The decoupling of a particular computer from the software system that tells it how to operate, the applications that run on it or the data stored on it is known as virtualization. And the mass conversion of physical servers, data storage devices and desktop computers into virtual machines is prompting a sea change in how data centers on Wall Street are configured and the speed with which new capacity can be brought to bear or new employees put to work. But "The challenge financial services firms have is that they want to take zero risk" with key applications for buying and selling stocks or analyzing risks, said Gary Chen, research manager for enterprise virtualization software at IDC, a Framingham, Mass. technology research firm. "They want that mission-critical application to have whatever resources it needs, to operate effectively, with no constraints." This means that mission-critical operations, so far, have not driven the adoption of virtualization. Instead, the biggest driver of virtualization to date has been in the cost-saving arena--chiefly, the ability to save space, power, capital and operating expense on maintaining servers in a data center. The operations of scores of physical servers, each loaded with a single operating system and a key application running on it, are consolidated into far fewer servers, each able to run multiple images of operating systems and designated applications. In effect, virtualization can mean replacing 100 servers in a data center with as few as 10. Natixis Capital Markets, the New York-based investment banking unit of Paris-based Natixis, for instance, managed to put eight or more virtual servers on each of its IBM blade servers, using Virtual Infrastructure software from VMWare, the best-known name in virtualization of servers based on Intel-type microprocessors. Where it used to have 240 physical servers, each dedicated to specific applications and operating systems, it has just 70 now. The five-year-old initiative allowed the company to put off buying a new generation of hardware, saving it $2.1 million and more than $200,000 in annual operating expenses.

Following server consolidation, the next step is to begin converting more computing resources into virtual equivalents that can be assigned on demand to particular uses. This includes not just processing power, but also memory, data storage and bandwidth, a.k.a. networking. The ability to aggregate resources and immediately reassign them from control panels in the data center helps a company grow its business. "Our clients tell us they can deploy virtual servers 30 times faster than physical,'' said Thomas Bittman, an analyst with Stamford, CT-based research firm Gartner, in a blog posting on the stages of virtualization. "They also tell us that customer demand roughly doubles when they deliver faster." On Wall Street, the impact can be dramatic. A case in point relates to last year's collapse of Bear Stearns and the elimination of Lehman Brothers--"virtually" overnight. This set up a big market opportunity for companies with the "virtual capacity" to take on new business, overnight. When a financial firm suddenly dies, its customers go elsewhere. Companies that can, quite literally, turn up new capacity overnight win, those that don't lose. One big-name firm that was ready when the credit crunch hit was Zurich-based Credit Suisse, which had begun to virtualize its data center operations around the world four years ago.

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