SAN FRANCISCO, USA: VMware Inc , the world's top maker of virtualization software, on Tuesday announced the first major upgrade to its main product line in three years, a "cloud operating system" enabling the delivery of IT infrastructure internally as a service.

The company said its vSphere 4 offering is a new category of software that will bring the benefits of cloud computing to internal IT and the internal data center.

"Cloud computing" refers to services offered over the Web from remote data centers. Still a relatively new technology, many IT companies are pinning their hopes on its future success.

Bogomil Balkansky, vice president of product marketing in VMWare's server unit, said vSphere allows customers large and small to simplify internal IT and use only what they need, thereby saving money. It collects and manages processors, storage and networking as a flexible operation, he said.

"As a user you can make up your mind on what you need and what you're prepared to pay for ... the big difference being you don't have to worry about the capital expenditure of putting storage and network together because that's already been done."

VSphere will be available in the second quarter in six editions, starting at $995 for three physical servers for small offices.

The product is the fourth major release of VMware's virtualization software since the company was born 11 years ago. VMware is a subsidiary of EMC Corp (EMC.N).

"From a strategic standpoint, we're seeing VMware put its money where its mouth is as far as cloud computing goes," said Pund-IT analyst Charles King.

"It's the first iteration of VMware's virtualization as an enabler for cloud infrastructure. It scales higher, runs faster, offers more automated management technologies."

Virtualization software helps the efficiency of computer hardware by allowing one server to perform the work of multiple machines. The software makes it easier for companies to manage machines in complex data centers.

Shares of Palo Alto, California-based VMware closed down 92 cents at $29.78 Monday on the New York Stock Exchange.