Desktop Virtualization Market Drivers and Early Market Acceptance

ESG’s survey of 480 North American and Western European IT professionals on the topic of desktop virtualization—technology in which a user’s entire desktop environment, including the operating system, applications, data, and user preferences, is hosted and managed in a central data center and accessed remotely by users—revealed significant early use of, as well as interest in, these solutions. In fact, almost 30% of respondents said their organization either already deployed a desktop virtualization solution or planned to do so within the next 12 months, while an additional 31% had no imminent plans to roll out virtual desktops, but would consider it.[1] Similarly, in two additional surveys, 23% of medium-size businesses (i.e., 100 to 999 employees) and 24% of enterprise-class businesses (i.e., 1,000 or more employees) cited “desktop virtualization/thin client initiative” as one of the top IT initiatives that would shape infrastructure purchasing decisions over the next 12-24 months.[2]

So what is the appeal of desktop virtualization? By consolidating desktop images in a secure location and streaming them to end-point devices, these solutions allow IT staffs to improve service levels and satisfy regulatory compliance and information security requirements—all while maintaining a seamless end-user computing experience. However, the most appealing attribute of virtual desktops to a majority of organizations is the potential reduction of desktop operational costs. This is not surprising in light of the global economic climate over the last year, which has subjected IT budgets to unprecedented levels of belt-tightening.  Indeed, according to ESG’s 2009 Data Center Spending Intentions Survey, 62% of respondents believe that a reduction in operational costs will be one of the key considerations in justifying IT investments to business management teams over the next two years.

The Early Read on Hosted Virtual Desktop Solutions

Organizations evaluating desktop virtualization technology have options when it comes to delivery models, including in-house and hosted solutions. The latter involves running virtual desktops in third-party data centers, which allows organizations to shift the burden of management from internal IT staff to outsourcers. This has obvious cost benefits, including the further reduction or even elimination of onsite PC support which serves to reduce operational expenses, as well as the mitigation of any capital investments necessary to fund potential internal data center infrastructure expansion. Among the early, planned, and potential adopters of desktop virtualization in ESG’s survey, more than half of these respondents indicated they would be amenable to a hosted virtual desktop solution, with 17% showing interest in an organization-wide rollout to all employees, and 34% envisioning hosted virtual desktops being leveraged by only certain users and/or applications (see Figure 1).

From a company size perspective, there is not much of a difference in overall attitude towards hosted virtual desktop solutions, with 52% of enterprise and 48% of midmarket organizations saying that they would consider these services in some capacity (see Figure 2). However, the degree to which organizations envision using hosted virtual desktops varies more significantly by number of employees, with almost one-quarter of medium-size organizations indicating they would consider outsourcing their entire desktop environment compared to only 14% of enterprises. On the other hand, 38% of larger organizations would consider a hosted virtual desktop solution for only certain users and/or applications as opposed to 25% of mid-size respondents.

When analyzed from an industry perspective, ESG’s data on opinions toward hosted desktop virtualization strategies appear once again to be heavily influenced by cost reduction initiatives. Revealing an obvious correlation to macroeconomic conditions, three of the top four verticals—professional services, financial, and manufacturing— expressing interest in hosted virtual desktops (see Figure 3) were also hardest hit by 2009 IT budget cutbacks according to ESG’s aforementioned 2009 Data Center Spending Intentions Survey. While IT spending in government organizations (both local and federal) was more resistant—relative to other sectors—to the financial meltdown, it follows that the collective interest in hosted virtual desktops is high among these respondents since many government agencies are increasingly tasked with outsourcing many IT functions.

Considering its relative nascence, ESG believes this data shows a surprisingly high level of interest in hosted virtual desktop services, regardless of company size or industry. This begs the question: what are some of the potential predictors of hosted virtual desktop adoption and use cases?

A Closer Look at the Operational Impact of Hosted Virtual Desktops

Among ESG’s survey respondents, two key market drivers for organizations considering a hosted virtual desktop solution were the total number of IT personnel responsible for managing all the various aspects of an organization’s PC environment, as well as the average number of hours spent by these full-time equivalents (FTEs) annually maintaining user end-point devices (i.e., desktop and laptop PCs, etc.) on a per device basis. Figure 4 reveals a direct correlation between the number of FTEs responsible for PC management and hosted virtual desktop interest. Specifically, 60% of organizations with more than 50 FTEs indicated the possibility of outsourcing their virtualized desktops in some capacity, as opposed to just 36% of organizations with 10 or fewer FTEs. Likewise, 61% of organizations whose IT staffs spend more than 12 hours per device annually on routine PC management and maintenance tasks are open to hosted virtual desktop services, whereas 42% of those shops in which less than six hours are consumed per device annually would not consider such a solution (see Figure 5).

