VMWare's main competition for this has been Virtuozzo and Mircrosoft Virtual Server, both proprietary. Xen isn't quite there yet. IBM's DB2 teaser release is in response to both Microsoft's and Oracle's teaser versions of their latest software, all are efforts to win over developers by giving them free systems they can play with, but that can't really support a full enterprise (free DB2 is limited to 2-way SMP and 4 GB RAM). It also gets small companies that can run on small hardware into their system, so those companies will buy licenses when they grow.
Open source is obviously one of the most significant threats we face
Yes, and free soup kitchens are a threat to restaurants.
A precarious position we've been put in by open source proponents like the FSF. You do know the freeware freaks like Richard Stallman still aren't satisfied with the DB2 givaway, of course. They want the source code, and a right to modify it, rename it, resell it, and not give IBM anything back if they want to. And so far, IBM and others are slowly but fully cooperating.