Desktone retools, now sells direct to consumer. Windows 7 VDI in the cloud, $1 per day. Brilliant!

Desktone's new strategy

"Circling the drain" is the phrase I recently used to describe Desktone to a friend. The company's been around for awhile with a vision of cloud-based hosted VDI desktops. They made a lot of noise a few years ago but I hadn't heard much of anything about them more recently.

But last year, Desktone announced a new strategy. Rather than trying to sell their software to huge providers (IBM, Verizon, etc.) who would then in turn offer hosted desktops to their customers, Desktone decided to make a bold bet and do it themselves. They bought a bunch of hardware and built-out their own environment in a Rackspace colocation facility, and now they offer Windows 7 Enterprise desktops in the cloud, direct to the customer, for as little as $1 per day.

Game on.

Desktone struggles through 2009 & into 2010

Prior to last week, the last real conversation I had with anyone at Desktone was in April 2009. (Shame on me? Shame on them? Dunno.) At the time they were a software company building a software product that could massively scale desktops running in a datacenter but tuned for service provider needs like multitenancy, distributed administration, image management, etc.

That's an important fact which I missed the first time around. Desktone was a software company, not a services company. Their software product actually competed with Citrix XenDesktop and VMware View in the eyes of the service provider. (What I mean is, if you're a service provider who wants to build a cloud desktop offering for hundreds of thousands of users, you need to decide whose VDI product you use: Citrix, VMware, Desktone...)

Desktone felt that since they were only building their product for massive scale which was only targeted towards server providers, they'd achieve success through their deals to these huge providers. And the providers would choose them because they'd be getting a purpose-built VDI solution that's ready to go out-of-the-box. They wouldn't have to try to take something like XenDesktop or View--which works fine as a single-server ten-user solution--and also scale it up to 100k-user grid.

Early customers included HP, SoftBank, Marubeni, Verizon, IBM -- all with the idea that they'd use Desktone's VDI software to power their own cloud-based Desktop-as-a-Service (DaaS) offerings.

The problem, however, was that there wasn't a lot of traction.

Desktone would later realize that a big drawback of their model was the sluggish timing of their approach. It would take 6-9 months right off the bat for the telco to really understand Desktone and to figure out how they'd do it. Then it would take another 6-9 months for the telco to build out their solution, followed by another 6-9 months for the telco's sales force to learn how to sell it. Add that together and you've got an 18-24 month cycle from Day One until the telco is really selling. And in this world, that's an eternity.

Of course there are other downsides to only selling through an intermediary. In the telco model, Desktone is removed from the actual end-customer feedback loop. Do customers like it? Are they using it? What features are important? What needs to be improved? Any answers to these questions come from the telco themselves, so it's hard to differentiate between what the telco wants and what the paying customers want. (Although I guess both are important. :)

Finally, this "only available through enterprise providers" model meant that Desktone couldn't answer simple questions like, "How much does it cost?" or "Where can I sign up?" (This is one of the main reasons I thought they were shady before. I wanted to try it, but they didn't have a direct way to do that.)

A new strategy for 2011+: Desktone Direct

In mid-2010, Desktone ended up with a new CEO, Peter McKay, who also brought over a few of his pals from years back. With the new CEO came a new strategy: Desktone would use the software that 25 developers spent four years writing to build their own cloud which they would use to sell Windows desktops as a service directly to end users. They literally bought racks and racks of hardware (from Dell, NetApp, & Xiotech) and installed it in a Rackspace colocation facility, creating their own cloud datacenter.

The new direct model gave them a lot of advantages:

First is that Desktone can now be the master of their own destiny. They can build their products, price them the way they want, and market and sell them the way they want. They're closer to the customers for feedback, so the products can get really good really fast. And they can incorporate new features quickly. This has led to them creating several ancillary offerings, like domain joining capabilities, VPNs back to on-premise servers, cloud-based file storage and network shares, and master disk image versioning & management.

Another benefit is that pricing is very straightforward and Desktone can customize the offerings as needed. (Need 100 desktops but with 4GB RAM instead of 2? No problem. That can be ready in just a few minutes.)

Finally, the direct model means that Desktone can more easily sign-on partners. MSPs who were offering complete desktop management to their customers could also now offer "the complete desktop," thanks to Desktone.

(Oh, and I guess I'll just say now that I think the name "Desktone" is a really clever name, so I'm glad it's getting out their directly instead of being something that's only in the back room that no one's ever heard of outside of a few telcos.

Why is Desktone is building their own datacenter?

