Magazine Article | April 16, 2009

It's Time To Jump Into Network Virtualization

To grow sales in a weak economy, this VAR is focusing on the strong value proposition of storage virtualization, plus the often-overlooked benefits of desktop virtualization.

Business Solutions, May 2009
Virtualization couldn’t be hotter. With business budgets slashed to the bare bones and the pressure to push existing IT infrastructure to its limits in an effort to minimize capital expenditures, virtualization of servers, storage, and, more recently, desktops has become the hottest trend in IT. Poised to cash in on that opportunity is Choice Solutions LLC, a solutions provider that recently deepened its concentration on virtualization. Company President Jim Steinlage is confident Choice Solutions will meet its 2009 revenue projection of $21 million despite eliminating three full technology practices last year — all because of opportunities related to the company’s remaining virtualization practice.

“Everything we’ve read and experienced indicates virtualization technologies will experience massive growth in coming years,” says Choice Solutions President Jim Steinlage. “Many decision makers are becoming more comfortable with the proven technology behind server virtualization, and pricing for necessary components has dropped.” In fact, a February 2009 Gartner report cited the biggest potential growth opportunity this year as server virtualization. According to that report, virtualization will grow at an average of 28% a year through 2013 — from $1.8 billion today to $6.2 billion in five years. That growth is happening for several reasons. First, the advantages of virtualizing servers are well established — by using software to “create” virtual servers that use the underutilized capacity of physical servers, customers leverage more out of existing servers, consume less energy, and see reduced costs as fewer servers are necessary, even as storage needs grow. Plus, the economy is helping push virtualization to the next level. “CEOs are looking for ROI in less than a year on any project, and virtualization can do that,” explains Steinlage. Choice Solutions expects to continue to grow its virtualization business, first through focusing on desktop virtualization and then by concentrating on adjacent technologies such as enterprise content management (ECM), storage, and business continuity.

Desktop Virtualization Is The Next Step
“We expect desktop virtualization to yield a 100% increase in new projects in the next two years,” says Steinlage, who explains that server virtualization projects accounted for at least an additional 25% of Choice Solutions’ deployments last year. There are multiple reasons behind the high expectations Steinlage holds for virtualization.

“If I told you that in three to five years, you’ll spend more on office supplies than managing your desktops, would you be willing to talk to me for 30 minutes about a plan?” Steinlage says that is the bottom line when it comes to pitching desktop virtualization. “We are working toward a ‘bring-your-own-device’ world, where the workforce is mobile, and you have to deliver applications at home, on the road, and in the office. Desktop virtualization is the answer to that.” The essence of desktop virtualization is this: The “image” a company wants on every desktop used for its business — from machines on desks in the office to the personal laptops used on the road — is composed of policies and applications. Traditionally, those are loaded onto each machine individually, each with its own license, each with its own upkeep needs. Each machine has its own hard drive and therefore contains unique, and often, unprotected data. With desktop virtualization, you have one image stored in your data center, along with all the data from each user. Each time an employee logs in, they see that image, pushed out to their machine, wherever it is. The advantages are many: lower licensing and maintenance costs, higher data security, stricter policy control, and considerably lower management costs. “A lot of people who wouldn’t do this in the past are being pushed to this model because they have to find ways to save,” says Steinlage. “As a corporation, I am responsible for what is on your desktop, and with virtualized desktops, I can push out to you what you should have, I can audit and prove usage when it comes to licensing, and I can control what you download and use. This keeps the desktop pristine, and you can imagine the relief at the help desk.” Additional benefits include simplified upgrades and patches. Rather than having IT staff moving from one machine to another to switch users from Microsoft XP to Vista, the IT staff can provision one version of the new application and push it out to the entire user base in minutes. “The management aspect is so much simpler; instead of 1,000 users with a 1,000 operating systems on 1,000 desktops, you have one copy of the OS, and you just push it out to each user,” says Steinlage. Desktop virtualization also eliminates security concerns, particularly those related to today’s mobile workforce. “Say I work in healthcare, and I have my laptop stolen, which has patient information stored on it. If you have a virtualized desktop, that data isn’t stored on that laptop, it is safe and sound in the data center, and that laptop is pretty much useless,” says Steinlage.

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For CEOs faced with making existing investments stretch further, the decision to move to virtual desktops can save money across several fronts. And with past technology glitches now eliminated, Steinlage says the market is ripe for sales. “Two years ago there was still the issue with storage. Virtual desktops still had a major footprint in the data center, and that kept storage costs high, but now you have one image on a data center, and you provision it out to everyone, making desktop virtualization ready for prime time.”

Add On Revenue Opportunities With Storage, ECM
Steinlage’s prognosticating doesn’t stop there. He believes — as do many vendors in the virtualization industry — that the day is fast approaching when each of us will carry one appliance, a combination device that meets communication, application, and multimedia needs all in one place through technologies such as desktop virtualization, unified communications, and mobility. “Your mode of business will be an appliance you carry with you,” says Steinlage. He believes that “one device world” will open the door to another opportunity tied to virtualization of desktops. “There is a piece missing. We’ve done a good job with all the digital information, but we haven’t addressed where we will access all the paper products.” Steinlage believes the opportunity that follows desktop virtualization is the capture of the paper documents that now need to be accessible digitally since your workforce is linked via the network, not hallways. That’s why Choice Solutions is projecting 300% growth in its ECM sales over the next year. “We show clients how to scan documents and create an electronic workflow, which ultimately drives more storage needs [Choice Solutions projects up to $2 million in storage sales this year],” says Steinlage. In fact, with that combination of sales — server virtualization, desktop virtualization, ECM, and storage — Steinlage sees tremendous opportunity for installation sales, plus managed services to monitor all those aspects of the network. And don’t forget business continuity.

Use Business Continuity To Extend Sales
“Virtualization goes hand-in-hand with disaster recovery and business continuity,” says Steinlage. “The economy drives virtualization, which drives storage. Then we talk to customers about disaster recovery and business continuity. That leads to talk about ECM, and then we progress to archiving and so on. It is all part of a transition that starts with virtualization.” As an example Steinlage cites a current midsize banking client that was outsourcing its disaster recovery structure to the tune of $50,000 a year. Choice Solutions installed two server structures (one for the bank’s main site, one for disaster recovery purposed in a branch 30 miles away), virtualized the main servers, and deployed software that enabled two-way data replication. That led to a reliable backup environment that allows the client to restore, within minutes, to any point in time rather than the hours it would have taken before. The customer can test any time and now has backup at a branch location, all for the same amount as the prior outsourced solution would have cost over five years. Plus, with that system up and running, the bank decided to take it one step further and implement desktop virtualization, which will be built on the existing infrastructure.

Using virtualization to build ongoing revenue is key to Choice Solutions’ plan to replace the $3 million in revenue lost from the company’s three cut practices. Perhaps more telling, Choice Solutions has already increased its gross profit margins by honing its technology focus on virtualization and adjacent technologies such as ECM and storage; that figure is up 4.5% despite slightly lower revenues. The lesson for VARs who may be facing the same issues as Choice Solutions faced two years ago (i.e. high certification costs and the battle to be the best at too many solutions) — you may be able to refocus, refine, and reboot your revenue stream by concentrating on a growing market such as virtualization.