Will SaaS + Virtualization Eat the Desktop and Transform IT?

by Rick Braddy on October 2, 2011

in Change The World,Innovation

Will a perfect storm of technologies, combined with the SaaS financial and delivery model disrupt traditional Windows desktops and transform how IT services are delivered, and how corporate data centers are managed?  It may be more imminent than you think.

First, let’s examine a little background and the context that’s brought us to this point.

Over the last decade, application virtualization solutions provided by companies like CITRIX® Systems and Microsoft® Terminal Services have changed the way “legacy” Windows business applications are managed and delivered.  At the same time, server consolidation projects have virtualized the majority of corporate servers, using server virtualization technology by companies like VMware® to reduce the physical server footprint in the data center.

More recently, interest in VDI (virtual desktop infrastructure) solutions has grown markedly, as companies look for ways to deal with an aging desktop infrastructure and migrate to Windows 7.

At the same time, SaaS and Cloud Computing are changing the way new applications and data are developed, managed and delivered – outside the traditional data center, where data now commonly resides in third-party data centers, alongside their corresponding SaaS applications.

All this is happening at a time when extreme financial pressures continue to depress capital investments, and executives are hungry for ways to avoid capital spending and minimize operating costs.  Local and state governments now find themselves operating under even more dire financial circumstances, brought on by contracted tax bases and local economies.

Both businesses and government agencies are searching for ways to reduce unnecessary spending, avoid large capital investment outlays and reduce operating costs wherever possible.

Meanwhile, the move is well afoot to virtualize the enterprise desktops, using VDI technology.  However, the maturing VDI solution stacks are mostly premise-based – and highly capital-intensive.

Worse yet, these premise-based VDI solutions drive corporate data centers in the wrong direction – drastically growing the number of servers, power and air conditioning requirements and increasing data center management costs – wiping out gains from earlier server consolidation efforts.

Still, some companies are moving forward with VDI, despite its questionable ROI, CapEx intensity and the data center bloat factors involved.  For many, the pains associated with managing, upgrading and replacing fat-client desktops and the Windows 7 desktop refresh cycle are simply too much to bear.

Even Microsoft acknowledges that VDI can’t help you reduce costs – VDI does not reduce desktop costs because it can represent a significant up-front investment in infrastructure, including hardware, software, storage, and network. And, unless steps are taken to improve basic desktop management and deployment processes, just choosing VDI for desktop deployment will not reduce total cost of ownership (TCO) either.

Enter the “cloud-hosted” virtual desktop, by vendors like Desktone®, Virtual-Q® and others.  Cloud-hosted desktops virtualize Windows desktops and applications, similar to what CITRIX and Terminal Services have done on-premise.  But instead of the virtual desktops residing in the corporate data center, they are hosted in the cloud – within a private, third-party data center.

Importantly, cloud-hosted virtual desktops are leased in bulk to the customer using a SaaS licensing model. There is no capital investment required on the part of the customer to virtualize their business desktops.

Instead, desktop and application delivery costs become operating expenses (“OpEx”) under a SaaS subscription model. The vendor incurs the capital investment costs associated with the VDI hardware and software, data center operations, security and management.  Of course, IT continues to develop, install, update and manage the company’s applications and data – it just resides in a data center that’s physically located across the Internet.

For example, to implement a basic 100-user, premised-based VDI solution here’s what you would need:

For many companies and government entities, the cloud-hosted desktop is a very enticing proposition. However, desktops running applications require high-speed, secure access to server-side (e.g., client-server) application code and corresponding data, typically residing in SQL databases.

So how can cloud-hosted desktops access the data and application back-ends they require?

Answer.  Move the existing virtualized servers and databases out of the corporate data center and collocate them with the cloud-based virtual desktops.  By collocating both the virtual desktops and back-end servers and data within the same third-party data center, it’s possible to switch most, if not all, of the IT infrastructure from a capital-intensive, corporate-owned and managed data center into a fully cloud-hosted IT service.