When I first heard that Desktone was literally buying their own hardware and renting their own datacenter space, I was thinking, "Why? Why don't you just go to one of the huge providers like Amazon or Terramark and just buy access to their virtual infrastructure? In this day and age, who wants to own hardware?!?"

But of course then I remembered, desktops are not servers! :)

The virtual infrastructure clouds that are out there are designed to run server workloads--databases and web servers and applications--they are not designed to run lots and lots of copies of Microsoft Windows 7. To illustrate this point, one Desktone engineer joked that "Windows is so chatty," and with the infrastructure providers literally charging for each disk IO and byte transferred, "we'd get charged every time a user moved the mouse!"

The other thing to keep in mind is that Desktone spent the last four years creating a software product that runs on bare metal. They need full control of the hypervisor, which is not something that service providers will do. So for that it has to be a private cloud.

Desktone also has the luxury of building for scale. There are a lot of great products in the VDI world (Xiotech, for instance) which are great but that only really make sense in the VDI world when you have a least a few hundred users. But since Desktone is designing for the big time, they can leverage all these fancy new products right from the start.

"Trust us," I've heard from various Desktone employees, "The last thing we wanted to do was to build our own datacenters." But when it comes to desktops, they didn't have a choice--it's either a custom telco datacenter or their own custom datacenter.

One interesting tidbit about this is that right now they're built on ESX. They keep considering XenServer with the tradeoff being ESX's better memory management versus its higher cost. Right now the cost model still keeps them on ESX, but they keep checking to make sure that makes sense.

Scaling up & scaling down

As I wrote previously, Desktone has been designed from the beginning to be a huge, multiuser, multitenant, multi-datacenter package. While today's direct offering is only hosted in a single datacenter (with a single connection broker shared by all customers), Desktone is rapidly expanding to add more locations in the US (for both performance & redundancy) as well as locations in Europe & Asia over the next few years.

Adding more datacenters will allow them to add additional options where customers' desktops & data can be spread across multiple datacenters (which would mean that Desktone desktops were more protected than probably 99% of most businesses' desktops. The whole Desktone platform was designed from Day One to support multiple datacenters and multiple locations. In fact Desktone could eventually put a "datacenter" directly on a customer site, seamlessly extending their cloud to the customers' premise as needed.

VDI? Really? Really!

At one point one of the Desktone folks made a comment that was sort of derogatory towards Terminal Server / RD Session Host. Of course almost by instinct I started to jump on my soapbox in defense of Terminal Server, but then I realized the only real advantage of Terminal Server, all things considered, is the cost. I can spend fewer dollars per user in terms of hardware in my datacenter with Terminal Server over VDI.

Except Desktone is selling VDI. For $30 per month. So given how cheap it is, why wouldn't you want a real Windows 7 desktop with normal apps and admin rights and all the other things you'd expect in a normal desktop? (Of course given Desktone's multitenancy and security requirements, it's also pretty clear why they offer VDI and not Terminal Server hosting.)

My point, though, is that with Desktop, you get VDI for $30 per month. You don't have to suffer through Terminal Server just to save money. I mean yeah I'll defend Terminal Server's honor to the death. But the day that I can do VDI more cheaply, I'm done.

Protocol Support

Right now Desktone will support RDP or HP RGS out-of-the-box. But if you've already bought your own Citrix XenDesktop licenses, you can get Desktone to enable HDX for your account too. (Which is great, because it works with all of the standard Citrix Receivers.) Desktone was unclear exactly how this works on the backend (I'm sure due to contractual reasons with Citrix). My sense is that it's more like "HDX Connect" for Desktone, rather than actually using the XenDesktop product.

But this brings up a good point. Citrix is an investor in Desktone, so I'd like to see the two companies work out a deal where HDX can be one of the standard out-of-the-box offerings. Maybe this would be a premium feature, like $5 per month? (Or maybe the two companies could go long and just make it a base feature that's included in the offering. If you want to blow people away with cloud-based VDI DaaS, this is one way you do it!)

This seems like a perfect case for Quest EOP Xtream, although with Citrix being an investor I'm not sure how that would shake out.

Teradici keeps talking about how they're not exclusive... I wonder if there could be something there?

2011 will be better for Desktone than 2008, 2009, 0r 2010. But there's still some room for improvement.

