How to measure the real ROI of virtualisation

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Esmond Higgins
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1 white paper white paper how to measure the real ROI of virtualisation How to measure the real ROI of virtualisation By Edwinder Singh, Practice Head for Professional Services, Data Centre Solutions, Dimension Data Asia Pacific

2 Contents 1 Introduction considerations for ROI calculation 01 Cost of centralised storage 01 Reduced pool of servers 01 Reduced cost of real estate 01 Reduced cost of power and cooling 01 Reduced network requirements 01 Cost of implementation 01 Cost of software licenses 02 Cost of backup and disaster recovery 02 Cost of security enhancements 02 Cost of training and operation 02 3 Cost efficiency of virtualisation 02 4 Choice of equipment 02 5 Conclusion 03 6 Impact of cloud computing on ROI calculation 03

3 1. Introduction In the face of a global economic crisis, the CFO is often found at the helm of the company. This is because IT spending constitutes a significant part of a company s budget and in present times, it is incurred on a need to basis. On the other hand, companies are faced with a shrinking market and have to compete aggressively in an attempt to increase market share, in order to replace the business volumes that are diminishing. Being able to compete effectively means having to respond quickly to changing market dynamics to create a captive client base and roll out new services regularly to capture new markets. The success of these initiatives relies heavily on the effectiveness of the IT infrastructure. The CIO today is trapped in a position where he needs to respond quickly to the business needs of the company, while maintaining or even reducing IT costs. Over the years, the evolution and emergence of technologies have brought about many silos in terms of IT infrastructure. In the last decade, many organisations have strived for IT consolidation and standardisation in an attempt to achieve higher levels of infrastructure utilisation, so as to reduce the cost of operation. Virtualisation today offers the technology for organisations to break down the walls of consolidation and dependency of vendor lock-ins, driving even higher levels of utilisation. While these benefits may seem obvious, today s CFO would be prudent to invest today for gains that are not immediately reaped, from a financial standpoint. As such, Return on Investment (ROI) becomes a critical tool for CTOs to justify how by investing in virtualisation today can bring about significant cost savings in the future considerations for ROI calculation When you consider the opportunity to reduce 200 windows servers to 30 servers based on a 1:7 server consolidation ratio, and its ripple effect that reduces costs in many other areas of the infrastructure, the ROI for virtualisation becomes a very compelling story or so it seems. While the benefits of virtualisation are apparent, one also needs to consider the changes to the infrastructure necessitated with virtualisation as well as other hidden costs. Conversely, new investments will also generate tangible and intangible benefits that can offset its initial spending. All these areas need to be factored into the ROI model for an accurate assessment of the investment in virtualisation. This white paper uncovers areas often neglected when measuring of the real ROI of virtualisation. Cost of centralised storage A central storage is a pre-requisite of virtualisation in order to hold the images of the virtual machine. As one accounts the cost to set up and maintain the centralised storage, one has to consider its benefits like higher availability of applications that can partially offset its investments. This is due to the failover from one server to another. Reduced pool of servers Virtualisation offers the opportunity to reduce the number of servers in a data centre. Through virtualisation, the utilisation rate of the memory and CPU of a server can be increased dramatically. Reducing the number of physical servers has a direct impact on the costs for acquisition and maintenance of a server pool. Reduced cost of real estate With fewer servers, the floor space needed to host the physical servers can be reduced driving down the expenses on real estate. However, at the same time, there could be a need to accommodate specialised cooling. For example, if the data centre cannot support the additional power and cooling requirements, then the server load needs to be spread over more physical racks, reducing the rack to server ratio. Considerations need to be made to ensure that the overall real estate cost is reduced. Reduced cost of power and cooling In a typical scenario, power and cooling costs can be reduced and to a degree that is directly proportionate to the number of servers reduced. In some cases, existing power supply system will need to be retrofitted to include supplementary cooling. This is due to the increase in heat and power density of a single rack. Hence, the additional cost needs to be factored in. Reduced network requirements Fewer servers also mean that lesser network ports will be required. As the existing switching technology supports the network at a lower port count, a larger pipe will be required to pump the same amount of traffic. If the network cannot support the traffic at a lower port count, there will be a need to deploy new switches that support 10G or FCoE networks. For example, VMware s newest virtualisation technology, vsphere, supports networking with Cisco Nexus 1000v switch in the VMware memory, enabling virtual machine mobility. This new switch aggregates the Nexus switching infrastructure offering 10G and FCoE protocol. Additional cost in switching needs to be accounted for. Cost of implementation Cost will be incurred for implementation of virtualisation and is directly related to the manpower required. Additional costs to ensure non-disruption to the business also need to be factored into the ROI calculation. 01

