Atlantis Computing, Virtual Desktop storage provider, has announced the close of a $10 million Series C investment. The round was led by Partech International, El Dorado Ventures and Cisco Systems Inc. Atlantis will put the funds towards sales and marketing, particularly headed for international growth.

“Desktop virtualization is one of the fastest growing technology sectors and has the potential to be even larger than server virtualization,” said Nicolas El Baze, General Partner, Partech International. “We think that Atlantis Computing is going to play a key role in the growth of this market and be an essential part of every VDI deployment.”

The Atlantis ILIO VDI storage and performance solutions integrate with Citrix, VMware, Quest and other VDI offerings. Atlantis’ optimization of Microsoft Windows integration with VDI Storage, along with its partnerships is to provide lower storage costs, greater options and improved desktop performance. Combined, these services enable businesses to be adaptable through efficiency.

Here’s a video from Atlantis on VDI storage reduction:

Making thin provisioning work from Chetan Venkatesh on Vimeo.

My Angle on Atlantis

VDI is a hot topic, but many are saying that it isn’t taking off like it should have.  The reason is that the costs to deploy are very high and users don’t want to give up their performance oriented notebooks.  Other issues are traffic and performance which has plagued the initial potential of VDI.

VDI needed to be rearchitected to handle all the performance issues generated by the edge apps and cloud capability.  The initial markets most interested in VDI are financial, insurance, government, and healthcare where the users need mobile lightweight thin clients.

What is needed is new performance levels and new economics.  This is what Atlantis is addressing.  I am expecting to hear more about this at VMworld where I will be talking to top executives and customers at SiliconANGLE’s exclusive coverage of VMworld 2010 at The Cube (part of our new SiliconANGLE.tv group).  The key to cloud is application performance and storage not so much about compute power.

Cisco taking a stake is an interesting signal as the market needs a new network architecture and VDI is very relevant in that equation.  I would expect that Cisco would scoop them up if Atlantis continues to get more traction.

What’s The Deal With VDI

Virtual Desktop Infrastructure (VDI) is the 21^st century’s version of thin client computing. The basic idea behind VDI is it allows organizations to provide desktop-as-a-service (DaaS), meaning desktop and laptop users access a centralized set of virtual servers dedicated to supporting client-side services. Desktop services are delivered over the network thereby simplifying management and lowering the cost of client devices, reducing support costs and lowering maintenance license and other software costs. As well, a VDI environment should be more reliable, available and secure because system images can be locked down, ‘templatized’ and easily replicated—all controlled by an IT administrator.

Last year, Gartner published a study that caught the attention of many CIOs. The research firm predicted that by 2013, the hosted virtual desktop (HVD) market would generate more than $65B in revenue worldwide, about 40% as large as the overall PC market. That is a huge number and while it still could happen, the numbers so far don’t appear to be tracking to Gartner’s forecast. Why not?

VDI deployments thus far have been niche-oriented, servicing selected financial and government applications where security and control are paramount and an ROI can be delivered very quickly. As well, for organizations using homogenous applications such as help desk support, VDI can lower costs and deliver tangible value.

Atlantis Computing is trying to change that game by offering performance and cloud technologies that enable a more nimble and cost effective infrastructure that can drive the growth of mobile and new user centric applications.

Update: I send an email to Atlantis management team asking for a few questions on their announcement.  Atlantis’ Director of Marketing Seth Knox kindly responded.   Thanks Seth for responding.  I’m happy to keep this conversation going.

Question:  What is the big disruptive trend enabling your value proposition?

Seth: The trend toward of Virtual Desktop Infrastructure (VDI) is fundamentally changing enterprise desktop computing by moving from a physical PC with a dedicated processor, memory and hard drive to a virtual desktop using shared computing resources. While sharing processors and memory between virtual desktops is well understood, using shared storage such a Storage Area Network (SAN) or Network Attached Storage (NAS) simply cannot deliver the performance of a physical PC at a reasonable price per desktop. Atlantis ILIO fundamentally changes the economics and performance characteristics of VDI by intelligently optimizing how the Microsoft Windows operating system interacts with VDI storage.
Question:  What has been the customer proof points that you are excited about?

Seth: Atlantis ILIO is deployed in large VDI environments in the USA and EMEA , has saved customers millions in upfront CAPEX costs when deploying VDI and has been shown to dramatically increase desktop performance when used in combination with SAN or NAS storage. With one Fortune 100 bank, Atlantis ILIO saved $10 million in CAPEX for a 30,000 desktop VDI deployment while at the same time dramatically improving desktop performance.

Question:  Why has VDI not been as big as it was hyped up to be?  Why now?

Seth: VDI has two key barriers to widespread adoption: upfront cost and user acceptance. Both challenges are related to the fact that VDI requires massive expenditures in storage and network infrastructure to achieve the desktop performance that users expect as they transition from PCs to virtual desktops. With Atlantis addressing the VDI storage and performance challenges of VDI, we believe that the hype of VDI will be realized and that many languishing POCs will move to phase 1 deployment.