I think the possibility of Man City promoting either Arteta or Vieira after Pep leaves is realistic. There is an expectation that a club of that stature will select from a small group of established manager/coaches with a body of work and a record of winning at the same level. But, that is an extremely small pool to choose from, and when one coach leaves or is fired, those big clubs often have limited options as many of those candidates already have jobs where they are happy. Which is one reason why sometimes such clubs have to hire a Zidane, or Pep (at Barcelona), just to open up the field.
But CFG has a further problem, in that as an organization they are committed to a specific style of play, and if they limit Man City to world class, established coaches who have won trophies and are both capable and want to coach to that style, that's a tiny, tiny reserve.
So they are growing them in-house.