I know, I know.  That’s just blasphemy!  Especially to many CIO’s and IT managers, who view their corporate data centers, servers and data as too business critical and sensitive to trust to any third party…

Well, there was a time when that attitude and perspective was completely understandable and even justified; however, times are changing.

In a 2010 article titled: Gartner Highlights Key Predictions for IT Organizations and Users in 2010 and Beyond.   Gartner predicts that “by 2012, 20 percent of businesses will own no IT assets. Several interrelated trends are driving the movement toward decreased IT hardware assets, such as virtualization, cloud-enabled services, and employees running personal desktops and notebook systems on corporate networks”.

This is a little extreme – the need for computing hardware, either in a data center or on an employee’s desk, will not go away. However, if the ownership of hardware shifts to third parties, then there will be major shifts throughout every facet of the IT hardware industry. For example, enterprise IT budgets will either be shrunk or reallocated to more-strategic projects; enterprise IT staff will either be reduced or reskilled to meet new requirements, and/or hardware distribution will have to change radically to meet the requirements of the new IT hardware buying points.

Trusted, professionally-managed data center providers like Softlayer®, Rackspace® and others now provide viable alternatives to corporate-owned and operated data centers – arguably, better managed and even more secure in many cases.

As a consequence, what begins as a cloud-based, desktop-as-a-service pilot project quickly evolves into a more comprehensive cloud-based computing-as-a-service solution, whereby the IT infrastructure is relocated into a private, secure data center managed by one of these trusted data center providers.  Backup data centers and multiple points of presence on the Internet provide the safety nets that make this a completely viable solution for most companies and government agencies.

This is even easier to contemplate today because most corporate servers are already virtualized, and IT has become more comfortable with virtualization and cloud technologies applied to business-critical computing.

It’s relatively straightforward to develop a plan to forklift application servers and databases, migrating them out of corporate data centers and into a cloud-hosted data center.

I know.  Double-blasphemy!

Needless to say, even the suggestion that the corporate data center, servers and data could no longer be directly under IT management’s control makes many of us gray-haired IT managers either want to scream or perhaps reconsider early retirement!

Seriously though, many CIO’s are beginning to recognize this emerging cloud-hosted desktop and data center model as the next logical step in the evolution of virtualization of IT, combined with cloud computing and SaaS delivery of applications and IT services.

Another less obvious economic driver involves the costs of software licensing by companies like Microsoft.  When a company switches from premise-based licensing to the cloud-hosted model, the Service Provider License Agreement (SPLA) can be applied to further reduce software licensing costs (typically covered under an ELA today).  When you combine the capital investment savings of both the IT infrastructure and traditional software license costs, the TCO advantages become clear and very compelling.

The security and reliability provided by top-tier hosting, colocation facilities and cloud-hosted desktop solutions has reached an inflexion point – one that enables many companies and government agencies to leave their own data centers behind over the next 2 to 5 years.  The service provider software rental licensing model is the icing on the TCO cake.

Is this really happening?  Yes, it is.

Earlier I showed you the cost of implementing a basic 100 user VDI solution.  Now add to that the cost of Redundancy, Firewalls, Support, Bigger Bandwidth, Power and Cooling.  All this is included as part of a cloud-hosted solution.

The financial advantages of transforming IT from a largely CapEx constrained proposition into OpEx is extremely attractive by itself. And for many, it may be the only financially viable way forward.

As CFO’s and CEO’s become more aware of the cloud-hosted desktop and data center as a viable alternative to traditional IT-owned and managed computing infrastructure, the business pressure to consider these alternatives is sure to increase with time.  And as the cloud-hosted IT-as-a-service model is proven across an increasingly broad range of industries, it could cross the chasm and become a mainstream IT strategy.

What does all this mean to IT?   And what affect will it have on the vendors who rely on capital-intensive, premise-based data centers, traditional VDI and/or fat-client desktop architectures?  And what about the architecture and security model of the cloud-based data center and cloud-hosted desktops?  And how does all of this factor into a mobile computing strategy?

Great questions – topics we will explore in future articles and blog posts.

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