For present machines, but clearly causes problems for BC in future hardware that isn't abstracted via VM.
If it's future hardware, it seems like Sony could opt to put the non-abstracted legacy applications into a VM or perhaps a para-virtualized version of the old firmware.
At least in theory virtualization wouldn't be virtualization if the applications within needed to know about being virtualized in the first place.
Sony does evidence a strong hardware preference for its compatibility measures, perhaps in part due to its history of non-standard hardware.
There are certain things it is paranoid about that a VM traditionally wouldn't handle well, such as an ISA or feature discontinuity in the base hardware for timing-sensitive code.
It's why I think the PS4 Pro's hardware is extended, but with certain elements fixed in-place to maintain the ability to run existing binaries trivially. The GCN3-4 ISA is not compatible in certain significant aspects, so certain features may simply be the same as the PS4.
Microsoft's virtualized system does significantly help with maintainability and flexibility within a hardware version, but the Scorpio announcement hints at a more intensive backwards compatibility effort for running Xbox One applications, where Microsoft takes on the responsibility for managing bugs. This does have the upside of allowing Microsoft to offer greater enhancements, but getting it to work would be a cost Microsoft itself takes on.
I'm not sure, but I thought the Xbox One could have pre-compiled GPU code. It's a step beyond just having a VM if something is intercepting incompatible binaries and replacing them.
Within an architecture line, instructions could be trapped and emulated, but that can be an expensive proposition in software. Even Scorpio didn't leave Jaguar, citing compatibility reasons.
A GPU is less amenable to trap and emulate than a CPU is, so I am curious if that means Scorpio is doing some additional software work or has made certain decisions about the hardware similar to Sony.