Citrix Survey: Is DaaS The Next Big Thing?

Worth The Hype?

Everyone wants to anticipate the next big service to fall from the cloud.

The folks at the Citrix Service Provider Center of Excellence asked their 2,000 plus partners about the future of DaaS. Some 718 service providers from 25 countries weighed in on the emerging, hosted desktop market.

Their answers, compiled by Citrix, shed light on how managed services providers see the market evolving through their own revenue and growth projections and customer characteristics.

The survey offers insight into a sector of the global cloud market that lacks significant research. While there's plenty of hype, Citrix noted that limited information on real virtual desktop trends creates "a difficult dilemma" for MSPs considering adding the offering.

Will DaaS Revenue Grow?

Most MSPs expect the market to grow substantially this year.

The survey found 87 percent of respondents anticipate acquiring more revenue through their virtual desktop offerings, and 34 percent of them project growth somewhere between 16 and 50 percent over the next 12 months.

The survey authors noted respondents are probably being conservative in their near-term estimates of the industry as a whole. New service providers entering the market will likely accelerate total revenue growth beyond those projections.

Which Services Will Fuel Growth?

Citrix asked MSPs what services they plan to add to grow revenue and total subscribers.

Just more than half the service providers see demand for bundled services -- those combining virtual workspaces with applications, mobile device management and cloud-based file sharing to solve specific workload needs of business customers.

Those bundles create business-ready desktops streaming on-demand applications that allow control over which employees see what parts of the corporate network. They're great for short-term staff, transitional labor forces and BYOD initiatives.

Forty-four percent of the respondents plan to add file-sharing-and-sync services, 43 percent mobile device management, 28 percent hosted line-of-business apps and vertical market-specific applications.

What Size Businesses Are Driving Demand?

Seventy percent of the MSPs queried told Citrix their average customer employed under 100 people, and 40 percent said that number was less than 50 employees.

About 22 percent of the respondents provide DaaS and other workspace services to larger companies, some of them enterprises with more than 1,000 employees.

"The appeal of DaaS for smaller businesses is driven by the ability to outsource line-of-business applications and desktop management to a service provider, combined with the fact that DaaS-hosted workspace packages can be delivered for a predictable monthly cost," Citrix reported.

At the same time, "service providers indicate a pipeline of growing interest among larger business customers."

Which Verticals Are Adopting DaaS?

The breakdown across vertical markets is well balanced:

Financial Services, 13 percent; Healthcare, 12 percent; Manufacturing, 12 percent; Construction/architecture/engineering, 10 percent; Government/Public Sector, 9 percent; Retail, 9 percent; Legal, 9 percent; Education, 8 percent; and Other, 18 percent.

That's an interesting shift from the rankings in the Citrix December 2011 survey, when the leading verticals were revealed as healthcare, legal and then public sector/government. Manufacturing finished fifth.

"The growth of manufacturing as a DaaS vertical is a keen indicator of new trends in the vertical market ranking," Citrix noted. "While it’s noteworthy, which vertical markets are being served, the breadth of responses also indicates the horizontal appeal of DaaS across a range of markets."

Is There A Preferred Infrastructure Model Or Hypervisor?

DaaS hosting is shifting to the public cloud.

Today, 80 percent of respondents use either their own or a co-located data center to host the virtual desktops they offer customers. But the Citrix partners expect that number to shrink to 61 percent over the next year, which means a 19 percent migration to IaaS vendors over the next 12 months.

"The responses for what service providers plan in 12 months show a definite trend toward shifting to a cloud-based infrastructure," Citrix said.

Slightly less than half of respondents use VMware's hypervisor, 29 percent use Microsoft HyperV and 23 percent use Xen.

"Since no majority prefers a specific hypervisor, the results indicate that DaaS providers like the flexibility of choosing their hypervisor -- or hypervisors."

Providers Prefer To Specialize On Verticals

While DaaS increasingly appeals to an expanding number of industries and markets, service providers like to focus on specific verticals like healthcare, manufacturing and financial services.

That type of specialization limits competition and gives credence to the MSPs unique value proposition to its customer, which in turn leads to better margins.

The DaaS Market Is Global, Growing And Bundling

The fact that survey respondents hailed from 25 countries speaks for itself -- DaaS is a global market.

Beneath the hype from pundits and vendors, the survey showed the DaaS market will continue expanding rapidly this year, although probably not at the exponential rate that some enthusiasts project.

At the same time, DaaS service providers will increase their revenue by packaging larger bundles of services onto virtual desktops such as applications, file-sharing services and mobile device management. That will attract new customers and encourage existing ones to make bigger buys.

"These combined service bundles also illustrate the demand among customer for business-ready desktops that come with applications designed for their specific vertical market," the Citrix team noted.