SITUATION: A larger company acquires a smaller one. IT infrastructure has to be merged. There are no immediate plans to change the current size or role of the smaller company - the offices and production remain.

It has a Win 2003 SBS domain server, Win 2000 file server, linux server for SVN and internal Wikipedia, 2 or 3 production machines, LTO backup solution. The servers are approx. 5 years old. Cisco network equippment (switches, wireless, ASA). Mail solution is a hosted Exchange. There are approx. 35 desktops and laptops in the company.

IT infrastructure unification: There are 2 IT merging proposals.

1.) Replacing old servers, installing Win Server 2008 domain controller, and setting up either subdomain or domain trust to a larger company. File server and other servers remain local and synchronization should be set up to a centralized location in larger company. Similary with the backup - it remains local and if needed it should be replicated to a centralized location. Licensing is managed by smaller company.

2.) All servers are moved to a centralized location in larger company. As many desktop machines as possible are replaced by thin clients. The actual machines are virtualized and hosted by Terminal server at the same central location. Citrix solutions will be used. Only router and site-2-site VPN connection remain at the smaller company. Backup internet line to insure near 100% availability is needed. Licensing is mainly managed by larger company. Only specialized software for PCs that will not be virtualized is managed by smaller company.

I'd like to ask you to discuss both solutions a bit. In your opinion, which is better from the operational point of view? Which is more reliable, cheaper in the long run? Easier to manage from the system administrator's point of view? Easier on the budget and easier to maintain from IT department's point of view? Does anybody have any experience with the second option and how does it perform in production environment?

Pros and cons of both?

Your input will be of great significance to me. Thank you very much!