Three years ago, IT officials at Heartland Financial USA were in a jam. They wanted to migrate from distributed computing to a centralized terminal services environment using Citrix Systems. But they had no way to determine a hardware budget for the project.

"We knew we'd need to create silos in the Citrix server farm based on application conflicts, but we didn't know which of [our 160 applications] would work well together and which wouldn't. Not knowing how many silos we would need made it impossible to cost out the hardware," explains Marti Vandemore, vice president of IS at the Dubuque, Iowa, regional banking firm.

A light bulb went off for the IT executives while listening to a Softricity presentation at the Citrix iForum user conference later that year. As the vendor explained how its virtualization software lets applications run independently of the host operating system and one another, they realized this newfangled technology might be the answer to their problem. Because these "containerized" applications could run on a single server without conflict, they would not need those server silos that were causing them such budgetary grief.

Application virtualization products, from Softricity as well as IBM Meiosys, Trigence and others, are distinguished by their ability to isolate an application in a logical container. The container, which holds everything the application needs to operate - meaning its core executables and binary code files - acts as an intermediary between the application and the operating system. Individual configuration settings and other non-essentials live outside the container, says Warren Wilson, an analyst with Summit Strategies, in a recent research report.

This differs from application treatment within a virtualized server environment, a la VMware. With server virtualization, for example, different applications and operating systems may coexist on a single server, but the applications remain dependent on the operating system. System overhead and performance would remain issues when dealing with applications that require their own operating-system instances, Wilson says in the report, adding that application virtualization efforts began as a way to address server virtualization shortcomings.