Why Enterprises Will Force Down the Cost of Virtualization

Force it's such a strong word, but it definitely applies if my reasoning has any basis in reality.

The point of this blog is to illustrate that regardless of the intrinsic value of any given tool in the IT tool chest, once it's implemented it becomes a cost. Now, please don't read this the wrong way, I'm not an advocate of the thinking that IT is merely a place that helps us cut the cost of IT. What I am saying is that once you've effectively implemented a new technology solution, managing the on-going costs becomes a factor in your survival.

In this case the target area is IT server infrastructure costs:

Servers

O/S

Power, Space, & Cooling

Virtualization

Management tools & Security

People

Taxes

Etc

Historically virtualization has been assumed to be a great technology to be used to reduce your overhead costs in the following areas:

Servers

O/S (?)

Power, Space & Cooling

People

Taxes

Notice that the following cost areas are specifically excluded

Virtualization

Management tools & Security

The above two items were left out of the "reduce your overhead costs" bullets because you didn't have virtualization and your management and security costs likely went up or at best stayed the same.  Now you probably asking, "so why is that important?"  It's important because, whether you actually reduced your total cost of ownership or have kept it the same (virtualization benefits), you now have a new cost basis.  Only now, a much larger percentage of your cost basis is the cost of the virtualization, where it used to be the servers.  Let's look at the issue another way using a simple example (Just a rough approximation):

Table 1: Infrastructure cost distribution as a percentage prior to virtualization

Servers

Management & Security

O/S & Tools

People

Power Space & Cooling

30%

10%

10%

20%

30%

 

Table 2: Infrastructure cost distribution as a percentage after virtualization

Servers

Virtualization

Mgmt & Security

O/S & Tools

People

Power Space & Cooling

10%

30%

15%

10%

15%

20%

 

The above tables are only meant to be a means to show that the costs that make up your infrastructure have shifted. The shift in costs is important if for no other reason than the simple fact that the areas with the biggest percentage of cost are also the areas that get targeted the most for savings. As some might say "a target of opportunity". 

How virtualization becoming a target will force the issue

In closure, I'm simply attempting to illustrate the fact that no one in the business cares what we in IT did yesterday to reduce costs. What the business only does care about is what we're doing today. If you reduced your server costs last year finance doesn't see a line item that says "IT Guy Mark Thiele saved us 100K last year by eliminating fifty servers, so this year we leave him alone". What the CIO & finance person do see is what it costs to run IT today.  Unfortunately, that puts virtualization square in the cross hairs as a target of opportunity.

If you believe any of what I've written here, then you're likely to see why I believe customers will become more and more likely to introduce new tools into their environment. New tools invariably means multiple hypervisors, which in turn will force the dominate vendors in the space to review their pricing practices. 

Authors note:  The above aside, there are other reasons to have more than one hypervisor in your environment, as certain functions and workloads have still proven to work more effectively with specific hypervisors.

 

Comments

Cost considerations of Virtualization

I think you are on to something here. I have seen this type of thing in process industries that have become heavily dependent upon automation..... perhaps overly dependent. In those cases, although production costs were initially lowered, no one considered long term costs of sustaining the enabling technology, which are very difficult to predict. As the market for automation products contracted (most of these systems have projected 7-10 year life cycle), the companies providing the enabling technology jacked up support prices and started generating "new releases" - available at additional cost. The lesson here is if you are going to become dependent upon on an enabling technology like virtualization, be sure to define the life cycle you expect and be absolutely sure to control support costs with a contract that is valid over that life cycle. Then, factor those costs into the economic calculations to determine if you want to go down that path. If the virutalization software is an enabling technology... by that I mean one that provides additional features that distinguish your company TO YOUR MARKET, then the decision must be based upon the value of the additional features to that market (increased revenue) and tempered by the longer term support costs. It is ok to be jaded by the marketing / sales hype but remember that YOU are the one that will be using this stuff after the sales guy is long gone! So YOU need to stay grounded in fundamentals.... and learn lessons from others in other industries which have followed similar paths.... and experienced undisireable consequences.