Desktone has made a lot of improvements in the past few years, and the new direct approach is exciting. But there's still some room for improvement:

  • The Desktone iOS client is $11.99. Yep. In 2011. A VDI company is charging for client software. #fail.
  • I'd love to see Desktone partner with a thin client vendor that they could bundle in with the offerings. It would be a nice one-click option to add to your shopping cart when you buy (and of course it would come pre-configured to connect). They could even get into leasing, like $10/month for as long as you have your account, or a free client device if you sign a two-year contract. (Complete with a $150 early termination fee. :) Maybe this is something that an MSP could offer. They could partner with Pano to configure the Easy Button to launch their own helpdesk portal or something.
  • I'd also love some kind of referral program where consulting firms or even bloggers with web ads could get something like $1 per month, per referred user, in perpetuity.
  • Licensing: Right now if you use Desktone to provide a Windows 7 desktop (they also have Linux options), you have to "bring your own" Windows 7 license since Microsoft doesn't offer Win7 in SPLA. (Don't get me started on that!) So if you don't have your own VDA license, you're looking at an extra $100 per year for your Windows license. (Although Desktone made a smart move and become a reseller so you can buy your VDA license when you're signing up for the service.) But still, I'd love to see a more-integrated pay-by-month offering.

Finally, I heard that Desktone gave at Boston's Virtualization User Group recently. I don't know what they did for the demo, but I know that group only allows two minutes for each sponsor's presentation. If I were Desktone, I would have walked on stage and gone through the whole process of becoming a customer. Visit the site. Create an account. Get the email validation. Click the link. Using my Windows 7 desktop the cloud. Any questions?

Bottom Line

I'm very excited for Desktone even though I still think that most users don't need VDI. But if you can use VDI, why not outsource it to someone else who can guarantee your cost? I think Desktone makes a lot of sense for smaller companies. It also makes sense for companies who want to provide a work desktop accessed via whatever existing computing device a user has. (Think of it as BYOC+VDI.) And if you believe with Chetan thinks about how the majority of us will all be using VDI some day, then Desktone makes a lot of sense.

What do you think? $30 a month per desktop? No brainer or fool's errand?


Join the conversation


Send me notifications when other members comment.

Please create a username to comment.

I'm just curious about 3 things :

- how they deal with VECD/VDA licence as, as far as I know, this was not eligible to SPLA contract and then could not been "monthly fees'ed".

- how they deal with applications as I'm not using only Office and everybody get their own requirement... Outsourcer knows how complex is the desktop when they have to get them on board.

- how they deal with back end infrastructure (application server) as it rely not only on dekstop but also on application and datas.

Trully curious... As, for me, this is not only DaaS but complete outsourcing services they will have to deliver...


Interesting but all I see is another company that thinks that the golden goose is in hosting desktops. I have talked to many hosting providers great and small, all over the world and they all share the same plan. Having homemade software to do their business is not an exception; it seems more of a rule.

Some of these companies are quite successful but none have exploded into the 100,000's of customers. I have witnessed the same thing 10 years ago. Back then we used to call them ASPs and it was going to be the best thing since sliced bread. As it turns out, it was not.

Don't get me wrong: I think there is a huge market for this and I want all of them to be successful because it will be good for our industry. I am just not holding my breath because there is something that is going to be a barrier for big success for companies like this: application back-ends. Without the application backends being in the same cloud as your desktops, those desktops will be of limited use for most companies. VPNing back to the heimat is a stupid way around this because your applications will get slower instead of faster. Time will tell how this hosting provider will do, or all of those others for that matter. Let’s hope they are wildly successful!


Disclaimer: I am an employee of Citrix

I keep hearing this over and over again - "Desktop in a cloud is a great idea, we want to do it, no one else does". Of course you (reader) are not the first one that case with this idea.

There are two reasons why we don't see it everywhere though.

The first one is the lack of the SPLA licensing for client OS from Microsoft (not the case for server OS though!). Simply said, you cannot let your customer use your own licenses. As mentioned before, there is known workaround - simply let the customer take care of VDA (or SA) licenses and off you go.

However, there is also a second limitation and I haven't seen any explanation how Desktone wants to overcome this. If your customers are using their own licenses, you must have dedicated hardware for them and you cannot share the infrastructure. This is where you have to decide - either you will stop the project or you will switch it to the hosting model.

You can overcome the second cloud limitation only if your customers are big enough - if they order 500 desktops, you can then build their own dedicated environment with their own dedicated hypervisors. And so far, I haven't been able to see any explanation how Desktone wants to legally solve this issue.



Disclaimer:  I work here at Desktone as the Chief Solution Architect.

