Virtualization - how big can this world get?

You know a company or technology has hit the big time when it has a "world" named after it. Just as Apple has MacWorld and penguin fans have Linux World, we now have VMWorld, hosted by VMWare, the storage virtualization firm that just executed the biggest tech IPO since Google. Investors have been pouring money into virtualization startups, all of which are developing products to help big IT organizations get more out of their hardware, systems and applications. The first virtualization market to explode is the one where VMWare plays --boosting the capacity of data-center servers. But that's just the start, and the number of companies presenting at the conference and range of their technologies begs the question -- is there anything that can't be virtualized?

Some Silicon Valley investors think the answer is "no," and that big companies will move in the direction of utility computing -- where everything from operating systems to applications to data will be hosted somewhere else and accessed only when needed. With most data servers operating at less than 20% capacity, "resources need to be allocated more efficiently, and that's why all the trends are pointing to utility computing," says Mark Leslie, an early investor in VMWare and, before that, a founder of Veritas Software. But to get to this "nirvana," as Leslie calls it, "you have to solve all kinds of problems first." One of those is the bottleneck lodged in all the interconnects between servers, storage gear and networking equipment, according to Leslie, who along with the venture firm Kleiner Perkins has invested in Xsigo Systems, whose virtualization software is targeting the problem.