Virtualization

Virtualization is expected to become even more widely deployed in 2010, driven by an improving economy. Virtualization, which allows users to divide physical hardware into multiple 'virtual' chunks, is seen as an effective way for companies to juggle myriad of operating systems and applications. The likes of VMware, Microsoft and Citrix ( CTXS) are all pushing the technology as a way for firms to reduce the amount of server and storage hardware within their data centers.

Deutsche Bank recently upgraded CA ( CA), citing strength in its virtualization initiative, and analyst firm IDC says that the technology will make its presence felt during the coming months.

Despite the fact that this sector took a hit during the recession, IDC has identified signs of its recovery. "The market is poised for the beginning of a significant infrastructure refresh cycle in the months ahead," wrote Matt Eastwood, the research firm's group vice president of enterprise platforms, in a recent statement. "Virtualization will be a cornerstone technology as medium and large enterprise organizations around the globe accelerate the need for more dynamic and converged infrastructure."

VMware, one of TheStreet's top tech picks for 2010, is the most obvious beneficiary of this trend. The Palo Alto, Calif.-based firm blew past Wall Street's estimates in its recent third-quarter results, and is seen as offering plenty of upside to investors.

It is not just servers, though, that are going virtual. Desktop virtualization is expected to be an up-and-coming feature, too. With IT spending creeping back, many firms will be looking to overhaul their PC infrastructure. That presents a massive window of opportunity for the likes of VMware.

Also, the push towards cloud computing is a shot in the arm for the virtualization market, as service providers build out their IT infrastructure.

Despite years of hype, though, many organizations have yet to deploy virtualization, which leaves plenty of room for growth. Analyst firm Gartner, for example, recently reported that just 16% of server workloads are virtualized, although this is expected to grow dramatically.

Small and medium-sized businesses will be at the forefront of the virtual revolution, according to Tom Bittman, Gartner vice president. "By year-end 2010, enterprises with 100 to 999 employees will have a higher penetration of virtual machines deployed than the Global 500," he wrote in a recent statement.

-- Reported by James Rogers in New York

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