Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering Total Cost of Ownership An Alinean White Paper Greg Shanker - Vice President
Published by: Alinean, Inc. 201 S. Orange Ave Suite 1210 Orlando, FL 32801-12565 Tel: 407.382.0005 Fax: 407.382.0906 Email: info@alinean.com Web: www.alinean.com January 2010 Copyright 2001-2010, Alinean, Inc. All rights reserved. No part of this report may be reproduced or stored in a retrieval system or transmitted in any form or by any means, without prior written permission. All other trademarks are the property of their respective owners Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO ii
EXECUTIVE SUMMARY... 1 Financial Overview...1 ANNUAL OPERATING EXPENSES... 2 SERVER CONSOLIDATION CASE STUDY... 2 Original Server Environment...2 Proposed Server Hardware Configurations...3 Software Licensing...4 Systems and Database Administration Labor Costs...4 Energy Costs and Environmental (Green) Impact...5 Upgrade / Migration Costs...6 Improved Operational Agility...6 Service Level Improvements...6 CONCLUSION... 7 EXPLORE FOR YOURSELF... 7 ABOUT ALINEAN... 7 Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO iii
EXECUTIVE SUMMARY In these tight and uncertain economic times many organizations are exploring ways they can lower ongoing operating costs and increase flexibility. With the economy teetering between a solid recovery and a potential double dipped recession organizations are seeking strategies that will enable them to quickly scale operations up or down to meet market demand. Reducing fixed operating costs and preserving cash liquidity are key financial goals for improving this flexibility. This paper discusses how a professional services firm recently streamlined their IT infrastructure by consolidating on IBM Power Systems servers to help achieve these goals. The paper examines in detail the financial case this organization put together for the decision to move forward with a server consolidation project. The organization had grown significantly over the past several years through a series of mergers and acquisitions. As the organization acquired new operating companies it migrated the financial applications for those companies onto a standard set of Oracle E-Business Suite applications. The organization deployed a new set of servers and application instances for each operating company they acquired. This approach enabled the organization to quickly integrate new operating companies with minimal interruption to ongoing operations. Most of the servers supporting critical operations were now reaching the end of their optimal life span. Performance and reliability were becoming a concern for some key functions. In examining its upgrade options, the organization wondered whether it would be better to maintain its current IT architecture and simply replace existing servers, or if it could achieve greater efficiencies through server consolidation. The organization considered three upgrade alternatives. 1) Replace current Sun Fire servers with the latest Enterprise servers. 2) Consolidate workloads onto more scalable Enterprise servers using virtualization. 3) Consolidate workloads onto IBM Power Systems servers using virtualization. Financial Overview Based on its financial assessment the organization determined that it could save $5,038,494 or 58% over three years by consolidating its Oracle E-Business Suite onto IBM Power Systems servers compared to upgrading its current architecture with Enterprise servers. With superior price performance the IBM Power Systems consolidation solution was also $2,895,109 less than a comparable Enterprise consolidation configuration. The primary advantage of the IBM Power Systems configuration compared to the consolidation option came from the cost of the server hardware. Compared to upgrading the current server configuration, the IBM Power Systems consolidation plan was expected to yield a broad range of savings including; server hardware costs, software costs, systems administration labor and datacenter expansion and energy costs. Table 1 shows the expected costs for the three alternative proposals, and the savings of the IBM Power Systems consolidation option compared to upgrading the configuration over a three year analysis period. Three Year TCO Comparison Upgrade IBM Power IBM Power Savings vs. Upgrade Number of Servers 42 4 4 38 90% Server Hardware Costs $4,036,000 $4,257,600 $1,180,000 $2,856,000 71% Server Software Costs $459,240 $169,200 $417,600 $41,640 9% Server Administration Labor $3,382,500 $1,732,500 $1,732,500 $1,650,000 49% Upgrade / Migration Costs $152,500 $173,750 $226,250 ($73,750) (48%) Energy Costs $424,913 $158,719 $40,310 $384,604 91% Datacenter Expansion Costs $180,000 $0 $0 $180,000 100% Total Three Year Costs $8,635,153 $6,491,769 $3,596,660 $5,038,494 58% Table 1: Three Year TCO Comparison Chart Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 1
