"Once the world figures this stuff out, this is going to be a huge change to the corporate landscape," Merrill Lynch chief architect Jeff Birnbaum predicts.

The "stuff" Birnbaum is talking about is "stateless" desktop virtualization, which promises cost savings from delivering the software that PCs need over a network using one-off virtual machines spun up in the data center. That should make it much cheaper to manage, since IT departments can change, say, a setting on the Windows operating system once, and all employees get the change as soon as they access their virtual desktops, rather than IT having to push the change to tens of thousands of PCs.

Desktop virtualization is an emerging technology for which the practical options for large-scale adoption are just starting to take shape, so most IT leadership teams aren't sure how big a part it will play in their IT strategies. Merrill Lynch, however, is way past wait-and-see. According to Birnbaum, the firm plans to virtualize 10 percent of its 63,000 employees' desktops by year's end, and as many as half within five years, including those of many mobile workers. That's a huge bet that desktop virtualization is ready for massive scale and Wall Street's demanding performance standards.

And Merrill is making this IT strategy bet in a brutal business environment, with the company having written down about $30 billion during the mortgage meltdown and posting operating losses the past three quarters. To Birnbaum, this economy makes stateless desktop virtualization more appealing because of the potential for "radically" lower operating expenses, saving about 50 percent on the total cost of owning and managing PCs and servers, he says. "The big win is to get out of desktop management across the board," Birnbaum says.

But there's big risk, too. The biggest is a greatly increased reliance on data center uptime. Birnbaum notes that Merrill Lynch will be living the 1980s Sun Microsystems adage that the network is the computer. "If the data center goes down, you can't run your desktop," he explains. But it's not as if the network is optional today, Birnbaum adds, pointing to the lifelines that are e-mail and electronic trading.

Another risk is that Software-as-a-Service (SaaS) will provide a cheaper way to go virtual, without the huge data center investment. Some firms have decided against desktop virtualization because so many key applications today are Web-based.

In addition, Merrill's plans call for a big investment. Desktop virtualization can run more than $900 per employee in up-front costs for new servers, storage, network bandwidth, virtualization and Windows licenses, and thin-client hardware, estimates Forrester Research analyst Natalie Lambert. "It might take a couple of years to recoup that investment," she says. "There are a lot of moving pieces."