What is the main variable that drives virtualization planning and budgeting activities? It is “economies of scale”. There is a lot riding on the numbers and cost comparisons are driving organizations to give a very serious thought to virtualization. Providers of Cloud services are eagerly coming forward with financial analyses that will help organizations decide in their favor. Grounded organizations will have to ensure that they do not make the wrong decisions and lead their organization through a cascading catastrophe of events ending in disaster. The decision makers will have to have clear view of virtualization and its economic implications, before taking a step forward.

If users who have experienced virtualization are to be believed, the transformation extends beyond technology and changes the IT perspective on economics and cost structures of setting up and running the data center. It is space saving and incremental cost saving. The shift is “tectonic”. It is the beginning of a new era of computing that will transform how computing is done everywhere.

Having said all this, let us look at what the bottom line is. What changes are effected by virtualization?

Fundamentally, application based costing replaces server based costing models. An IDC survey* found that 50% of the organizations surveyed by them in 2008-09 preferred to virtualize their data centers for economic and other reasons. They were putting strong virtualization policies in place and were offering incentives to applications owners if they were willing to virtualize their applications because they found the application based cost model, advantageous to their enterprise. With the shift to application cost model, they found that they could:

  1. Budget on per application-instance-cost rather than per-application-server-cost. Multiple application instances can be run on a single server. This redefines the metrics for the data center.
  2. Create pools of computing networks and storage resources making scale up and scale-down of resources dynamic. This supports growth.
  3. Change historical efficiency metrics. Efficiency is no longer measured in terms of “servers per systems administrator”, but “OS instances per system administrator”. Customers focus on “portfolio based costing”.

IDC predicts in the report that most server workloads will run within virtual machines in the future. They conclude that dedicated computing models will be phased out and organizations will take virtualization into consideration when budgeting for their enterprises. The shared resource model will be favoured and an increase in density of virtual machines can be expected.

Survey link: http://www.vmware.com/files/pdf/Virtualization-application-based-cost-model-WP-EN.pdf