In addition to the direct hard cost savings identified in the TCO Comparison Table, the organization also expected to achieve significant benefits through improved performance, systems availability and greater agility from the server consolidation effort. Because the measurement of these benefits was more subjective, the organization elected to exclude them from the financial analysis. All of these benefits are explained in further detail in subsequent sections of this paper. ANNUAL OPERATING EXPENSES In addition to lowering its total costs of ownership (TCO) over time, the organization was also interested in reducing annual operating expenses and preserving precious cash reserves. Once it determined that the IBM Power Systems solution provided the lowest cost option, it discussed financing options with IBM Global Finance. Based on the cash flow analysis the organization decided to enter into a three year lease for the server hardware and to finance the software and migration services costs for a three year period. By spreading its payments over time with attractive financing rates, the organization was able to improve its IT operations and lower annual operating costs by 30% saving over $525,000 per year. Interestingly, the savings in annual energy costs and software expenses were almost the same as the additional costs for the new server hardware, basically offsetting those costs. Table 2 shows the annual operating cost comparison between the original server environment and the IBM Power Systems solution leveraging the three year contract with IBM Global Finance. Annual Operating Costs Original Server Environment IBM Power Annual Savings with IBM Server Hardware Costs $232,400 $355,000 ($122,600) Server Software Costs $181,500 $150,000 $31,500 Server Administration Labor $1,127,500 $577,500 $550,000 Upgrade / Migration Costs N/A $84,000 ($84,000) Energy Costs $104,755 $13,437 $91,318 Datacenter Expansion Costs $60,000 N/A $60,000 Total Annual Operating Costs $1,706,555 $1,179,937 $526,218 Table 2: Annual operating costs SERVER CONSOLIDATION CASE STUDY Original Server Environment The original server environment consisted of five sets of servers, one for each operating company, and a set of servers for test and development. Each set of servers supported three tiers; a database tier, an application tier and a web user interface tier. The configurations varied slightly based on the scale required for the different operating companies. Overall, there were 8 Sun Fire v890 servers with 8 dual-core UltraSPARC IV processors, 20 Sun Fire v490s with 2 dual-core UltraSPARC IV processors and 14 older Sun Fire v440s with 4 single-core UltraSPARC IIIi processors. The Sun Fire v890s were used exclusively for the database tier. The Sun Fire v490s were used for all three tiers. The older Sun Fire v440s were used for the web tier. Table 3 below shows the original server configurations, original purchase prices and annual hardware maintenance costs per server. Server Type Number of Servers Cores per Server Memory per Server Purchase Price Annual Support Sun Fire v890 UltraSPARC IV 8 16 32 GB $125,000 $11,500 Sun Fire v490 UltraSPARC IV 20 8 16 GB $47,000 $4,950 Sun Fire v440 UltraSPARC IIIi 14 4 6 GB $36,500 $3,850 Total All Servers 42 344 660 GB $2,451,000 $244,900 Table 3: Original server configurations Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 2
Proposed Server Hardware Configurations Going forward the organization considered three upgrade alternatives: 1) Replace current Sun Fire servers with the latest Enterprise servers. 2) Consolidate workloads onto more scalable Enterprise servers using virtualization. 3) Consolidate workloads onto IBM Power Systems servers using virtualization. The organization worked with engineers representing both hardware vendors to size the appropriate configurations based on current workloads and the desire for greater processing power. For the first option, the Sun Upgrade Configuration, the organization would replace the current Sun Fire v890 servers with Enterprise M5000 servers. Each M5000 server would be configured with 8 quad core SPARC64 VII (2.53 GHz) processors and 64 GB of memory. The Sun Fire v490 servers would be replaced with Enterprise M4000 servers, each with 4 quad core SPARC64 VII (2.53 GHz) processors and 32 GB of memory. The Sun Fire v440 servers would be replaced with Enterprise M4000 servers, each with 2 quad core SPARC64 VII (2.53 GHz) processors and 16 GB of memory. For the server consolidation options the organization expected to be able to increase average system utilization from 18.7% to over 45% by moving current processes from separate physical servers to virtual machines on larger more scalable servers. For the configuration the organization would need a cluster of four Enterprise M8000 servers, each with 16 quad core 64 VII (2.53 GHz) processors and 256 GB of memory. The IBM Power configuration would have a similar architecture with four clustered IBM Power 780 