As I mentioned in Part 1 of this Blog, “how big is the cloud-hosted desktop market?” is still the top inquiry I get from our Citrix Service Provider (CSP) partners looking to enter the market.

In that first post I outlined some of the approaches I take to describe the growing size of this market.  In this post, I want to offer additional data that Service Providers can use when justifying investments of IP and capital for ventures into cloud-hosted desktops.

Analyst assessment of the SMB Market

Small-and-Medium Businesses are likely the first (and major) adopters of DaaS. They are least likely to have sophisticated IT departments and/or data centers, most cost- and complexity-sensitive, and most likely to have mobile (i.e. work-from-home) employees.

Conservative analysis in 2013 by AMI Partners who specialize in SMBs, tens of thousands of SMBs (larger than 50 employees) are pre-disposed toward purchasing DaaS solutions; In the US the estimate is 95,000 businesses; in Western Europe, 38,000; in LATAM, 87,000.  Contact me at the Citrix Service Provider program if you’d like more detailed findings.

Furthermore, recent analysis,  BYOD and Virtualization in SMBs, trends by Gartner Research indicates that

“According to our 2012 survey results, approximately 43% of SMBs are already deploying HVD [Hosted Virtual Desktops]. We believe SMBs’ interest in DV is partly driven by the fact that their client computing environments are not as complex and distributed as the ones in large enterprises. In fact, the highest planned adoption rate for 2013 to 2016 is among SMBs where the number of absolute devices that are considered for virtualization is fewer than 100 physical devices (40% of 100 to 250 users)…

Using Office 365 as a Proxy

Indeed, comparing Microsoft Office 365 to a full-blown hosted DaaS solution is a bit apples-to-oranges.  But it does provide a proxy for estimating SMB’s propensity for using – indeed, subscribing to – a cloud-based workplace productivity tool.  According to recent Microsoft announcements, there may be as many as 1,000,000 seats in production – at an advertised $100/yr price. Now that’s momentum.

I also subscribe to the conservative view that Microsoft may be overstating their numbers somewhat. But even if so, even a lesser number is probably quite impressive as an adoption metric.  Watch this space in the near future to see what larger enterprises adopt it, and what Microsoft’s annual run-rate grows to.

Overtures by large players

Another piece of evidence is simply the fact that if large vendors make large bets on the space, that could be empirical evidence of a growing (or soon-to-grow) market. Obviously Citrix has already invested heavily in this space, with over 2,500 partners now offering DaaS solutions globally. And recently VMware’s End-User Computing group announced its intention to move into the space as well. To wit, Dell has made a similar entry in the market with 3rd party technology.

But what happens if other mega vendors enter?  If or when we see players such as Microsoft (Azure) and Amazon (AWS) offer DaaS or other forms of hosted workspaces, it could be evidence that the players in-the-know are getting enough market encouragement from customers to make significant investments.  And this could add to the self-fulfilling prophesy that the age of cloud-hosted desktops is beginning to mature.

Timing: The $64 question

With the momentum we see at Citrix, and with the number of large design wins in our pipeline, I expect the DaaS market to “pop” in 2014.

By that I mean that customers will begin to be less skeptical about performance, and providers will have richer offerings. I would also expect new entrants into the space – complete with new/expanded business models.  And, from a “hype” cycle perspective (thanks, Gartner) I’d expect to see DaaS move away from the peak of expectations in the direction of a more mature technology.   While we may be many years from DaaS becoming a mainstream complement to other delivery mechanisms, all signs indicate that it has certainly moved out of its early stages and is on its way to adulthood.

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