4 Cost of software licenses The cost of a virtualisation license is an aspect often overlooked by organisations, as it is perceived as a minute component of a virtualisation project. The bulk of the cost comes from OS and application licensing. Cost of backup and disaster recovery When virtualisation is implemented in an environment, the backup and Disaster Recovery (DR) aspects of the infrastructure change because traditional backup and DR methods will no longer be relevant. A server that used to have a backup window in the event of no activity may no longer have one, as other virtual machines residing on the same host server may be active. As such, additional licenses and technology need to be introduced to overcome the limitations. Cost of security enhancements Security in the virtual environment is not the same as security in the physical world. New security technologies need to be implemented to secure the hypervisors, which are virtual machines that could be moved around between host servers. Traditional intrusion, detection and prevention software now need to be virtualised to be able to secure the virtual machines that reside in the host memory. Cost of training and operation One common blind spot lies in the modification of processes and skills required in the company s administration and operations. In the new virtualised environment, the processes to deploy a new service, from the acquisition to the provisioning of hardware, need to be revamped. New processes for managing growth and utilisation need to be put in place. The cost of operations that used to be determined by the cost of physical boxes now has to be metered using management platforms aware of the new virtualised environment. The skills of administrators and operation staff need to be upgraded. Hence, existing staff need to be trained to ensure the smooth transition from administrating a physical environment to a virtual environment. These costs are not always apparent but need to form part of the ROI model. 3. Cost efficiency of virtualisation Virtualisation appears to be an easy decision when a large pool of servers is consolidated into a few powerful servers or blades. In comparison, when the number of servers is low, the seemingly attractive gains begin to diminish. Table 1: Cost before and after virtualisation based on 20 machines cost of without virtualisation virtualised into 3 servers Servers $100,000 ($5,000 each) $48,000 ($16,000 each) Storage (SAN) $40,000 Additional training $5,000 Total cost $100,000 $93,000 Table 2: Cost before and after virtualisation based on 50 machines cost of without virtualisation virtualised into 7 servers Servers $250,000 ($5,000 each) $112,000 ($16,000 each) Storage (SAN) $40,000 Additional training $5,000 Total cost $250,000 $157,000 As shown in the two tables above, the cost effectiveness of virtualising 50 servers is much higher compared to that of 20 servers. 4. Choice of equipment Although there is high cost savings associated with virtualisation, ample consideration must also be given to the implementation of the new virtualised infrastructure. For example, the older data centre may not be ready to accommodate new generation blade servers. In this case, each rack can only support power consumption of about 3-5 KWatt. A newer blade infrastructure will require up to 18Kwatt 24Kwatt of power consumption per rack. To resolve this problem, a retrofit of supplementary power and cooling may be needed. Based on a simple calculation, the marginal gains in cost are observed in the tables below. This does not take into account additional considerations around facility and power. When calculating the ROI based on server consolidation, ratios and cooling & power reduction, one must consider the limitations of the data centre and how they will affect the design of the IT infrastructure and physical facility. 02

5 5. Conclusion Companies need to be aware that virtualisation is not for organisations of all sizes. Its approach also has to be able to counter design constraints. When embarking on the journey of virtualisation, the first step is to ascertain its ROI, which is key to justifying the investment and quantifying its success. Though numerous online tools are available to gauge virtualisation ROI, it is only through a detailed ground study that this analysis will be complete and accurate. Hence, it is important for the company to engage a virtualisation partner who is able to provide a complete as well as in-depth view in the investment, for an accurate ROI measurement. The partner has to ensure that the initial objectives and end results are aligned as well. About the author Edwinder Singh is the Practice Head for Professional Services in the Data Centre Solutions at Dimension Data Asia Pacific. He is responsible for providing consulting services to clients and growing the Data Centre line of business for the Asia Pacific region. Edwinder has extensive hands-on and project management experience for IT solutions in the Data Centre space, with over nine years of experience specifically in the area of infrastructure and technology management; including server, storage and backup consulting and services implementation. 6. Impact of cloud computing on ROI calculation In the near future, cloud computing will become a key enabler for organisations to further reduce costs and increase opportunities for even greater returns. Cloud computing allows computational requirements to be dynamically moved, internally or externally to cloud providers, all towards maximising storage utilisation. This will allow companies to reap even greater ROI by harnessing latent computational resources for processing. Key enabling technologies are available today from technology vendors like VMware, EMC, Cisco Systems, Netapp, F5, Check Point, Symantec and Gigaspace. While the current ROI model looks at dedicating virtual machines to a physical machine, the cloud computing model will require a different kind of modeling, taking business operations and the unit cost of computing resource into consideration. CS / DCA-0030 / 04/11 Copyright Dimension Data 2011 For further information visit: 03

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