servers. Each of the IBM Power 780 servers would be configured with 2 eight core IBM POWER7 (3.8GHz) processors and 256 GB of memory. Table 4 shows the configurations, purchase prices and annual hardware support costs for the various options. Server Type Upgrade Configuration Number of Servers Processors (Chips/Cores) Memory per Server Purchase Price Annual Support Enterprise M5000 8 (8 / 32) 64 GB $150,000 $11,500 Enterprise M4000 20 (4 / 16) 32 GB $65,000 $7,000 Enterprise M4000 14 (2 / 8) 16 GB $45,000 $5,000 Total Upgrade 42 (172 / 688) 1376 GB $3,130,000 $302,000 Configuration Enterprise M8000 4 (16 / 64) 256 GB $900,000 $54,800 Total 4 (64 / 256) 1024 GB $3,600,000 $219,200 IBM Power Configuration IBM Power 780 4 (2 / 16) 256 GB $250,000 $15,000 Total IBM Power 4 (8 / 64) 1024 GB $1,000,000 $60,000 Table 4: Proposed server configurations The lowest cost option was the IBM Power Systems configuration. With a powerful system architecture and highly efficient virtualization solution the IBM Power 780 servers were able to deliver superior performance to the larger Enterprise M8000 servers at 72% lower cost per server. Similarly, the higher efficiency of the clustered IBM Power configuration resulted in $2,130,000 lower hardware costs than the Upgrade configuration. Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 3
Software Licensing In addition to the server hardware costs, the organization also examined the software costs associated with switching platforms. Changing platforms to IBM Power Systems would require new IBM AIX operating system and IBM PowerVM virtualization software licenses, which would cost $64,000 per server for the licenses and $16,000 per year for annual support. Compared with current annual software support costs of $181,500, it turned out that the consolidation would actually reduce annual software maintenance costs by 59% per year. These savings would compensate for the additional license fees in just over two years and reduce overall software costs by 23% over the three year analysis period saving $126,600. The software cost comparison included the upfront license fees and ongoing annual support for operating system software as well as systems management software. Typically database and application server software are also included in the cost comparison. However, the costs for these components were the same for all three configurations, since the Oracle database and Oracle application server licenses were bundled with the Oracle E-Business Suite application software, which was priced on a per user basis rather than a per server basis. Table 5 shows the upfront license costs for the new IBM AIX and PowerVM licenses and the annual software support costs for all three options. Software License and Support Costs Upgrade IBM Power Number of Servers 42 4 4 Operating System License Cost per Server N/A N/A $64,000 Total Operating System License Costs N/A N/A $256,000 Annual Operating System Support per Server $2,211 $8,500 $16,000 Annual Systems Management Support per Server $1,433 $5,600 $2,800 Total Annual Software Support Costs $153,080 $56,400 $75,200 Total Three Year Software Costs $459,240 $169,200 $417,600 Table 5: Three Year Software License and Support Cost Comparison Systems and Database Administration Labor Costs One of the major objectives for the server consolidation was to reduce ongoing operating expenses. While the original architecture of separate standard implementations per operating company simplified systems management, maintaining multiple servers required considerable overhead. Upgrades and patches needed to be applied consistently to all servers. Performance tuning, availability management and access control were also performed separately for each individual server. The organization anticipated that it could reduce the server and database administration workloads by 50% through server consolidation, reducing current staffing levels from nine down to four and a half staff. This would allow the organization to shift these freed up resources from daily administration and operations functions to more proactive roles of data management and reporting in support of business initiatives. Table 6 shows the current staffing levels for Systems Administration, Database Administration and Operations along with expected levels for a consolidated environment. By reducing the labor requirements for infrastructure management from nine staff to four and a half, the organization expected to reduce annual operating costs by $550,000 per year, saving $1,650,000 over the three year analysis period. Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 4
