In the previous article of this series we discussed the delicate phase of capacity planning, where virtualization architects have to carefully evaluate which kind of physical machines will need to host all expected virtual machines, how this evaluation depends on specific arrangement strategies, and how heavily these strategies depend on hosted applications workloads.
The expenditure report will detail part of the investment a company have to face in its virtualization adoption and will be compared against a long list of cost-saving benefits this technology provides.
ROI calculation
This is probably the most critical part of the whole project and it’s the third one, not the first. This means a potential customer should arrive at this point already investing a significant amount of time and money just to understand if he really can afford the adoption or not.
The Return on Investment (ROI) calculation is done applying a simple math to a complex amount of costs our company could mitigate or eliminate once adopting virtualization.
The operation is not so trivial because some direct costs can be underestimated in the equation and indirect costs could not even be recognized.
Among direct costs virtualization can reduce we can include:
- physical space cost (leased or owned) for physical servers
- energy cost to power physical servers
- air conditioning cost to cool the server room
- hardware cost of physical servers
- hardware cost of networking devices (including expensive gears like switches and fibre channel host bus adapters)
- software cost for operating system licenses
- annual support contracts costs for purchased hardware and software
- hardware parts cost for expected failures
- downtime cost for expected hardware failures
- man-hours of maintenance cost for every physical server and networking device
Some entries deserve a deep analysis which has to be reconsidered from project to project, given the incredible speed at which the virtualization market is changing.
Software cost for operating system licenses for example has not been a relevant entry until this year.
Using a virtual machine or a physical server didn’t change anything for customers deploying Windows, but Microsoft slightly changed its licensing agreement this year facilitating virtualization adoption.
At the moment owners of Windows Server 2003 Enterprise Edition are allowed to run up to four more Windows instances, any edition, in virtual machines.
The imminent Windows Vista will have a license permitting to have a second, virtual instance in virtual machine.
And license of upcoming Windows Server codename Longhorn Datacenter Edition will grant unlimited virtual instances of the operating system.
In a near future it’s highly probable Microsoft will further revise this strategy allowing unlimited virtual instances of the host operating system while they stay on the same physical hardware.
In any case all listed direct costs directly strictly depend on two factors we examined in the previous phase: VM/core ratio offered by the chosen virtualization platform, and most of all virtual machines arrangement we decided during capacity planning.
The better we worked on the previous step the most realistic situation we’ll have.
But whatever arrangement or virtualization platform we’ll decide, some important indirect costs should be calculated as well:
- time cost to deploy a new server and its applications
- time cost to apply the required configuration
- time cost to migrate to new physical hardware for severe unplanned failure
- time cost to migrate to new physical hardware for equipment obsolescence
While these factors cannot be easily quantified they drastically change a return on investment calculation when dealing with virtual infrastructures.
Speed and effectiveness in deploying new servers with pre-configured environments, something usually called capability to perform, is unbeatable in virtual datacenters.
In the same fashion speed and effectiveness in moving the mission-critical applications from a failing hardware to a safe one, the so called capability to recover, is a basilar feature of virtualization and no security solutions can compete with it.
It’s evident ROI calculation is a hard operation to achieve and different interpretations could lead to very different results, leading to potential failure of our project.
To help potential customers, some vendors offer ROI calculation tools with partially precompiled fields, providing for example CPU/VM ratio values or products license prices.
It’s the case of SWsoft which offers an online form for its OS partitioning product, Virtuozzo.
In other cases skilled virtualization professionals transform their experience in useful tools, available for the whole community.
It’s the case of Ron Oglesby which created an Excel spreadsheet called VMOglator needful for evaluating virtual machines costs depending on physical hardware characteristics.
In most cases these self-service calculators aren’t really effective, both because aren’t able to track all concurring factors in the cost-saving analysis, and because customers are often unable or don’t have time to evaluate from themselves the real value of some expenditures.
The best option would be require a traditional ROI analysis, possibly from a neutral third party firm, but being a very time-consuming and expensive service few small and medium companies can afford to commit it.
At the end of this phase we have to have a list of costs for the current infrastructure, so called AS IS environment, a list of costs for the virtual infrastructure, and a list of costs required for the adoption, including:
- the man hours cost to recognize physical servers to virtualize
- the man hours cost to complete the capacity planning
- the man hours cost to ROI analysis
- the man hours cost to perform the migration of actual infrastructure
- the man hours and learning material cost to acquire required know-how for migrating the new infrastructure
- the software license cost of all tools needed in all adoption phases
These values are the final tools a company should use to understand if virtualization is approachable or not and in how many months it will have a payback.
In the next part we’ll enter the operational phases of the project, beginning from the very first step: transforming existing physical machines in virtual machines, through a process known as physical to virtual (P2V) migration.
This article originally appeared on SearchServerVirtualization.