Cashing in on Desktop Virtualization

Centralized virtual desktops promises to lower TCO and improve employee productivity. The technology leader in this space is Citrix XenDesktop with VMware View close behind. They probably have about the same market share and all of the virtual desktops are running Microsoft XP or Vista.

Let's take a look at what is becoming a very common configuration - Citrix XenDesktop Enterprise running on top of VMware Virtual Infrastructure (VI) with Microsoft XP/Vista virtual desktops. So Citrix is providing the desktop virtualization infrastructure, VMware is providing the virtualization platform and Microsoft is providing the desktop OS.

So for three year software licensing costs.

Citrix XenDesktop Enterprise is $295 per user plus $15 per year after the first year to stay current with updates. The three year cost would be about $325 retail.

Microsoft XP/Vista costs will vary considerably but if you are using thin clients the annual costs are about $120. This is for a VECD license without SA. A Terminal Services CAL is also required at a one time cost of $120 in order to use the XenApp for VDI component in XenDesktop. The three year cost would be $480.

VMware Virtual Infrastructure (VI) is used in almost all large companies for server virtualization. So these companies are choosing to use VMware VI as the virtualization hosting platform for their virtual desktops. The three year cost per server will be about $8800. With an estimated 35 user per server this breaks down to about $250 per user.

The estimated average cost per user is $325 + $480 + $250 = $1055. And this is just the software costs as you will have a significant costs in servers, thin clients and storage.

For a Citrix XenDesktop you will most likely have a Citrix sales engineer working at least one to two weeks and a Citrix sales member having several meetings and presentations to make one sale. Microsoft and VMware would need to work with the customers usually under a volume license agreement to faciliate the purchase of licenses.

So we have Citrix doing most of the work but as you can see they get less than 1/3 of the total software cost.

VMware at 24% ($250 / $1055) gets almost 1/4 of the total software revenue for the least amount of work.
Microsoft at 45% ($480 / $1055) gets the most software revenue for only slightly more work than VMware.
Citrix at $31% ($325 / $1055) gets less than 1/3 of the software revenue but does the most work by far.

These numbers are all estimated based off retail costs. The Microsoft licensing costs could be signficantly lowered if you already have a Microsoft desktop OS installed on the client.

From these numbers we can draw some interesting conclusions.

1. Microsoft benefits greatly from virtual desktops and receives a huge portion of the software revenue.

2. VMware gets about the same amount of revenue ($250 per user) as long as VMware VI is used as the virtualization platform. VMware's desktop virtualization product, View, is about $250 per user for the enterprise version which includes VMware VI.

3. Citrix does most of the work for the sale yet gets less than 1/3 of the total revenue. This is why Citrix needs the base virtualization platform to be Citrix XenServer or even Microsoft Hyper-V. This mostly likely drove Citrix to make XenServer free.

If anyone has questions or more exact numbers please feel free to comment.