With acquisitions, desktop virtualization market shifts from TS to VDI

Former Wyse CEO John Kish sees vendors in the desktop virtualization market pulling customers away from Terminal Services -- because they can make more money on VDI.

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A swath of desktop virtualization acquisitions this year has given a boost to the VDI market, and that trend could continue as customers move away from Terminal Services.

In this Q&A, Pano Logic CEO John Kish shares his thoughts on where the desktop virtualization market is going and how that will fit into the new era of cloud and mobile. Before Kish came to the zero client computing vendor in 2008, he was CEO of Wyse Technology, a thin client provider that Dell acquired in April.

Read about Dell's goals for Wyse and Quest Software as well as how all the recent deals will affect VDI customers. Hint: You won't be saving money right out of the gate.

As former CEO of Wyse, how do you think the company will fit into Dell's product line?

John Kish: Dell really wanted to have more of an offering in the Terminal Services space. They had a hole in their product line that HP was exploiting. A few years ago HP bought Neoware, which gave them thin clients that they were able to offer to customers at good prices. Dell didn't have that.

VDI will pick up because what we've seen...is the long, slow death of the personal computer.

John Kish, CEO, Pano Logic

To that extent, it's a good fit. The real question here is whether thin clients have as long a future as Dell thought they did when Dell acquired Wyse. I think what you're going to see is that the Terminal Services market is going to get fractured pretty quickly, between cloud and VDI. The lion share of product offerings that Wyse has is in the Terminal Services space, and I think that's going away. So how quickly Dell is able to adapt [Wyse's] products to both VDI and cloud is really going to tell whether this was a successful acquisition or not.

Do you think that, with the acquisitions of Wyse and Quest Software, Dell can become a major vendor in the desktop virtualization market?

Kish: I think that through those acquisitions, they are, whether they want to be or not. In my opinion, Dell was looking for a way to do two things. One was to drive more data center business, because that's higher margin business for them. Number two was to drive more services business because that has a much longer tail than Capex purchases do. The Quest and Wyse acquisitions helped Dell achieve both of those goals. It's not clear whether that's to the benefit of customers or not, given that what they're likely to do is put out premium products that are as expensive or more expensive than using a PC.

Do you think these acquisitions will help or harm VDI customers?

Kish: Over time, it is likely to drive the cost of delivering a desktop down: I think that's to customer benefit. I think over the short term, that is not what's going to happen. … What companies are all trying to do is figure out how to get [customers] to take their desktop-purchase money and transfer it into the data center. You make more margin on data center purchases if you're a big vendor like Dell or HP.

What we're seeing now is an attempt to put together all the pieces of the puzzle end to end, which over the short term will probably cause net prices to increase, but over the long term, it's going to benefit customers because the overall cost of delivering desktop virtualization is going to drop.

There's been talk that Dell will downplay Quest vWorkspace. Do you think that's what the vendor will do, and if so, what does that mean for Quest customers?

Kish: It's all about making sure customers have enough choices so they can reap economic benefits from the services. … Even though Dell may de-emphasize one product line or another, the fact is, they'll continue to support it. The goal is to improve the services penetration, not necessarily the product penetration. I don't have a crystal ball with respect to what Dell's doing, but I think what they're trying to do is improve their corporate margins by shifting customers into the data center and working to improve their services offerings so that they can tie themselves more closely to customers and have a longer tail on the revenue stream than they've seen in the past.

More on the desktop virtualization market

Virtual desktop adoption to continue slow pickup

Partners expect VDI customer wins with Dell, Citrix

Dissecting six months of desktop virtualization acquisitions

So where do you see the desktop virtualization market going in 2013? Is VDI going to see higher adoption or is more of a niche technology?

Kish: I think VDI will pick up because what we've seen in the last couple years is the long, slow death of the personal computer. … So, what are you going to replace [PCs] with? Rather than thinking about that in terms of how much the device needs to cost, vendors are thinking about what they need to provide to users by way of user experience and applications support.

In large organizations, you'll probably find that roughly 50% of the users truly need the full-blown Windows experience. I think those end users will migrate over the next three or four years to VDI. ... If vendors can achieve 50% penetration in the existing desktop install base, it's a significant win for everybody.

What about Desktop as a Service? Do you see hosted desktops picking up in the coming years?

Kish: Desktop as a Service has really always been with us, just in a different form. Anytime I log on to Salesforce or NetSuite, I'm able to get access to the information I want, whether it's packaged as a Windows desktop or not. So, Desktop as a Service means I'm going to log in to the cloud and get my Windows desktop, I'm just not convinced economics are going to favor that kind approach. I think what you're rather going to see is an approach where all the applications you need to use are pre-assembled for you in the cloud. ... The illusion will be that you have a desktop, but what you're going to do is in fact have access to disjointed applications that you can access as you need them.

Are there any other desktop virtualization acquisitions that you see coming in the future?

Kish: There are bigger players that have not yet put forward their vision for virtualization and cloud in a consistent way. That includes companies like Oracle and IBM. I expect that you'll see companies like that get involved in the desktop virtualization market.

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