Market timing – Research firms have got it wrong for the last few years. Adoption hasn’t been what they forecasted. Hence, by 2014 there will not be 40M+ hosted virtual desktops in the U.S.
Mitigating Factors – Everything we’re hearing from our customers is the opposite. IT admin and management have become a huge pain point with consumerization of IT and all the various end points employees are bringing in the workplace. Software publishers are coming up with updates a lot more frequently and to keep up with the latest and greatest is a huge task. Costs to maintain desktops have stayed high and with the economic backdrop and softness in the business, cutting costs is a key initiative. No longer is IT just a back office and “keep my emails running” type of a job – IT is now strategic and a competitive advantage.
Competitive Landscape – the market is fragmented with a lot of players coming up. Furthermore, VMware and Citrix can enter the hosting space, which, with their install base, could wipe out smaller companies.
Mitigating Factors – The rise of many companies in this space gives credibility to the nascent space. If market timing wasn’t right, why would all these companies start coming up? The market is completely greenfield and so there is room for more than one player. VMware will never get in the hosting space as it creates a channel conflict for them. For example, if Microsoft has a lot of cash on its balance sheet and has 80%+ of the enterprise OS, then why doesn’t Microsoft start building desktops? It would be a channel conflict. Citrix on the other hand could make a play in hosting, but would have to significantly deviate from its core business (always challenging).
If investors can get more comfortable with these challenges, we’ll continue to see massive investment $ in the cloud, and more specifically, hosted virtual desktops.
