Virtualization has evolved rapidly since it first began to be used on x86 servers in 2003, mainly for test and development. By 2007, the second generation, Virtualization 2.0, was under way, and the focus was consolidating production applications. Today, we are transitioning to the third era of virtualization deployment (3.0), which is taking on cloudlike attributes for highly virtualized and automatically managed internal deployments. The transition to adopting cloud-like deployments shifts the focus from early capex savings drivers to transforming IT into a service and delivering operational efficiencies. Crucial to the success of this transition to the cloud computing deployment model is the inclusion of tier 1 applications, the most complex and often business critical in nature to an enterprise. This IDC white paper includes two case studies and a sidebar highlighting the experiences of three enterprises with virtualizing their tier 1 applications, which include Oracle and Microsoft SQL databases and a Microsoft Exchange email system.