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Limitations of Citrix's Application Isolation Environments
Citrix AIE works by redirecting registry keys, files, folders, and some system objects from common locations on the server to isolated locations. It works by installing and running the applications through an AIE filter application that redirects the objects as needed. However, the applications are still installed on the server. They still write the the registry and the file system. They still run with the rights as the logged on user.Compare this to Softricity's application virtualization. With Softricity, the application doesn't touch the local file system or registry at all. Softricity can virtualize Windows services, execution rights, and a lot more stuff from this list.
Citrix released a KB article explaining the limitations of it's Application Isolation Environment. But you can also read the extract on Brian Maddens website.