Server Administration Labor Costs Original and Upgrade Labor IBM or Sun Annual Savings Number of Servers 42 4 38 Database Administrators 2.5 1.5 1.0 Average Annual DBA Salary * $145,000 $145,000 $145,000 Systems Administrators 4.0 2.0 2.0 Average Annual System Administration Salary $135,000 $135,000 $270,000 Systems Operations Staff 2.5 1.0 1.5 Average Systems Operations Salary $90,000 $90,000 $135,000 Annual Administration Costs $1,127,500 $577,500 $550,000 Total Three Year Admin Costs $3,382,500 $1,732,500 $1,650,000 Table 6: Three Year Server and Database Administration Labor Costs * Note: All salaries reflect the fully burdened costs for staff including base salary, benefits, payroll taxes, paid time off, and office expenses. Energy Costs and Environmental (Green) Impact With the recent focus on global warming and fluctuating energy costs the organization was interested in reducing its energy requirements. This was particularly important because the datacenter had started running rather warm in the past two years. If the organization could not reduce the energy consumption and corresponding heat generation they would be forced to undergo a costly datacenter expansion and air conditioning system upgrade. The datacenter expansion and HVAC upgrade was expected to cost $600,000. Using a simple ten year straight line depreciation schedule the amortized cost of the expansion came to $60,000 per year. For every year to organization could avoid the upgrade they would save this $60,000 expense. The proposed IBM Power solution was expected to reduce total energy consumption by an impressive 87%, saving over 950,000 kwatts per year or $91,318 in electrical costs. This reduction in power consumption and heat generation was sufficient to postpone the expansion of the datacenter. The alternative Sun M8000 consolidation solution would also reduce energy requirements by almost 50%, but this configuration would still require nearly three times more energy than the IBM proposal. Table 7 below shows the energy requirements for the original server configuration and the three alternative proposals. Annual Energy Consumption Original Environment Upgrade IBM Power Number of Servers 42 42 4 4 Average Power Consumption per Server (Watts) 1,188 1,606 6,300 1,600 Annual Operating Hours 8766 8766 8766 8766 Data Center PUE Factor* 2.5 2.5 2.5 2.5 Annual Power Consumption (kwatts) 1,1093,471 1,478,474 552,258 140,256 Average Price per kwh $0.0958 $0.0958 $0.0958 $0.0958 Annual Power and Cooling Costs $104,755 $141,638 $52,906 $13,437 Average CO2 Emissions (lbs/kwatt) 1.341 1.341 1.341 1.341 Annual CO2 Emissions (tons) 733 991 370 94 Table 7: Annual Energy Consumption and Cost Comparison Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 5
* PUE Power Usage Effectiveness is the measure of energy required by the data center as a whole for each unit of energy delivered to servers. This measure includes cooling and other data center equipment. Finally, from an environmental perspective, the reduction in energy consumption for power and cooling would result in a decrease of approximately 639 tons of CO2 per year, or the equivalent of eliminating the emissions of 106 cars per year. (On average cars produce 6 metric tons of CO2 per year.) Upgrade / Migration Costs The installation of the new IBM Power Systems servers and application migration would be performed by a combination of external professional services personnel and internal staff. The initial installation of the new servers and application migration would take ten weeks including system design and planning. System verification and testing would take an additional six weeks. Overall the organization budgeted $120,000 for external professional services fees. They estimated internal migration costs at $106,250, based on 1700 hours of internal labor at an average fully burdened hourly rate of $62.50. Improved Operational Agility While the organization had a sound process in place for integrating new operating companies, the deployment of new systems for each new acquisition or merger required considerable time and effort. First, the organization would need to assess the current workload for the new operating company to properly size the required servers. Since the operating companies were typically running different financial applications, this required some analysis to translate current workloads over to the Oracle E-Business Suite. To compensate for any sizing errors and to account for growth, the IT organization generally inflated the system specifications and purchased larger servers than were truly needed. In addition to the time and effort required for system sizing the organization also needed to procure the servers, install the hardware and configure the systems. Once the physical hardware was in place and operational, then the IT group could begin the application configuration and data migration. This process took six to nine months on average. With the new virtualized server infrastructure the organization could simply define new virtual servers on the existing physical server cluster to accommodate new application instances. The organization expected that eliminating the sizing, procurement, installation and configuration of additional servers would trim three