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Virtualization: Where is the ROI?

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Virtualization is for real, and is here to stay. CIOs and IT heads in several organizations that I interact with, are contemplating some form of virtualization initiatives, be it desktop or server. 

I have been an early adopter of virtualization. Although it is a buzzword today and takes a substantial mindshare of every CIO, I would take a step back in time when I introduced virtualization in the organizations that I worked for. I remember the time when we got thin clients to get into Windows servers, where we had taken terminal licenses, and around 80 people used to work on it. I am not sure if VMware was there or not but certainly virtualization was not in the limelight as it is today. In my present organization, ABC Consulting, I have virtualized servers, running on four blades. I did so in PVR too. 

When it comes to virtualization initiatives, a big challenge for any CIO is to have the budget approved. For this to happen, the CIO has to closely look at the tangible benefits of virtualization and return on investment (ROI). Desktop virtualization makes sense if you have a mobile workforce. But if the users are stationary, working out of the office, desktop virtualization becomes a costly proposition. The return on investment (ROI) just doesn't work out. This is in today's scenario. If tomorrow, the cost of licensing changes, then things could change. 

When I thought of desktop virtualization in ABC, the economics just didn't work out. If I couldn't justify ROI to myself, how could I convince the management? I tried talking to several peers of mine, and I got the same answer. If you are fine with security being placed somewhere, then you might find it workable in terms of cost. But it varies from sector to sector. If you talk of a BPO or a financial services business, in that case, the cost may work out. 

On the server front, I have not met any peer of mine who is not looking at it or not doing it. Some way of the other, they are trying to virtualize servers. In this case, if you already have the budget with you, then it is fine. But, if you have to get the budget passed for virtualization, you will have to make the management understand the cost of acquisition and total ownership. Acquisition cost of virtualization will be higher but the overall cost will go down. 

As the CIO, some of the tangible benefits of virtualization that I see include savings on retail space and those linked to electricity and cooling. My expectation from virtualization is higher uptimes, which means that if one of my physical servers goes down, I should not see interruption of any service. The moment I am able to achieve that, I have achieved whatever I want from server virtualization. 
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ABOUT THE CONTRIBUTOR

Atul Luthra is the CIO of ABC Consultants, a leading recruitment services company. ...

More about  Atul Luthra
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This post has received 4 Comments

You might want to take a fresh look at Desktop Virtualization. While I was evaluating it, I found that if you don’t include power savings in your calculations, VDI will never make sense. Additionally, you might want to consider manageability cost too. Even if you consider manageability cost as intangible, VDI still justifies ROI. We made the mistake of not considering these two factors and bought virtual desktop machines. Later we regretted the decision. VDI definitely make sense if your machine count is above 50.

The difference in power utilization is substantial to justify the ROI. Just to give you an idea a difference between end devices will be roughly 150W (thin client is 5W and desktop is minimum of 200W). Whereas server will take close to 600W. So effectively power saving comes to 150xn - 600x4. If you are considering 50 units, the total power saving comes to 122.4 KWH a day. It roughly converts to roughly Rs. 800 per day. Assuming there are 300 working days, it converts to Rs. 2.4 Lakh a year.

600W not the only power to be consumed. There is other set of power which is part of calculation e.g. terminal point also need almost 150W and at the end we reach to the same price. i do agree with Atul this is good for organizations like BPOs/KPOs etc. and not for the enterprises where it is difficult to prove ROI.

Excellent thoughts in this article. Most of us would talk about success stories but I really appreciate that Atul has spoken about challenges. One of the things we can look at it as staff productivity from this exercise. Specially if people are traveling a lot and we can virtualize to anywhere access on any device, we can count productivity in money terms of 40% for C-level executives and slightly less say 20% for next level. The rest will be value creation in terms of agility of business and decision making, faster time to market etc. Of course, availability will lead to this but has to be worded in business sense to make it interesting for your CEO/CFO.

Virtualization projects, particularly the desktop virtualization ones, are looked at as transformational projects. Alongside the technology transformation, we need to drive a fundamental shift in the way we manage delivery of applications to end users.

I agree that a business case is different for different industries and there is no ‘one-size-fits-all’ solution for all segments of users. As business requirements vary, so does the technology solution. Segmenting the business requirements and mapping right technology solutions is very critical in justifying the business case.

Additionally, an equally important factor is a business view of IT costs. We see a compelling business case for virtualization and application delivery transformation, when such case is evaluated using an advanced cost management framework that takes a composite view of IT costs and also incorporates the business perspective.

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