W H I T E P AP E R

B u s i n e s s V a l u e o f B l a d e

Sponsored by: HP

Jed Scaramella Randy Perry

April 2012

E X E C U T I V E S U M M A R Y

Today, a company's datacenter is tightly integrated with its day-to-day business

operations. Companies are increasingly looking to their IT as a means to gain a

competitive advantage in the market rather than simply as a means of supporting

business functions. IT applications and services have become a critical element in

how companies interact with their customers, deliver new products and services, and

improve their own workforce productivity.

Yet even though IT organizations are charged with delivering an expanding base of

workloads and seemingly higher degrees of service-level agreements (SLAs), they are

also challenged with constrained budgets and overburdened staffs. In response, IT

organizations must seek efficiencies in their operations and shift to a more agile

infrastructure that is flexible enough to adapt to future changes in the business.

Over the past decade, IDC has seen the industry move more toward distributed

environments as lower-cost x86 systems have increased their share of workloads.

While this migration has enabled customers to control capital expenditure with lower-

cost servers, the increased operational costs of managing the x86 base are taxing IT

budgets, making it difficult to fund and staff new initiatives.

This paper examines how eight midsize companies spanning the education,

healthcare, media, retail, research, and telecommunications (service provider)

industries were able to reduce their annual IT infrastructure cost per user by almost

25% by migrating to a blade platform. Reduced requirements for staff time and

resources, hardware infrastructure, and facilities drove these savings.

The integrated nature of the blade platform delivers efficiencies in system

management, monitoring, and provisioning. The HP BladeSystem utilizes HP Insight

Management software to automate key management processes, including a system's

physical deployment, configuration, and problem management. As measured by IT

infrastructure cost per user per year, companies implementing blades saved an

average of $55 per user per year in reduced IT infrastructure staff time (as the

company can apply that saved time to other business IT initiatives) and $56 per user

per year in reduced hardware and software costs.

HP BladeSystem ProLiant server blades enabled these companies to consolidate

physical servers and components while still maintaining the same workload capacity

and performance. Blade technologies, such as HP Virtual Connect, reduced

networking and hardware costs by enabling up to four FlexNICs per physical NIC

port; a single HP Virtual Connect interconnect module eliminates four switches.

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The study also demonstrated that virtualizing HP ProLiant servers further improved IT

infrastructure savings. By deploying a greater number of virtual machines (VMs) per

physical server blade, IT organizations were able to further reduce IT infrastructure

savings by 17.1%.

IDC research indicates that available power, not floor space, determines the extent of

a datacenter's capacity. HP Thermal Logic technology enables the HP BladeSystem

to pool and share the power and cooling resources. The combined solution then

utilizes management software to efficiently deliver those resources based on the

performance level required. This study shows how customers reduced power costs

and avoided facilities expansion, saving an average of $17 per user per year.

In addition to illustrating the IT operations cost savings, the study also shows how

migrating to a blade environment improved IT availability. Relative to traditional server

environments, customers with virtualized blades incurred 75% fewer server incidents

per year and reduced server downtime hours by an average of over 80%.

IDC believes that the HP BladeSystem delivers improved return on infrastructure

investment for customers, creating a flexible IT environment that provides for both

easier IT management and easier adaptation to the changing needs of the business.

IDC estimates that over a three-year period, the companies in the study saw their

implementation of a bladed infrastructure deliver a return on investment (ROI) of over

250%, and cumulative savings from the implementation paid back the full investment

within a period of just over 10 months.

W H AT ' S C H AN G I N G T H E G AM E ?

O p e r a t i n g T o d a y ' s I T E n v i r o n m e n t w i t h

L i m i t e d B u d g e t a n d R e s o u r c e s

In today's competitive marketplace, customers are evaluating how their IT

organization can run more efficiently and drive additional value to the business. First

among the challenges facing the managers of IT organizations is the fact that even

with constrained budgets, they still must continue to deliver on increasingly stringent

SLAs, build new applications, and maintain high levels of application availability. To

respond to these challenges, IT managers must build their infrastructure on platforms

that can deliver operational efficiencies and maintain the flexibility to adapt to future

changes in business demands.

