The Coming Desktop Revolution?

Companies as varied as Nortel, Nationwide, and Bechtel are experimenting with virtual desktops that are likely to improve securitybut will they reduce costs?

Nortel Networks Chief Information Officer Steve Bandrowczak has already taken a whack out of the high cost of managing and operating his company's thousands of desktop computers. He estimates that it costs Nortel about $100 per month to operate a PC, including everything from the purchase price to software, maintenance, and support expenses. That's compared with upwards of $150 per machine at other companies.

Bandrowczak isn't done yet. "It's still not good enough," he says of the cost-saving efforts to date. The executive's ultimate goal is to cut monthly costs to $50 per PC. Spread across the 27,000 computer users at the phone equipment maker, the 50% cost reduction could translate to $1 million in monthly savings.

Lenovo's Secure Managed Client

To reach Bandrowczak's lofty goal, Nortel is experimenting with tools that could make it easier and cheaper for IT staff to manage the company's fleet of computers. In a lab setting, Nortel (NT) is testing a new Lenovo ThinkCentre desktop PC called a Secure Managed Client, which comes without a hard drive. Instead, the computer stores data and software applications centrally in a corporate data center where Bandrowczak's staff can more efficiently handle backups, update software, and fix problems. Lenovo says that in some cases the computer can help customers reduce desktop costs to about $70 per PC per month from an estimated corporate average of $120 per month.

Bandrowczak, previously chief information officer at Lenovo, sees virtual desktops as a good fit for about 70% of Nortel's users. Nortel is now trying to determine whether and how much virtual desktops can help the company save money. Depending on the findings, Nortel may equip a couple thousand employees with virtual desktops in 2009.

At a time when slowing demand is forcing corporations to slash costs by any means, nearly one in four companies is experimenting with virtual desktops in some capacity, according to consulting firm Nemertes Research. Among them are Nortel, Nationwide Insurance, and Bechtel. "It is probably one of the real game changers from an infrastructure standpoint in the next year or two," says Bechtel CIO Geir Ramleth. This month, Bechtel will increase testing to about 100 employees from about two dozen.

Enhanced Security

While many CIOs are intrigued by the technology, most aren't yet deploying it on a large scale. The biggest challenge, says Ramleth, is deciding what flavor of virtual desktop to use. "We're looking across the board at many types of virtualization," says Robert Burkhart, head of new technology innovation at Nationwide. Burkhart is testing virtual desktop software from VMware (VMW) and Citrix Systems (CTXS) as well as the Lenovo Secure Managed Client. There may be room for all three at Nationwide, he says. Right now, the insurer has a few hundred employees using virtual desktops. "We think we're going to aggressively grow that," says Burkhart, adding that in 2009 the goal might be for 10,000 or more employees to use virtual desktops.

Besides helping companies reduce expenses, virtual desktops can also help IT departments better handle PC security. With virtual desktops, the storage and processing of data typically occurs in another place, such as a remote server or storage device.

It's similar in some ways to cloud computing, except virtual desktops are usually delivered internally from a corporate data center and not from a third-party provider. If an employee's computer crashes, that blue screen of death is not necessarily catastrophic because the virtual desktop can often be restored.

IT staff no longer need to worry about the security of the entire physical device but rather the security of the virtual desktop. "We can protect the data much better because it never leaves our walls," says Nationwide's Burkhart. If an employee loses a laptop with sensitive data such as Social Security numbers, the IT department can block access to that desktop like credit-card companies do with stolen credit cards. "Some of these laptops have bigger storage capabilities than I had just 10 years ago in my entire data center," says Nortel's Bandrowczak. "You have a very significant intellectual property asset that is mobile."

Personal Laptops for Business

Another defining trait is that multiple virtual desktops can run on the same piece of hardware, so a worker could use a personal laptop to access a work virtual desktop and be able to toggle between a work and personal set-up on the same machine. Eventually, virtual desktops could pave the way for employees to use their own laptops at work. Already, Parallels and VMware (VMW) make software that lets people run Windows programs on a Mac so that they look and behave almost exactly like Mac OS X programs.

Citrix, which also makes virtual desktop software, started an employee-owned computer program in September and within the first two months 350 employees signed up to participate. Citrix gives those employees up to $2,100 to buy their own laptops and asks them to sign up with maintenance plans through the manufacturer. Citrix uses its own virtual desktop software to ensure that employees still have access to corporate software used internally.

Software engineer Mark Beyer signed up for the program early on because he preferred to use a Mac. "They issued me a PC and I never used it because I didn't like it," he says. Instead, Beyer purchased a $3,500 Mac laptop. Since he uses it for both work and personal use, he says he was happy to pay the extra amount out of his own pocket.

Citrix plans to get about 750 laptop users signed up for the program by the end of 2009. One goal is to reduce the dependency on IT to purchase and maintain those devices. If employees can be persuaded to call the manufacturer and not the IT help desk when there's a problem, that could help save Citrix money, too.

Not every CIO is eager to start an employee-owned computer program. Nortel's Bandrowczak envisions that employee-owned hardware would instead become a management and logistical nightmare for IT departments, especially if employees purchase inexpensive computers vs. more expensive, corporate-grade PCs. "We're still not there yet," he says. Bandrowczak also fears that the IT department would be called on to support those employee-owned devices, quickly eroding any anticipated savings.

Cost Reductions

In the same vein, it's still not clear whether or how quickly desktop virtualization will yield significant savings for CIOs. "It has enormous potential to reduce costs but it's not a quick fix," says John Burke, principal research analyst at consulting firm Nemertes Research. Cost reductions will largely depend on the type of virtual desktop used.

The cost of operating virtual desktops that are hosted on servers in the data center, for example, is about 2% to 10% less than comparable conventional desktops when all costs, including maintenance, are considered, according to an August report from consulting firm Gartner (IT). That approach requires a capital investment in servers and/or storage, a barrier for many companies, according to the report.

Today the market is highly fragmented with very different approaches to desktop virtualization. The technology can be installed individually on a PC or hosted in a data center on servers or storage devices and delivered through conventional PCs or pared-down machines known as thin clients. Road warriors can even download entire desktops to thumb drives for business trips instead of lugging laptops. There are a range of offerings by software vendors such as VMware, Citrix, Microsoft (MSFT), IBM (IBM), Parallels, RingCube Technologies, Moka5, and others. The Secure Managed Client that Nortel is testing is the result of collaboration among Lenovo, Intel (INTC), and Avocent's LANDesk Software subsidiary and others.

Despite the untested nature of the technology, Bandrowczak and others have high hopes for virtual desktops. Many companies saw the enormous cost benefits of a related technology, virtual servers in the past few years. That technology let companies consolidate many servers onto one piece of hardware in the data center. It dramatically lowered hardware capital costs for companies, which added up in some cases to millions of dollars.

"With server virtualization, you're consolidating the data center and there's a clear-cut return on investment," says Chris Wolf, senior analyst at the Burton Group. "With desktop virtualization, I'm not taking resources out of the data center, I'm adding to it." On the high end, Wolf estimates a 40% reduction in desktop support costs, but generally, he says, that number is closer to 20%.

"No matter what you do, you have to spend some capital to get the costs out," says Bandrowczak. "Every CIO is looking at every technology to improve their infrastructure and their operating costs. We are under such tremendous pressure to drive better productivity, to drive better costs, especially in the economic climate we're in." In the face of challenges like that, even modest IT savings will do.

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