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Because it serves as a buffer, the hypervisor is a key ingredient in a virtualized environment. But not everyone agrees which vendor's hypervisor is best, and customers want the freedom to choose.

That's where Marshall's company comes in, simplifying the work for the ISV. His vision looks like this: You—the customer—get to pick the hypervisor for the VM: VMWare, Xen, Microsoft, whatever you like. But the software vendor controls the software stack. Otherwise, it costs the software vendor too much, he says.

Pros and Cons of Virtual Software Appliances

Will CIOs accept the idea of more software being delivered via virtualized appliances? "CIOs have already accepted hardware appliances," Marshall says. "They've also accepted SaaS. This is middle of the road between the two."

That's a peek at how the software vendors will pitch you on it. Unlike a hardware appliance, there's no extra physical item to track, maintain and secure. Unlike SaaS, you can keep your physical server with the VM on it within arm's length if you want.

Don't just dismiss this idea as the new fad, says James Staten, a Forrester Research principal analyst. "CIOs should change their thinking about software deployment from deployment on traditional servers to deployment on virtual servers first," Staten says. "This change in thinking is fundamental and will be the predominant way of deploying anything in the next five years. Whether they deploy applications in their own data center or onto hosted infrastructure such as the new cloud computing offerings from Amazon, Layered Technologies or others, the default deployment will be the virtual server."

Software delivered via an appliance will deliver "dramatically easier installation," Staten says. The next step? "CIOs should think about whether they should 'appliantize' their own applications, as that will make deployment and redeployment of their own software easier," he says. "What comes as a byproduct of this thinking is greater OS freedom as the appliance is self-contained and can thus leverage whatever OS is best for that application, and application development can tune, optimize and strip down the OS to maximize performance and security."

Of course, this game has just started: Virtual software appliances is an emerging market, says IDC Research Analyst Brett Waldman, representing almost none of the overall software market right now.

IDC predicts that will change to "a fraction of a percent" by 2011, worth about $687 million in revenue worldwide, he says. "But remember, getting to almost three-quarters of a billion dollars in only a few short years is a pretty remarkable achievement for an emerging market," Waldman says. "We are bullish on it, but this will take time."