VDI Economics and Reality (Part 1)

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On the surface, Virtual Desktop Infrastructure (VDI) is a wonderful thing. There are promises galore out there with regard to how much money you’ll save and all of the other benefits around it. But, there are some cold, hard truths that must be confronted before jumping into the fray.

You will not immediately save money with what’s being sold as VDI today. If you’re planning to replace your existing end-user workstations with full virtual desktops as a way to save money right now, you’re out of luck.

Now, when we’re talking about long-term TCO, things might look a little different, but it largely depends on your goals, the current state of your desktop management solution and your willingness to differentiate users with different needs and provide computing solutions based on those differing needs.

Let’s start by talking about a recent study performed by Microsoft, which had some interesting results regarding VDI. Here are the primary results of the Microsoft study:

  • VDI with Windows 7 is 11% more expensive than Windows 7 PCs for office workers
  • VDI with Windows XP is 9% more expensive than Windows XP PCs for office workers
  • Total PC and VDI labor costs are similar, but costs are accrued to different support teams
  • Higher software costs make VDI more expensive than PCs

How can this be? Although I think many people realize that VDI won’t have the same kind of return that we’ve enjoyed through the implementation of virtual servers, there is still a wide expectation that the technology would have some kind of positive return on investment.

Microsoft’s study focused on typical office workers and included pretty comprehensive total cost of ownership details, including:

  • Hardware costs
    o   PC assumption: PCs cost an average of $750 (with monitor) and four year lifecycles
    o   VDI assumption: Thin clients are replaced every 7 years; back-end servers and storage is replaced every 4 years
  • Software costs included Microsoft and VMware licensing
    o   System Center Configuration Manager for management
  • Electrical costs
  • Back-end infrastructure including
  • Personnel costs for all kinds of activities
    o   The study goes so far as to realign IT staff responsibilities are a migration from standalone machines to VDI is undertaken

At the end of the day, the results showed that, although hardware costs were significantly lowered through the implementation of VDI (a 32% reduction, to be exact), the corresponding 64% increase in software costs basically negated the hardware savings. It should be noted that some of the additional costs are related to the need to purchase additional Windows licenses specifically intended for use in virtual environments; in fact, I see this cost as a huge deterrent to VDI. More on that, later.

VDI vs. Terminal Server

It’s also important to realize that this is a study that focuses on the typical office worker. Do office workers need the benefit of a full VDI implementation or would these users be better served through the use of a Terminal Server-based environment instead?

A Terminal Server basically shares a single operating system instance with a number of connected users whereas VDI in its purest form generally provides each user with his or her own computing environment, which includes an operating system instance. Right there, we begin to see that there is an economy of scale with terminal services that isn’t there for VDI; under terminal services, user density levels can be much higher due to the sharing of a single operating system image, single application installation, etc. Under VDI, although hypervisors will perform some memory management that alleviates some of the overhead, the operating system and each of the applications requires a bunch of resources that, when scaled out, means that a single host could be running a few dozen copies of Windows 7. Add up that generalized overhead and it’s easy to see why a single OS terminal services environment enjoys higher density levels.

A Terminal Server-based solution also enjoys simpler licensing overhead since you’re dealing with a single company – Microsoft. As you move into the VDI space, Microsoft remains an option, but there are other competitors out there, most notably VMware.

Of course, I would be remiss if I didn’t mention that there are competitors and add-ons to Terminal Services, but I’m not going to focus on them in this article.

The upfront costs

Although the list below is not nearly as comprehensive, let’s do a quick comparison of four scenarios:

  • Traditional desktops
    o   The way companies have done desktops for a long time
  • Terminal Server with regular thin clients
    o   Move to server-side computing with cheap terminals
  • VDI with PCoIP (Teradici) using shared storage
    o   Closer to “desktop replacement” than the terminal server solution
    o   All of the benefits of virtualization including high availability
  • VDI with PCoIP (Teradici) using local storage
    o   “VDI on the cheap”

These scenarios will compare direct costs only. We’re not going to take into consideration staff overhead and changes that might come from use of these solutions. We’ll take a look at a 100 user implementation and see where we land.

Let’s assume the following replacement cycles and costs. These are rough (and, maybe, a bit low in some cases) costs, but good enough for comparison:

  • Desktops: 4 years ($550)
  • Monitors: 4 or 7 years ($200)
  • Low end terminals: 7 years ($200)
  • PCoIP terminals: 7 years ($380)
  • Servers: 4 years ($5,000 – $7,000, depending on specs)
  • Storage: 5 years ($20,000)
  • Windows Virtual Desktop Access (VDA) license: $100 per year per concurrent device
  • Windows Terminal Server Client Access License (CAL): $149 per concurrent user/device

Based on the information identified in Microsoft’s white paper entitled Remote Desktop Session Host Capacity Planning in Windows Server 2008 R2, I’m going to assume that all 100 users can use a single server with 32 GB of RAM. Now, this is not likely to be a real world deployment due to the fact that there would be no failover in the environment and a server failure would result in the loss of productivity for 100 desktop users. I realize it’s simplistic, but this exercise is intended to establish a cost baseline at which point we can begin adding in options such as failover.

