Bringing virtualization to the data center via Windows Server 2008 is only part of Microsoft's grand plan. The bigger goal: using virtualization to change the way IT works, all the way to the desktop.

The company said last week it will buy Calista Technologies, which makes desktop virtualization software, for an undisclosed sum. It also announced simplified or lower-cost virtualization licensing for various versions of Windows desktop; support for running Office in a virtualized environment; an expanded alliance with Citrix Systems that moves beyond Terminal Services to virtualized desktops; and new deployment tools.

These moves illustrate that Microsoft's virtualization goals go far beyond server consolidation and business continuity into application, presentation, and "profile" virtualization to deliver what Microsoft calls "dynamic IT,"a highly virtualized model in which apps are decoupled from physical hardware, data centers provision based on business conditions, and apps are delivered to workers where and when they're needed.

Server virtualization alone won't get companies there, says Bob Muglia, senior VP of Microsoft's server and tools business. In the short term, the company's strategy hinges mostly on Windows Server virtualization and management of virtualized servers with its System Center Virtual Machine Manager, the next version of which is due later this year, in the same time frame as the final release of Hyper-V. Microsoft sees a few key scenarios for Windows Server virtualization, including server consolidation, application deployment and testing, business continuity, and accelerated server provisioning.

Longer term, it means tapping into budding desktop and app virtualization markets. Microsoft already has offered or is poised to offer a full slate of virtualization products, but the company is coming from behind against entrenched competitors such as VMware and Citrix Xen while working to see exactly how all of its new virtualization technologies will work together.

That isn't to say competitors are too far ahead: VMware just joined the application virtualization fray earlier this month with its acquisition of Thinstall. Meanwhile, Microsoft Application Virtualization, formerly SoftGrid, is the fastest-selling enterprise app the company has ever introduced, with 3 million copies licensed in the first six months.

A big part of Microsoft's strategy is what the company is calling "The Optimized Desktop," where a user's apps and profile are virtualized to follow the user, regardless of PC or device. This would let companies provision new PCs automatically and in minutes without losing employees' important data or settings. It also could set Microsoft on a collision course with longtime ally Citrix, known for its desktop and presentation virtualization capabilities.

Still, it's a compelling vision: Workers could walk up to any PC and be able to get their jobs done.

"No matter where I am, I want a rich experience," says Shanen Boettcher, Microsoft's general manager of Windows client product management. That's the point of Dynamic IT, but as with any Microsoft vision, it's yet to be seen where this all will really end up.