IBM never had a plan for a mainframe operating system that made sense -- given the idea that the "360" was supposed to encompass the whole circle of applications.
What happened was some academics figured out it was possible to make virtual machines on the 370 and that you could run a few different operating systems at the same time. If you were doing software dev on the 370, for instance, you would start up a VM running VM/CMS which was a single-user OS a lot like CP/M or MS-DOS, work there, possibly using services offered by another OS in another VM by some kind of message passing.
This turned out to be the "master plan" in the long term, since they could have a few different mainframe OS, even some applications that run on "bare metal", but have it all run on one machine or one cluster of machines and be managed under the same pane of glass.
The reason it worked out was that each virtual machine was given a set of capabilities, and the hypervisor restricted access for that machine to only those resources.
Eventually, this lesson will spread. I think about 5 more years of chaos until people finally catch on.
Also there are many x86 and other systems where people use VMWare or something like that for "server consolidation" without going all the way out to the cloud.
The difference today though is that the guest operating system today is a "full-service" operating system such as Linux or Windows. In many of these cases the partitioning of the service could be accomplished through user id's, processes, sessions, containers, and similar facilities offered by the guest OS.
What happened was some academics figured out it was possible to make virtual machines on the 370 and that you could run a few different operating systems at the same time. If you were doing software dev on the 370, for instance, you would start up a VM running VM/CMS which was a single-user OS a lot like CP/M or MS-DOS, work there, possibly using services offered by another OS in another VM by some kind of message passing.
This turned out to be the "master plan" in the long term, since they could have a few different mainframe OS, even some applications that run on "bare metal", but have it all run on one machine or one cluster of machines and be managed under the same pane of glass.