I would have to second any comments about wishing for the day when we had SPLA type licensing available for Windows desktops.  Unfortunately, the only option today is to use the licencing vehicle available - in this case VDA.  We attempt to make this as easy as possible by reselling this ourselves, but of course the customers can bring their own as well.

Desktone has invested significant resources into several areas that allow us to use the platform at large service providers for the hosted Desktop as a Service.  Some of our patent-pending concepts include the scalability, role separation, service grid architecture and of course multi-tenancy.  It is important to realize however, that the multi-tenancy refers to our management framework.  Each of our customers does run on dedicated hardware.

We're glad to engage with anyone that wants to learn more.  :-)


A lot of nay sayers :)  

As we all know, there are numerous challenges when hosting a desktop in the cloud, but many of those are technical issues that can be overcome with the right technology. However, some will have a big impact on Desktone's business model. They need to have these items defined at the get go. Is their goal to be a low-cost provider? Then that will mean a more simplified desktop solution.

Just think about a few of the underlying challenges with cloud hosting:

1. The Windows 7 license thing, they are making their customers buy the Win 7 licenses. No issue.  

2. They will probably have to have each customer on dedicated servers as well, if I read MS licensing rules correctly. True this hurts bottom line, but not really that much.

3. Application integration will be more difficult.  However, maybe they require the customer to manage the apps.  If so, that takes the burden off of Desktone.

4. Application backend data is interesting. What if the user needs to get data that is located in their home data center? They would need a back-haul link setup (IPSec VPN).  

5. What about user authentication? Will users have a new account in Desktone or will it be integrated with their own AD?  Federated? Read-only AD? Something else?


In addition to the few minutes Desktone had to address the audience at our user group meeting, Desktone also did a full presentation, which we captured on video.  Below is a link to that video.  It's a little dark, but at least the audio is decent.


Great job Desktone - Now tell me the value prop of direct-to-consumer?


There are some extremely valid concerns being raised here and ones that Desktone have either built their solution specifically to address or have thought through in their offering.

The Desktone architecture is designed from the ground-up to support the desktop service provider model, so it is able to segregate each client's network within a single service provider framework.  That is one of the big Desktone USPs.  So the point about back-end connectivity to enterprise apps is a fundamental Desktone strength.  You can deliver (via VPN for example) back end connectivity by logically extending the corporate network into the Desktone framework (I think of this as the same process as opening an office in a shared building).  The virtual desktops remain on the corporate network, segregated from the service provider and the other tenants, so they use the corporate AD and applications.

The Desktone service provider framework is great for offering virtual desktops up to but not including the OS and apps.  The best answer for large corporates is that they continue to do this piece either in-house or using their current outsourced service provider in exactly the same way as they do today.  Once there is a back-end link in place, the likelihood is that their current deployment tool may not even notice that some of the desktops are virtual.  This is harder in the small business market because they may not have a clear model for managing this today, so Desktone are currently offering some help in this space to get them going.

My perception is that Desktone are on the right track here (although I am possibly a little biased since I run a specialist virtual desktop service provider in the UK called Molten Technologies).  Today, my experience is that large organisations want to do this in “their own” data centres (although many of them are less clear on what this really means, since they are relying on a third party to provide such services already).   What I see today is Desktone stirring up a lot of interest in the small to medium markets, where organisations seem more prepared to use “cloud-like” services, which fits.  What I am really looking forward to seeing is how this model extends into the large corporate market…


@ Brian Madden, PLEASE Weigh in on this discussion.

Just so that we're all on the same page, here is the "Customer Separation" clause as it appears in the Microsoft VDA document (thank you Danny Allen for citing this in an email):

"Additionally, hosters need to ensure that they isolate the hardware and other resources for each company (i.e. no two customers can share the same set of resources, such as hardware, storage, etc)."

@ Danny Allen, thank you for opening up to this blog and engaging those of us who want to learn more.

I think the big question everyone here has is: "How do you actually meet the "Separation" requirement?"

I for one outspokenly reject the idea that this is even possible based on the intent of the license agreement and my understanding of modern computing. Desktone is offering extremely low priced "virtual computers", each of which receives completely "dedicated hardware".  I am sure you can understand how this concept is difficult to take seriously, even with the vague suggestion of a "patent pending grid architecture"

Despite my skepticism, I sincerely hope I will be proven completely wrong and if so, will probably become a major customer/reseller of your services.

Actually, I just realized something. All we really want to hear is that you've ensured that your business model is supported by Microsoft. Please tell us that before you made significant investments into this special architecture and business model, that you explained your plan to the Microsoft Licensing folks, and confirmed that you would be within your rights.