I’m also making the following assumptions:

  • One of the VDI setups will require three servers to host 100 full VDI desktops supporting PCoIP and will use a relatively inexpensive hardware.
  • For the VDI environment, VMware View Enterprise (not Premier) is being used. Again, this is a baseline cost comparison.  If we decide we want to add Enterprise features later, we can.
  • Monitors for the traditional PC deployment will be replaced at the same time that the PC is replaced.
  • Monitors in the terminal and VDI deployments will be replaced when the terminal is replaced.
  • I’m assuming that the organization has an agreement in place that includes Windows Server CALs (user-based) as well as appropriate volume licenses for the Windows desktop environment.
  • I’m also assuming that this fictitious organization does not yet have RDP/Terminal Server CALs.
  • And here are some important facts that must be known ahead of time:
  • The Windows VDA license is required for any device that does not come with a valid Windows OEM license. This includes devices that run Windows XP Embedded (XPe) and Windows Embedded 7 (WE7). In essence, you’re paying for two Windows client licenses.
  • At present, the new VDA license is not available via Campus Agreements for colleges and universities.
  • The licensing prices in this article are all list prices. It’s entirely possible – and likely – that organizations might already have in place licensing agreements that could cover some of these items. For example, some of Microsoft’s Client Access License bundles might include some of these licenses.
  • Microsoft Software Assurance customers have additional options with regard to accessing virtual desktops. Specifically, according to Microsoft, “As of July 1st, 2010, the rights to access virtual desktops have been included as a benefit of Software Assurance. Hence, if you intend to use PCs already covered under SA to access your VDI environment, no additional licensing is required. However, if your PCs are not covered under SA, contact your Microsoft representative to understand how to get SA for those PCs.” The reason that I bring this up is that SA customers can

And, I want to fess up on one uncertainty that I have:

  • I’m not 100% positive whether you need an RDP (Terminal Services) CAL if you purchase a VDA license. I don’t believe that both licenses are required. I’m happy to be corrected as I’m not the definitive resource when it comes to Microsoft licensing.
    o   I believe that the RDP/TS license simply allow the device/user access to the server-based desktop.
    o   I don’t believe that VDA is required because VDA is a license that essentially allows virtualization of a desktop, which is not what Terminal Services does; TS redisplays the server desktop, not a client desktop.

The scenarios played out

Now, let’s look at what happens as we play these scenarios out over eight years. Again, please understand that I’m keeping these scenarios simplistic for demonstration purposes. I’ve included hardware turnover but did not include software upgrades or maintenance in these raw numbers. In a future article in this series, we’re going to expand on these scenarios and include more of these items.

Traditional desktops

Here’s a look at what the cost might be for 100 regular old desktops with decent monitors. Obviously, this is not a total cost of ownership (TCO) value, but a direct cash outlay value.

Figure 1: Terminal Server with regular thin clients

Now, let’s see what happens when we switch to a Terminal Server/Remote Desktop Services-based computing model. In the chart below, you can see that our direct costs have gone down. It’s conceivable that an organization could run in this environment – with no software upgrades – for the eight year duration, but it’s not really likely. Again, comparison purposes only.

Figure 2: VDI with PCoIP (Teradici) using shared storage

What happens when we decide that virtualizing the desktop and deploying that to a user is our desired course of action?

Figure 3

As you can see costs go through the roof for a few reasons:

  • Microsoft requires the additional of an annual VDA license for each endpoint since the endpoints are, in this case, PCoIP-based terminals not running Windows themselves.
  • Additional servers and storage are required to support the load. Further, this backend infrastructure needs to be replaced every so often.
  • Additional licensing for VDI from VMware is required.  We’ll look at a Hyper-V-based scenario in a future article. Bear in mind that this is the base license from VMware!  It doesn’t have the Premium features.

VDI with PCoIP (Teradici) using local storage

If we change to local storage, the picture starts to look a little better, but not a lot. If we could eliminate that pesky VDA license, we’d be in great shape.

Figure 4


Here are the key takeaways from this article:

  • VDI licensing and costing is incredibly complex. The examples I’ve shown here show only a small part of the story. I’ll expand on this story in a future article in this series.
  • Microsoft has added a huge VDI “tax” in the form of an annual charge for the VDA license.
  • Terminal Services/Remote Desktop Services remains a completely viable option and might actually save money!

My goal in this article has been to share what I see as some major licensing and cost challenges when it comes to VDI. To the best of my knowledge, I’ve gotten the facts straight, but if I’ve blown it anywhere, I look very forward to you sharing your corrections in the article’s comments.

Now that it looks like VDI’s costs are simply out of control, in a future part of this article series, we’ll discuss exactly why VDI remains a hot topic and how a look beyond the obvious costs might make VDI a desired solution.

If you would like to be notified of when Scott Lowe releases the next part in this article series please sign up to our VirtualizationAdmin.com Real Time Article Update newsletter.

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