How can this data be interpreted? Clearly, organizations with larger, more complex, and more labor-intensive PC environments—as measured by the number of FTEs responsible for managing PCs and other various end-point devices— displayed a greater willingness to off-load either some or all of their virtual desktops, and the subsequent responsibilities associated with managing them, to a third-party provider. This has obvious capital and operational expense reduction implications: in addition to minimizing the amount of onsite equipment necessary to support virtual desktops, at least some of the dedicated PC FTEs could be redeployed to more strategic endeavors. On the other hand, the hours consumed managing end-point devices are more indicative of the sophistication of an organization’s PC environment in terms of applications, operating systems, and device types. The fact that the majority of respondents (65%) that spend at least 13 hours per client access device for annual maintenance would consider hosted virtual desktops in some form could signify that organizations recognize that there are user groups whose needs exceed the current skill sets of the support staff. The takeaway from these data points is that both the size and complexity of PC environments are key drivers of interest levels in hosted virtual desktops.

The Hosted Virtual Desktop Ecosystem

Unfortunately for users, choosing a hosted virtual desktop solution is not as easy as looking at a price book and selecting a model number. There are many moving parts within the hosted virtual desktop spectrum, from the technology providers—such as Citrix, Microsoft, Symantec, and VMware, among others—to the services organizations—like IBM and Verizon—which provide the back-end infrastructure to support thousands of multi-tenant virtual desktops and deliver the actual service end customers. There are even specialized systems integrators that understand the nuances of desktop virtualization and can pull together the disparate components into a single solution that can be sold either directly to users or to various third-party providers with hosting capabilities. Figure 6 provides a high-level view of the current hosted virtual desktop service ecosystem.[3]

The major participants in the hosted virtual desktop ecosystem are:

• Technology Providers: Develop and market desktop hypervisors and other technology components that facilitate the delivery of virtual desktops, including solutions based on central execution and management of images that are remotely streamed, as well as those with centrally managed images that are streamed down to the endpoint and locally executed. One key distinction between in-house vs. hosted virtual desktop implementations: network acceleration solutions are a key consideration in the hosted model because of users’ dependence on the WAN—as opposed to corporate LANs—to access their virtual desktops.
  • Examples: VMware, Citrix, Microsoft, Wyse, Riverbed

• Framework Providers: Integrate the various technology components of virtual desktops, including the hypervisor, and provide a complete virtual desktop solution, enabling hosting providers (outsourcers, ISPs, etc.), as well as enterprise IT organizations, to deliver cloud-based desktops. The framework providers mask the complexity associated with hosted desktop virtualization solutions and deliver desktops and applications on a consumption basis.
  • Examples: Desktone, DeskStream, VDIworks

• Systems Integrators/Outsourcers: Can either solicit the various vendors in order to assemble a virtual desktop solution for direct delivery or partner with framework providers to deliver pre-packaged solutions to users based on the best fit from a technology and business process standpoint. These third-party organizations also provide infrastructure support in the form of data center space. ThinkGrid is unique in this regard since it develops its own virtual desktop solution and also provides users the infrastructure upon which to run it in the form of collocation facilities.
  • Examples: IBM, HP, SunGard, Savvis, ThinkGrid

• Telcos/ISPs: View hosted desktops as a new service offering with the potential to complement existing business voice and data offerings, like hosted e-mail. While small and medium businesses are likely the initial targets for hosted desktops, providing a computing platform for consumers—with minimal capital investment—has the potential to be especially lucrative. To that point, AT&T, Comcast, and Verizon are currently giving away free netbooks to new broadband subscribers, which could certainly serve as thin client access points for virtual desktops somewhere down the road.
  • Examples: Verizon, AT&T, Comcast

Research Implications

What would compel an organization to offload virtual desktops to “the cloud” in lieu of managing them within the confines of their own data centers? The short answer is simplification and reduction in operational cost. A common sentiment regarding desktop virtualization shared by many end-users with whom ESG has spoken is that it is not a standalone, discrete product, but rather a more complex solution comprised of many different technology components. One way for organizations to avoid the headache of integrating these disparate piece-parts is to enlist the services of a third-party provider to build and deliver a comprehensive solution. In addition to eliminating the resource strain that typically accompanies multi-faceted technology solution implementations, this option helps to reduce the burden on in-house staff and equipment in the long run, which translates directly into both operational and capital expense savings.

Desktop virtualization is a relatively new technology, but ESG’s research confirms that interest is clearly growing. As customers develop their desktop virtualization strategies and mull over their options, ESG’s data shows an early willingness to consider hosted solutions delivered by third-party providers. While likely accelerated by the current macroeconomic climate, a large part of the appeal of hosted technologies, especially virtual desktops, is the shift to a more operational expense-based model; in fact, the only capital expense in a hosted desktop scenario would be the device used by employees to access their remote PC images. Of course, in many cases, the potential benefits of hosted services or “cloud-based” solutions are metered by customer trepidation over moving to a new and somewhat untested model. As such, would-be hosted virtual desktop vendors would be well-served to proactively and comprehensively address concerns related to security, performance, and ROI in order to help customers identify which use cases are most appropriate for hosted virtual desktop services, help customers build a compelling business case for hosted solutions, and ultimately convert the initial interest in hosted virtual desktops into actual orders.

[2] Source for medium-size business data: ESG Research Report, Medium-Size Business Server & Storage Priorities, June 2008. Source for enterprise data: ESG Research Report, ESG 2008 Enterprise Storage Systems Survey, November 2008.

[3] Note: This is not an exhaustive vendor list, but rather just a few specific examples in each respective segment.

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