Citrix buys XenSource, VMware raises $1 billion, Microsoft plays footsie, and VMware says it'll make operating systems obsolete. That's all very exciting, but why should CIOs care?Well, take a look at this scenario and see if it's one you would welcome at your company:

"Software will tend to be distributed as a combination package. Applications will be packaged up with an operating system that's been stripped down to run them and only them. The database application will be packaged up with its preferred application server. Experts creating standard packages will make it easier to install and run software in virtual machines in the data center. Any changes or precise configuration will be left to these outside experts. The enterprise's applications, such as Oracle and SAP, will become less manpower intensive. 'Software appliances,' or software as virtualized files already packaged in combination with the operating system or other elements needed to make them run, will become the standard way of distributing software."

Sound like a plan? It's part of what my colleague Charlie Babcock (cbabcock@cmp.com) envisions business technology will be like in a mostly virtualized world. Charlie shared these thoughts after I'd read his not-to-be-missed analysis of the recent bold moves in the field by Citrix, VMware, XenSource, and others. When I asked Charlie what's just over the horizon in this tumultuous part of the market, he said:

"Server virtualization will be followed by desktop virtualization; storage is already virtualized or is well on its way toward being virtualized; network access, network resource management, is or will be virtualized along with these other developments. As most of the data center resources become virtualized, it will be possible to move to new ways of doing things. Virtualization will cease of be a feature of some elements of the data center. Rather, data centers enjoying a high degree of virtualization will be the standard way of doing business."

In another excellent analysis, InformationWeek's editor in chief for reports, analytics, and labs, Art Wittmann (awittmann@cmp.com), framed a powerful argument in favor of virtualization:

"IDC estimates that server management costs will grow hyper-linearly for the foreseeable future, while expenditures on server hardware itself are expected to be relatively flat over the next few years. Enterprise system management tools have done and can do almost nothing to change the growth in the cost of managing a data center infrastructure. These products are essentially bolt-on tools that can't change the fundamental difficulty of managing what are primarily static systems -- it will always be the case that with today's operating systems, managing 100 servers will be more than 10 times as hard as managing 10 servers. Virtualization can change that equation."

Maybe that one single point about the wildly escalating degree of difficulty for server management -- given today's operating systems -- is enough to push the decision for you. If you're leaning that way, you'll also want to be sure to consider this perspective from Art re operating systems:

"While rumors of [the operating system's] death are certainly premature, BEA put the first nail in the coffin a week ago when it announced that its LiquidVM Java virtual machine would run directly on the VMware hypervisor -- no OS needed. That's an attractive proposition for performance hungry applications, where increasingly the static OS serves little purpose other than that of a middleman that unnecessarily sucks valuable CPU cycles."

But Charlie Babcock says not to order the full coffin just yet, noting that the OS-killer code is still, well, virtual -- it doesn't exist yet: "At LinuxWorld this month, Mendel Rosenblum, chief scientist and co-founder of VMware, suggested hypervisors make operating systems vulnerable to replacement by other software that can assume their role on top of a hypervisor. Such talk is a threat to Microsoft, but it's also highly theoretical. Almost no such software exists."

As for Citrix, Art Wittmann says the XenSource acquisition puts it in a great spot (and for InformationWeek Labs review of XenSource, click here): "The smart money is on Citrix to play Switzerland in this war, allowing customers to choose their hypervisors and operating systems and eventually to permit no operating system at all. It's the sort of flexibility that resonates with IT architects. If Citrix can pull it off, that $500M price tag [for XenSource] will seem like a bargain."

And one of the reasons it'll seem like a bargain, says Charlie Babcock in his vision of the future, is the huge value virtualization can deliver to customers in terms of more system-level automation and more intelligent IT operations:

"What follows is a much more highly automated data center. By applying both human operator and software-contained intelligence to virtualized resources, we'll move toward self-maintaining, self-healing, self-governing data centers, with fewer people working/supervising them. Computing as a utility will become a more practical goal. The compute resource will expand and contract as traffic dictates, based on the ease of generating and killing off virtual machines."

If you're weighing your options about whether -- or how deeply -- to take the plunge into virtualization, do yourself a favor and check out Art Wittmann's analysis here, and Charlie Babcock's here.