of showcase exhibits from VMware's solution and technology partners.
Forum theme is 'beyond boundaries' which represents the platform's ability to remove the limits traditionally associated with IT datacentre infrastructure.
"In Australia we have moved beyond server consolidation to providing companies with virtual tools that enable them to treat their IT assets as a dynamic resource." Harapin said.
VMworld, which was held in the US in September, attracted more than 7000 attendees.