Sometimes the best way to make money on desktops is to stop selling them.
By Erik Sherman
September 05, 2013
There was a time when desktop and laptop PCs were a core of what VARs and integrators offered to their customers. Sure, the margins had been thin for years, but volume helped, and there was the ongoing service that also helped keep the calendar full.
What happened? A sharp explosion of reality. Desktop computers have become so commoditized that the bottom has fallen out of the market. Notebooks are no better. At an IHS event in May 2013, Zane Ball, vice president and general manager of Intel’s Global Ecosystem Development group, suggested that a $200 ultra-thin touchscreen notebook was not only possible, but that Intel would push to enable it.
DaaS implies more than a virtualized desktop. “You want to be able to connect from home, the office, a hotel, and do meaningful work. You want email, productivity tools like Microsoft Office—probably line-of-business applications.” Eugene Murray, Principal, Local Mobile Colorado LLC
Compounding the problem, businesspeople increasingly want mobile devices like tablets that offer enough power to do what they need without being tethered to a desk or forced to lug pounds of hardware. But there’s hope on the horizon. A growing number of VARs and MSPs are finding that desktop as a service, or DaaS, offers cloud-delivered virtual desktops that are both attractive to clients and capable of delivering robust margins. To achieve them, though, channel professionals have a number of technical, client management, and financial hurdles to clear.
CLARIFYING THE DAAS MARKET
At first, DaaS may seem like yet another nebulous term introduced for its own sake. After all, virtual desktop infrastructure (VDI) has been around for years. “Fundamentally, I’m abstracting a Windows desktop and providing it to you over a network,” says Roy Bettle, president of San Marcos, Calif.-based channel pro CDM Advisors. “All the marketing BS can check itself at the door. It’s all the same.”
For most providers, however, there is an understanding of a basic difference. VDI is something delivered from servers that are typically on premises. DaaS (not to be confused with database as a service), is generally provided from a cloud deployment and usually run by a third party, not a company’s own IT department.
In addition, DaaS tends to imply a more extensive solution than just a virtualized desktop. “You want the ability to bring your own device, BYOD. You want to be able to use your tablet, smartphone, desktop, whatever,” says Eugene Murray, principal of Aurora, Colo.-based cloud solutions provider Local Mobile Colorado LLC. “You want to be able to connect from home, the office, a hotel, and do meaningful work. You want email, productivity tools like Microsoft Office—probably line-of-business applications. You want to put that out in the cloud. You want file sharing. You want rock-solid security. You want always-on backups.” DaaS must be a well-designed system that satisfies the full needs of the SMB client, which won’t have the resources to build out from a set of essentials.
There’s also a speed-to-deployment factor. “VDI is complex,” says Steve Bodnar, director of cloud services at Dell Inc., headquartered in Round Rock, Texas. “Customers are struggling to get it to work well with good performance within the tight budgets they normally have. It takes six to nine months where they can start scaling. Something like [cloud-hosted DaaS] can get it down to a month.”
This division into VDI and DaaS is relatively recent, and analysts have not followed the latter closely enough to build meaningful growth estimates. However, in the second quarter of 2013, Forrester Research Inc. surveyed companies in North America about adoption of DaaS. Notably, 42 percent of respondents are either interested in the technology or otherwise bullish on it (see chart).
VIRTUAL DESKTOPS, REAL BENEFITS
There are potential benefits that should be attractive to many SMBs, such as access from anywhere, better integrated business continuity and recovery, smoother upgrades, and corporate access to all data. Plus, when correctly constructed and implemented, DaaS can reduce technical complexity for a client. “Are they going to focus on IT, or are they going to focus on what their business does?” asks Geoff Green, director of managed service solutions development at Cleveland-based IT consultancy MCPc Inc.
“I’ve run into people saying there are certain [regulated] areas where this has attractive features,” says Dan Kusnetzky, founder of analyst firm Kusnetzky Group. Such areas as healthcare, government, and finance can appreciate applications being available to workers without leaving masses of confidential data at hand. “The idea of running a desktop environment with the applications they demand and managing everything somewhere else so the clinic or nurse’s station or financial services trader’s desk are pristine, and no critical or private proprietary data remains [is attractive].”
For channel players, DaaS as part of a more extensive offering, possibly including other managed services, can be a great business boost. VARs and MSPs we spoke with who are selling DaaS services report anywhere from 30 percent to 100 percent margins, depending on what is included. They charge prices that range from $30 to $200 per month per user, and that can still come out less than the cost of traditional desktop and server architecture when you factor in cost of software, support, and provision of services like email.