Include ROI measurements to find true server virtualisation costs

Although it’s widely accepted that virtualisation, especially server virtualisation will save organisations money, IT pros must not sidestep the return on investment calculation process.

It’s a truth universally acknowledged that virtualisation, especially server virtualisation, will save an organisation money. But just because IT administrators “know” that virtualisation delivers fast savings, they should not bypass the return on investment (ROI) calculation process. It is increasingly common for virtualisation projects to involve higher than expected costs or lower returns for several reasons.

Yes, moving IT assets from a physical to virtual infrastructure reduces hardware, power and cooling costs. This is particularly true for server virtualisation because they help reduce the number of physical boxes needed to run IT applications.

Server virtualisation claims to deliver ROI within six months. In some cases, however, organisations have unrealistic expectations of just how far virtualisation will allow them to consolidate resources. In addition, some companies fail to account for the necessary investment in new technology to support a virtualised environment.

Some costs associated with cloud and virtual infrastructures are overlooked entirely, and this is a significantly risky thing to do.

Here’s a list of costs associated with virtualisation that you shouldn’t overlook:

-          A physical server running multiple virtual servers will use more power and create more heat, which in turn increases cooling and power costs. You may even need to upgrade your data centre to cope with the demands of virtual servers running at a much higher utilisation rate than is typical for physical servers.

 

-           Automated provisioning of virtual servers when rolling out a virtual infrastructure can add more software and management costs. Lower prices through virtualisation lead to growth, which often results in VM sprawl. Being able to manage a growing virtual environment is a complex task; it requires new skill-sets and ways of thinking. To overcome those issues, invest in skills training and look at IT infrastructure from a holistic perspective.  

 

-          You’ll need two levels of security in a virtual environment: physical host security and virtual machine security. Monitoring also needs to be performed on both levels.

 

-          Don’t overlook additional hardware costs associated with server virtualisation. You may need new network adapters and switches for all the new high-traffic connections.

 

Calculating ROI of server virtualisation

So what’s the key to fully understanding the costs associated with server virtualisation?

First, make sure you do the ROI calculations before you spend any money. And don’t forget to factor in the somewhat murkier costs like those mentioned above in addition to hardware, software and labour.

You are likely to lose many of the savings you expected if you don’t understand the kind of infrastructure you’ll need to support virtual servers, or how a virtual environment will change your software license requirements.

Second, think about how exactly you will measure the cost of delivering virtualised IT services and how that expense will be charged back to the business.

It is simple to apply activity-based costing in a virtual environment. Just take the total IT cost (including hardware, software and labour) and then divide by the number of transactions, the number of servers or some other standard business measure. The only downside to this approach is it can be difficult to understand the cost/value of resources that are provided but not always used.

Another easy approach is tiered pricing where departments or branches are charged a monthly fee for IT services based on the group’s size and complexity. For example, a small team with relatively low storage and bandwidth requirements may fall into a different charging “band” than a team that requires fast, constant access to many resources.

Alternatively, you could separate service and infrastructure when calculating costs (and charges) of virtual services. In this scenario, there is a base cost associated with bandwidth and data centre resources that remains stable, while service charges can be based on consumption.

Once you understand the costs and charges of the virtual servers, you will be in a far stronger position to understand – and measure – the benefits.

But it’s crucial to remember that ROI calculations aren’t a one-time activity. Most organisations should refine their calculations as their project matures and remember to build in technology refresh cycles and upgrades as they happen.

Although a basic server virtualisation project may well deliver ROI within six months, for many organisations that won’t apply. Figures from industry analyst IDC suggest that, for many companies, true ROI from virtualisation will probably take between one and three years, depending on their size and complexity.

The good news is that, if you measure and track properly, you can benefit from virtual servers. The results can be impressive: Typically, server virtualisation projects yield an ROI of more than 400% over three years and sometimes more.

Eric Boonstra is the managing director of data centre provider EvoSwitch and a contributor to SearchVirtualDataCentre.co.UK.

This was last published in August 2011

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