months off the time it took to integrate the financial systems for new operating companies. Additionally, by leveraging a virtualized environment the organization could make more efficient use of physical server resources. Rather than over-sizing server requirements, the organization could now define virtual machines to more closely match expected processing needs, and easily adjust the allocation of these resources over time to match actual processing requirements. Service Level Improvements Based on benchmark tests with the IBM Power Systems servers, the organization expected to improve service levels for the organization by accelerating key business processes and improving system availability. Over the years growth in computing requirements had started degrading the performance of both interactive users of the applications as well as crucial period end financial processes. The new IBM Power Systems were able to complete many of these processes up to four times faster than the previous systems. The organization expected that these performance improvements would yield tangible productivity benefits for the Finance group in being able to process weekly payroll, close month end financial statements and process accounts receivable more efficiently. The new clustered configuration with IBM PowerHA SystemMirror would also provide higher availability through automated failover. Although improving performance and reliability were key factors in the server consolidation decision, the organization chose not to quantify these benefits for the financial analysis. Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 6
CONCLUSION While standardization of core technologies and processes can contribute to improved operational efficiency and increased service levels, this case study revealed that consolidation of IT resources can provide even greater savings. By consolidating forty two servers down to only four physical servers our study participant was able to lower ongoing operational costs for systems administration and energy by a combined 52%, saving over $641,318 per year compared to upgrading existing servers. Additionally, the IBM Power Systems consolidation solution offered superior price performance characteristics compared to the Sun SPARC Enterprise M8000 proposal. By switching architectures and consolidating on IBM Power 780 servers the organization featured in this paper expected to reduce the total cost of ownership TCO for their server infrastructure by $526,218, or 30% over a three year analysis period. By modernizing their server hardware and implementing high availability clustering, they also expected to decrease system downtime, improving service levels for the business. The implementation of a virtualized server environment would also improve average resource utilization and accelerate the deployment of new applications, thus increasing business agility. EXPLORE FOR YOURSELF As illustrated in this case study, the latest IBM Power Systems servers powered with the latest IBM POWER7 processors offer tremendous opportunity for reducing energy consumption, shrinking your data center footprint and lowering operational costs. Alinean has developed an easy to use Server TCO Calculator that will allow you to explore these potential savings for your unique environment. Learn how you can achieve similar benefits with a payback in a little as nine months. Get your customized report at: http://www-03.ibm.com/systems/migratetoibm/whyibm/campaigns/sconevaltool1.html ABOUT ALINEAN Since 1994, the Alinean team has been the pioneering builder of tools to help quantify and improve the ROI and TCO of IT investments. Alinean was named for the Spanish word for Align, matching the Alinean mission as the leading developer of analytical tools to help IT vendors, consultants and IT executives align IT investments with business strategies. The Alinean team has over a decade of experience in the practical development and application of ROI and TCO methodologies, models and tools to optimizing IT investment decision making. In 1994, the Alinean team formed Interpose, the original pioneers of ROI tools, developing analytical software for over 50 major IT vendors and consulting companies worldwide, and creating the industry standard TCO Manager and TCO Analyst software. Interpose was sold to Gartner in 1998, where the team continued their developments and marketing of ROI and TCO software tools. The original team reunited to form Alinean in 2001, once again becoming the leading pioneers and developers of ROI sales and analytical tools. Current customers include leading IT solution providers such as HP, IBM, Dell, Intel, Symantec, NetIQ, EMC, SAP, Oracle, SBC, and Microsoft, as well as leading consultancies and Global 1000 companies. Additional information about Alinean and helpful ROI educational resources can be found at http://www.alinean.com. Server for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 7