Desktop Virtualization Comes Of Age

http://www.dabcc.com/documents/DesktopVirtualization_11_26_07.pdf

26 November 2007

Americas/United States

Equity Research

Software / Computer Hardware (Software & Services/IT Hardware) /

OVERWEIGHT/MARKET WEIGHT

Desktop Virtualization Comes Of Age

THEME

The Data Center Is The Desktop

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Desktop Virtualization Has Been Underappreciated. While much of Wall

Street has become fixated on the growth potential of server virtualization, we

believe that investors have underestimated the size and potential growth of the

desktop virtualization market. We expect desktop virtualization software to grow

from minimal deployments currently to at least a $1.5 billion market by 2011

with approximately 25.6 million end users—representing 5.7% of the

professional desktop PC installed base.

Desktop Computing = Serial Cost Offender. In the current spending

environment of IT organizations looking to reduce the cost of maintaining

existing IT systems, the corporate desktop is a serial cost offender. Desktop

hardware and software acquisition expenditures typically account for only 20-

30% of the total cost of the device, while the remaining 70-80% consists of IT

maintenance. We estimate that desktop virtualization could lower the annual

total cost of ownership of desktop computing by 40-50% versus high-end

workstations and 5-10% versus low-end PCs, while simultaneously improving

computing flexibility and reliability for end users.

Why Now? “Thin” computing models have failed to gain significant traction in

the past, as the static published desktops of legacy thin-client architectures

could not satisfy the desktop needs of all users—many of whom required more

performance, data isolation, desktop personalization, and control. Furthermore,

many applications are not designed for use in a multi-user terminal services

environment, which limited the addressable user base of the traditional serverbased

computing model. Now, however, we believe that virtualization

technologies have matured to the point where they can now be applied to the

corporate desktop environment to improve performance, increase flexibility,

provide personalization, remove application compatibility issues, and reduce

operating and capital expenses.

How To Invest In Desktop Virtualization: Citrix Systems. While we expect

both Citrix Systems and VMware to attempt to leverage dominant positions in

each company’s respective core virtualization market to enter into the desktop

virtualization market, we view Citrix Systems as the better-positioned vendor to

capitalize on this emerging opportunity, based on the breadth and depth of its

product portfolio, as well as its large installed base of more than 70 million end

users currently utilizing Presentation Server. Furthermore, we expect IT

hardware vendors to experience a shift in spending from traditional desktops to

thin-clients and higher-end servers, where we believe that Hewlett-Packard has

developed the strongest roadmap.

Table Of Contents

Executive Summary 4 

The Problem: The Cost And Inflexibility Of Desktop Management 4 

The Solution: Desktop Virtualization Trumps Legacy “Thin” Computing

Technologies 4 

The Timing (Why Now?): Virtualization Technologies Have Matured And Server

Scalability Has Increased 5 

The Opportunity: A Multi-billion Dollar Software Market 6 

The Desktop Virtualization Winners: Broadest Portfolios Of Desktop Delivery

Solutions Triumph 7 

State Of The Desktop Union 11 

The Fat PC And Constrained IT Budgets 11 

Will Vista Drive Enterprises To A “Thin” PC Model? 13 

Desktop Management Models 15 

Shared Hardware With Centralized Management 15 

Presentation Virtualization (Published Desktop In Server-based Computing) 15 

Advantages 16 

Disadvantages 17 

Virtual Desktop 17 

Advantages 18 

Disadvantages 20 

Dedicated Hardware With Centralized Management 20 

Blade PC 20 

Advantages 21 

Disadvantages 22 

Client Hosted Desktop 22 

Advantages 23 

Disadvantages 24 

Automated Software Distribution 25 

Advantages 25 

Disadvantages 26 

Application Virtualization 26 

Advantages 26 

Disadvantages 27 

PC Disk Virtualization (Diskless PC) 28 

Advantages 28 

Disadvantages 29 

Dedicated Hardware With Local Management 29 

Manual Installation 29 

Advantages 29 

Disadvantages 29 

The Future Of Desktop Delivery 31 

Virtualization Technologies Can Be Combined To Create A Virtual Desktop Utility

(VDU) 31 

Virtual Desktop Utility (VDU) 33 

Advantages 34 

Disadvantages 36 

What About Offline And Desktop Virtualization? 36 

One Size May Not Fit All 37 

Investment Analysis 39 

Software 39 

Competitive Analysis 40 

Citrix Systems 41 

26 November 2007

Desktop Virtualization Comes Of Age 3

Will Desktop Virtualization Cannibalize Or Complement Presentation Server?

43 

Citrix XenDesktop 44 

Future Directions Of Citrix XenDesktop 46 

Broad Product Portfolio Addresses Multiple User Types 49 

Protocols Matter – ICA Versus RDP 51 

VMware 52 

Virtual Desktop Infrastructure (VDI) 52 

VMware ACE 53 

Microsoft 54 

Terminal Services 56 

Softricity 56 

Quest Software 59 

Hardware 60 

Industry Units 61 

Competitive Analysis 62 

Hewlett-Packard 63 

Sources and References 65 

DesktopVirtualization_11_26_07.pdf