In my recent blog, I talked about moving to a virtual environment and provided some tips and tools to do it, but I didn’t talk about the costs.
In this blog I’ll discuss ROI (return on investment) calculation.
This blog is relevant to project managers who calculate the ROI and to managers who should approve the project. I’ll try to provide all aspects you need consider when calculating ROI for a virtualization project.
So it is always profitable to use virtual servers? In the same way that people tend to think that virtual servers are as not as “good” as physical servers (which is not true, but that is a whole topic for different blog), people tend to think that using virtual servers will save costs, but this is also not true in all cases.
So will you always save costs? From my experience, the answer is ‘no’. That is to say, it is not always profitable to use a virtual environment. That is totally dependent on the current status and on your plans. Always calculate ROI, include everything inside and you’ll get the answer for your plans.
Note – in the coming items I’ll mention the word “tend” a few times. That is to emphasize those items that usually people ignore (which I originally did myself….)
When calculating the ROI, one should consider the following;
1. 1. Calculate period items (maintenance, electricity, etc.) according to the life cycle of your solution, for example how long you think your new solution will be deployed until EOL. That depends on the company plans, on the HW support and other considerations. If you have no idea assumes 3 years of cost which is about the average life cycle of new HW.
2. 2. One tip is to create an ROI formula for all items (servers cost, SW cost, electricity, etc.) so you’ll be able to change the number of servers and see when it becomes profitable to have virtual environment.
3. 3. Add electricity cost to your calculation. People tend to ignore it, but simple exploration will show you that each physical server consume electricity with cost of ~500$-1000$\Year. Sometimes that cost can change the ROI decision.
4. 4. Add hardware maintenance cost. Include all hardware in your solution, even if you already have it on site. Don’t forget that new hardware is usually been quoted with maintenance contract included for the first few years which can be an advantage.
5. 5. That is pretty obvious – add the hardware cost, whether if it is to build the virtual environment or the physical servers. Don’t forget to include hardware you buy to change hardware you already have on site. Don’t forget also that to host a virtual environment usually requires a higher spec hardware set which will usually cost more per server.
6. 6. Depreciation – again, usually workers tend to ignore that (and many times because of lack of knowledge) especially when using existing hardware, or hardware you got from other sites. Consult with finance how to add depreciation.
7. 7. Storage – that is one of the items that workers tend to ignore more frequently and definitely can change the ROI decision. When using virtual environment with cluster hosts, one usually needs more storage. That has been ignored mainly when the needed disk space relatively small and site already has storage in place. So don’t ignore it, add it to your calculations. Even if you have free space, you’ll need it for other things. In addition include all other items related to the storage – HBA cost, fiber switch port cost, etc.
8. 8. Head Count – virtual environment can be managed centrally. This is not relevant for small environments, but for larger environments with thousands of servers you can reduce the needed headcount and it should be reflected in the ROI.
9. 9. Servers support items – for example rack and cabling. (e.g., for 100 servers you’ll need 10 racks, while 10 host in virtual environment can host those 100 servers and will need 1 rack. Make the calculation and see it make the change.)
10. 10. Software & Operating System (OS) cost – there are many combinations to quote virtual environment. Some virtual software costs money, and in some virtual environment you can host more than one OS at one OS price, etc., check the cost of the virtual environment software and the cost of the OS for all servers\hosts.
Here are 2 tools Intel provide:
- Server sizing – that tool help to choose the right servers for using
- Saving estimator – that tool calculate the cost saving when moving to virtual environmen
I hope this has helped you to create your respective ROI calculation, which in turn should help in the project approval process.
I would love to hear other items that I didn’t consider or any comments.