If you have Microsoft's written stamp of approval, this discussion can be very short indeed.



Really nice product !!   Work well.  You can even ask them to pre-configure a base image with all your cie softwares.

Nice !!


Hm...356$ per year for only one VDI client...endpoint device hardware and VDA licence not you really think this is a good offering?

If you design your own VDI infrastructure you will get close to this price (if not below) including VDA and endpoint device hardware costs.

OK, you'll save some money on energy consumption and implementation cost but that's not a big deal.

Did I get something wrong or what do you think?


@mub - As for the product offering itself I think it's phenomenal... for it's target market. Remember, this is their super-simple-retail product offering to draw in attention. As with any product, it will fits some companies much better than others.  If you consider the thousands of businesses with 30 people or less with a struggling low-budget IT guy that wants Windows 7 virtual desktops ... Its a dream come true. A home-brewed VDI solution for these types of companies is a nightmare waiting to happen. If you look at a company with 500+ people with an existing datacenter with SAN, UPS, and generator, and an IT staff that's actually capable, it might be make more sense to in-house it if you look strictly at cost. I've analyzed cost versus value in outsourcing things about a thousand times, and I've found that AAS offerings almost always make sense for small businesses when you truly look at all factors (staffing, downtime, security, technical complexity, disaster recovery, etc).  I'll be pushing all my small business clients to this (once I'm comfortable with the licensing).

Furthermore, if you're over the 30 machine mark, then you probably need a server or two and other custom configurations, so I would wager that Desktone will open up to talks about bulk pricing, and more scalable solution. I'll be calling them soon myself :)


I agree with @jerrywiltse -- my small business just signed up for the Desktone service precisely because we don't have a huge number of users but needed Win7 virtual desktops for some employees. We have staff in six states but no one who has built a VDI solution before, and frankly the prospect of setting up our own infrastructure seemed complicated. And when we ran the cost-benefit analysis of doing it in-house vs. outsourced, both for setup cost and ongoing operation, the hosted infrastructure won far and away.

The solution might not make sense for everyone, but we were able to get a proof of concept up very quickly and go from that to rollout in about three weeks -- with the peace of mind of knowing that someone else could deal with all the technical details and fix any bugs. We're just a few weeks in, but so far the speed and reliability are working well.


This is a great discussion.. Having worked with several service providers worldwide who want to offer Desktops as a cloud service -- I can vouch for the excitement and interest.

Based on the needs of SMB customers who want to move to Windows7 without any VDI capital upfront, we at Virtual Bridges launched a Rackspace backed hosted VDI offering last April -- and we have few production customers at roughly $30/month/user.

This segment of Hosted Desktops is divided into 4 categories:

1. CPE based service providers -- SP simply manages on-premise deployment for tenants. All the management and images are managed in the central data center. Virtual Bridges supported some SP customers using our Cloud Branch technology. Licenses - customer owned or VDA provided by the SP.

2. Hosted Dedicated -- Rackspace and few other service providers. Each customer gets their own dedicated VDI infrastructure with guaranteed SLAs and Security requirements. Customer brings their own application licenses. Perfectly legal from MS standpoint. We have few customers using this now.

3. Multi-tenancy Management -- Each tenant gets their own dedicated VDI run-time infrastructure [dedicated server pool], but all managed from a multi-tenant mgmt console.

This is also used by several SPs.

4. Full Multi-tenancy -- This is what most SPs want for the economics efficiency. Unfortunately, no vendor can achieve this because of the Microsoft licensing constraints.

We at Virtual Bridges support this configuration for Linux desktops..

Bottomline: There are many deployment and business models for SPs. None of us can deliver a fully multi-tenant solution because of MS constraints. We worked with many SPs to have creative workarounds of using Windows2008 Server in Desktop mode to get around the SPLA, but Office has not SPLA. So we all aborted this whole idea and moved to Hosted Dedicated or Multi-tenant management.

Last but not least, SP framework is a shell for the VDI solution. Ultimately, we also need to make sure that the core VDI solution meets the needs of the customers.

We all know about how VDI can be painful from user experience -- protocols/WAN, static vs dynamic desktops, online/offline, branch offices etc..

This market will fully succeed when the solid core [working VDI solution] + solid shell [good MT architecture] + Microsoft SPLA.

Until that time, this will be a trial and error effort that appeals to niche audiences.

My learnings from this market.. Having attempted this at Moka5 and now working with many service providers worldwide in the last 2 years.