Lawyer Bait

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Friday, September 26, 2008

ROI and TCO of Virtualization - Same Difference?

The hits to this blog are running at 98% of visits are looking for ROI information about Virtualization. Must be budget season...

Anyway, in a discussion I was having earlier this week it struck me that people are looking for TCO (Total Cost of Ownership) for their environments almost as frequently. Why is this?

Is it because they've already virtualized and need to know where to spend their savings in next year's budgets?

Are they trying to be more responsible in their budgeting process?

I believe it is very simple and is boiled down to the Quest of data. Not generic, data like - what does Gartner or Burton, or the Uptime Institute say, but what does this mean to ME vs. what does it mean.

So companies in the absense of ME Data try to bend what is out there to what they need. I have offered up a framework in a previous post and I will be hitting the road to offer up an ROI workshop. First stop is Boston. Keep an eye on the blog - I will post up all pertinent data when I get things nailed down.

It should be fun, you're all invited, and they'll be free.

Monday, September 8, 2008

How important is Virtualization ROI?

Hello folks, I am back on the grid after some much needed time off. I am at CRGWest these days and couldn’t be happier. As part of my re-entry to the working world I went and took a look at my stats for the blog and to comb the results for ideas and see what people are interested in.

Virtualization ROI was 80% of the queries and referrals. I’d have to be even more of a bonehead not to talk more about it. Here goes...

As I have said in my posts in one of my other blogs that focuses on identity management with a dose of security, the bad guys are way better at sharing information than the good guys. I believe same rings true for just about any data that people think may be perceived as wrong or invaluable – people don’t want to stick their neck out.

We should stick our neck out. Why? It helps us all. Why do you think I blog? Even if my numbers are wrong, the frameworks that I develop and share are helpful. Your savings, your numbers will be different than mine – I will guarantee that. However, the way in which I got to those numbers is important because it is a piece of the accounting puzzle that is vital to the bean counters and CIO’s who prepare budgets and decide how the revenue will be spent. Is it 100% of the puzzle? Nope. Not even close. Is it helpful? Well, 80% of the people who came to my blog in the past 30 days think so.

So how do I help people figure out ROI? I ask two simple questions -
For every dollar invested in new technology how much more will I make back through revenue or savings? Question #2 – when will it happen?

If I spend/invest $1 I want to make more than that back, otherwise it’s like trading lunches at school – it’s still lunch. So I want to set a goal, or perhaps one is set for me – 20%, 40%, etc. and we need to see which projects will get us to that goal and which ones don’t. A side benefit for management is that it sets the accountability up front so that you aren’t pestered with requests for things outside of this criteria as often – everyone knows that they need to meet or beat this criteria or don’t even bring it up.

So in one of my examples – if I wanted to virtualize 1000 servers onto 50 blade chassis (been there done that) I need to compute the current power draw, vs new power draw, support licenses, VMWare licenses, and labor required to run the hardware and the software applications on those boxes.

I look at what the current config costs to operate vs. the new config, and then look at the power, cooling and space savings in addition to the reduced hardware support costs – that’s my ‘what do I get back’ number. These are the hard costs. Soft costs are that you can manage resources more effectively and peg out servers by using underutilized boxes resources to crunch zeroes and ones. You’re more green by consuming less fossil fuels to cool and power your environment. Users are happier because their apps run as they should – reliably.

I’ll cover more on this, and please if you have specific questions about your situation and what you’re trying to do, I have built a few thousand business cases (even got a few rock solid ones in there) and I’d be happy to help.
Mark dot macauley AT