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The Business Case in Virtualization Summary Document
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Summary
Mid-market enterprises are in the sweet spot to achieve cost savings from virtualization
Despite being a very powerful technology, virtualization benefits are more readily realized in certain types of enterprises.
Two key factors are leading indicators of greatest success:
Size of Enterprise
(# of employees) • Enterprise size affects the role of IT, the materiality of expenditure and savings, and comfort with new technologies.
• Very large companies may experience more difficulty in implementation due to established bureaucracies.
• Very small companies have trouble justifying the investment.
Sweet Spot: ~100 to ~5,000 Number of Servers
(# of Supported Physical Servers) • Thirty servers or more leads to the greatest and most demonstrable cost savings and benefits when taking implementation costs into consideration
Sweet Spot: 15+ If there is organizational fit, virtualization does provide most vendor-stated benefits.
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Summary
The virtualization business case will be rooted in hardware savings
Implementation of Virtualization does not affect the number of applications, but rather the number of physical boxes in use.
Thus, the majority of pure cost savings are linked to reduction in physical boxes.
Cost avoidance and incremental business benefits exist in areas of Disaster Recovery (DR)/Business Continuity (BC) and efficiency, but are not always as tangible.
Business Case Value
1. Reduction in one-time and ongoing hardware acquisition costs 2. Reduction in hardware-related maintenance costs 3. Efficiency benefits from increased manageability 4. DR/BC enabled by removing need for homogeneous hardware 40%-75% Acquisition Cost Savings 25%-50% Monthly Recurring Savings
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Fit Indicators
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Fit Indicators
In the context of virtualization, success means achieving all three set benefits TANGIBLE BENEFITS: Achieved the stated business case financial objectives, including one-time and ongoing cost savings and on-time implementation completion.
SUCCESS INTANGIBLE BENEFITS: Recognized feature benefits inherent in virtualization and exhibited improved efficiency.
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STRATEGIC BENEFITS: Recognized value of virtualization and have plans in place to leverage technology for future growth.
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Fit Indicators
It’s necessary to look both within and outside of IT to accurately assess fit
Virtualization can be implemented in any enterprise; however, success (as defined on the previous page) of that implementation depends on a number of factors, broken down into three summary categories.
• IT Autonomy • Political Complexity • Size • Etc.
Please see full report for additional Fit indicators and detail.
Company Characteristics
• Materiality of Power Savings • Proportion of Servers to Virtualize • Etc.
Please see full report for additional Fit indicators and detail.
IT Department Characteristics
• Number of Servers • Utilization of Existing Servers • Etc.
Please see full report for additional Fit indicators and detail.
Server Infrastructure Despite being a “cool” technology, perform adequate due diligence in assessing fit.
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Fit Indicators
Small and mid-sized companies make the most use of virtualization technology
Virtualization is really an infrastructure initiative that can bring some level of benefit to any size of company.
Although adoption penetration of virtualization is greater in larger companies, the proportion of their environment that is virtualized is much less significant.
The greatest benefit can be seen in small and mid-sized organizations.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1-100 101-500 501 1000 1001 2500 # Employees 2501 5000 5001+ 30% 20% 10% 0% 70% 60% 50% 40% 67% 11% Small/Medium Enterprise Large Enterprise Not Using Planned/POC Using www.infotech.com
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Benefit Drivers
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Benefit Drivers
There are real savings resulting from virtualization implementation
Virtualization implementations bring benefits that span both tangible and intangible benefit areas: • • •
Cost Savings
(spending less)
Cost Avoidance
(not spending more)
Intangible Benefits
(not readily quantifiable)
DECREASE HARDWARE ACQUISITION COSTS
by buying and setting up fewer servers
Please see full report for additional detail on assessing cost savings
Many clients interviewed realized ongoing savings of 30-50% SHRINK YOUR FOOTPRINT
by decreasing rack space and cutting back on cooling/electrical costs
ENABLE AUTOMATIC FAILOVER
to improve/enable DR and BC operations
Please see full report for all 7 intangible benefits
HELP BUSINESS GROW FASTER WHILE KEEPING STAFF CONSTANT
by making staff more efficient and repurposing/reallocating freed resources
IMPROVED MANAGEABILITY & FLEXIBILITY SEPARATION OF HARDWARE/SOFTWARE LAYERS VIRTUALIZATION OF DESKTOPS Etc.
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Pitfalls to Avoid
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Common Pitfalls
Heed the warnings of your peers
There are 10 key pitfalls we identified, of which 2 are highlighted below: Please see full report for detail of all 10 pitfalls.
Be wary of including FTE headcount reduction Companies we spoke to had found improved efficiency in their maintenance staff, but this is rarely sufficient to remove resources altogether since, in most cases, the system administrators perform other roles in the IT department.
Quell Your Expectation of HUGE Consolidation
Quell your expectation of huge consolidation. Consolidation ratios mentioned by the vendors differ from actual client experiences.
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Per Core Per Processor
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What vendors report… What to expect…
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Making the Virtualization Business Case
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Business Case Areas
The business case should be based primarily on hard cost savings
Virtualization has the benefit of having real cost savings; use these instead of quantifying other intangible benefits or cost avoidance items that may obfuscate the real cost-saving benefits which exist.
The preliminary business case can have a tolerance of +/- 25%, but be sure that all areas are addressed, as per the table below:
Cost Savings Cost Avoidance One-time
•
Hardware Acquisition Costs
•Host Machine Hardware •Virtualization Software •Purchase of the SAN (if required) •Staff Training and Consultancy Costs
Ongoing
•
Facilities: Cooling, Power and Rack Space
•
Incremental Hardware Acquisition
•Disaster Recovery and Business Continuity •Labor and Maintenance Savings •Virtualization Software Maintenance •Staff Training (Turnover) •Salary Increases (In-demand Skills) Please see full report for detail and rule-of-thumb calculations behind these Cost Saving and Expenditure areas www.infotech.com
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Creating the Plan
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Twelve critical planning steps for virtualization implementation
Based on successful cross-industry implementations, below is a compiled leading-practices guide to moving forward with virtualization.
Step 1: Determining the Approach Step 2: Developin g the Business Case Step 3: Gaining Buy-In Step 4: Capacity Planning & Benchmar king Step 7: Resourcin g Step 8: Applicatio n Sequencin g Step 9: Testing
Please see full report for details and breakdown of each best-practice step.
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Step 10: Centralize/ Consolidat e Step 5: Hardware Selection Step 11: Migrate Step 6: Software Selection Step 12: Monitoring & Expansion
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