Quoting from Law.com

Venture capitalists and corporate acquirers are betting on a technology used to run software over the Internet, a particular boon to companies with mobile work forces.

Known as "application streaming" or "application virtualization," the approach is drawing interest from major industry players such as Microsoft Corp. and Citrix Inc., which have recently purchased startup makers of this software. Alitris Inc., which Symantec Corp. said on Monday it would acquire for $830 million, also makes streaming software.

The technology allows computer users to download a program from the Web without it being located on their machines. For corporate customers, that allows them to more easily and cost-effectively offer remote access to geographically dispersed workers, prevent virus-infected computers from contaminating an entire corporate network and run multiple generations of the same software, such Microsoft's popular Office 2003 and 2007.

"There are a lot of startups getting into this space," said Andi Mann, an analyst with Boulder, Colo.-based research firm Enterprise Management Associates. "It crosses over into a number of areas that are of growing importance to businesses, like security, compliance and mobile workers."

Other startup providers of application streaming technology include: Ottawa-based Trigence LLC, which has raised venture funding from BDC Venture Capital and VenGrowth; Palo Alto, Calif.-based AppStream Inc., backed by Draper Fisher Jurvetson, JK&B Capital, Goldman, Sachs & Co., Evergreen Partners, Sun Microsystems Inc.; CA Inc.; and San Francisco-based Thinstall Inc., which is self-funded.

With Fort Lauderdale, Fla.-based Citrix closing soon on its acquisition of Ardence Inc. and Microsoft's purchase of Softricity in July 2006, other large information technology vendors will have to offer similar capabilities, said George Hamilton, an analyst with research firm Yankee Group Inc.

"They will need to be fast followers, so the question is, will they have time to build?" Hamilton said.

Large technology players likely to make acquisitions to get into application streaming include IBM Corp. and Hewlett-Packard Co., although they could also opt to develop the software internally, while CA Inc. and BMC Software Inc. also could have interest in offering the service to their customers, Mann said.

But while the emergence of application virtualization offers commercial opportunities, it could force large software companies to overhaul their licensing models. Most software makers charge users per computer. But with virtualization, it is possible to have one copy of a program that is streamed to a variety of devices. In other words, multiple people could access the program without paying for the additional licenses.

Indeed, Microsoft is already revising its licensing model to take virtualization into account by charging differently according to whether software resides on a corporate server or on a desktop. But Peter DeGroot, an analyst with Kirkland, Wash.-based research firm Directions on Microsoft, said the software giant's policy is confusing.

"It has done a good thing on the server side by licensing each running instance of a program," DeGroot said. "But with the desktop it has a different strategy requiring every install on a virtual machine to have a license. To me that's a nonstarter and is impossibly expensive for clients."

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