CFOs love virtualization! “Replace ten servers with one”, how easy can a business case be? CFOs have seen too many IT business cases that do not make any sense. They appreciate one that can be summarized in five words.
But virtualization is really not primarily about hardware cost. Looking at VMware’s standard business case, two things stand out. On the benefits side, it is the huge impact of improved availability. With virtualized servers, you do not have to bring down the application to replace a fan in the server. You move the application to another server (with VMotion, availability remains at 100%). Without virtualization you have to schedule downtime and find out who the users are in order to inform them. Big impact, but most would consider it “funny money”. Unlike the hard green dollars of a server that is purchased, the savings may never make it to the bottom line.
The second big impact factor is on the cost side. The biggest drive is not that pricey VMware licensing, but setup and management. It’s not only interesting because it’s a big dollar amount, but also because it has a large fixed cost component. Getting a virtualized environment up and running and operating it costs money. And running a pool of 10 ESX servers is not significantly cheaper than running a pool of 50.
Digging deeper into VMware’s standard business case is very instructive. I really like a sensitivity analysis. The point is to find out which of the dozens of parameters that go into the case have the biggest outcome regarding what I care about (typically the return on investment, ROI). So I individually change every input parameter by 10% and see how it impacts R0I. Some parameters are more “sensitive” than others; you guessed correctly, that’s why it’s called sensitivity analysis. But that is for the next post ..
Tags: Business case, Network Virtualization, RoI