Furthermore, the datacenter has become more tightly integrated with day-to-day

business operations. IDC has observed that companies are placing greater emphasis

on the operations of their IT environments not only to gain a competitive advantage in

the market but also because IT services and applications have become a critical

element in day-to-day business and workforce productivity. An unfortunate reality is

that enterprises are asking IT organizations to do more with less, pressuring them to

reduce their operational expenses. This can become a significant obstacle to

increasing application availability, improving service levels, and providing higher

levels of IT flexibility.

©2012 IDC #227508R1 3

C h a l l e n g e s w i t h D i s t r i b u t e d x 8 6 S e r v e r s

E n v i r o n m e n t s

Over the past decade, IDC has seen x86 servers account for an increasing share of

IT workloads. x86 servers started out as an extension of the PC market and provided

business units, which were previously unable to secure space on the larger systems,

the means to set up IT systems. Development on these platforms set in motion a

positive feedback loop that drove expansion of IT capabilities via x86 that in turn

drove still more development and innovation to the x86 platforms. This pattern has

resulted in an increasing number of IT applications migrating to x86 platforms.

Because the price point for smaller x86 systems is much lower than that of monolithic

business systems, customers have been able to use x86 to expand server capacity

while controlling their capital expenditure. However, this migration to a distributed

environment created a more complex infrastructure that resulted in higher operational

costs.

As Figure 1 illustrates, today's IT organizations face rising operational expenses,

power and cooling constraints that limit IT capacity expansion, and IT staffs

overburdened by manual tasks. The management and administration costs

associated with x86 servers have grown to eclipse costs in all other categories. The

personnel costs required to manage and maintain the x86 server base consume the

majority of IT budgets, leaving little time and few resources for value-add initiatives

such as building new applications.

Additionally, the power and cooling of servers is a top-of-mind issue for IT

organizations, as the growth in server energy expense has outpaced spending on

servers themselves; server energy expense grew at a compound annual growth rate

(CAGR) of 9.5% compared with a server revenue CAGR of -2.6%.

4 #227508R1 ©2012 IDC

F I G U R E 1

W o r l dw i d e S p e n d i n g o n S e r v e r s , P o w e r a n d C o o l i n g , a n d

M an a g e m en t / A d m i n i s t r a t i o n

Source: IDC, 2012

Future Requirements for a More Efficient IT Environment

These trends toward sprawl and higher costs for datacenter management have

significantly impacted the IT environment. Going forward, IT managers need to

implement solutions that can considerably reduce costs by:

Increasing IT hardware utilization. Research indicates that only a fraction of

most servers' total capacity is typically utilized in a distributed environment. The

overprovisioning results in wasted rack space as well as increased power,

cooling, bandwidth, and operational costs.

Simplifying management and increasing flexibility. As currently deployed,

most server configurations are static, hardwired, and difficult to change. Too

much manual coordination is required to maintain applications and server

configurations, involving too many people to perform too many manual steps.

Improving server energy efficiency. IDC finds that the primary driver behind

efforts to improve energy efficiency is to ensure the availability of IT to the

business by averting risks posed by power and cooling challenges. To avoid

costly new buildout, IT must deploy more systems with the current available

power.

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©2012 IDC #227508R1 5

These requirements become imperatives because distributed server environments

can often consume large amounts of space, power, and IT staff time. The costs

associated with provisioning, monitoring, and managing servers have escalated,

challenging IT organizations to seek systems and tools to help them lower the overall

cost of IT operations.

B L AD E S Y S T E M S D R I V E E F F I C I E N C Y AN D S I M P L I C I T Y T O T H E I T E N V I R O N M E N T

M e t h o d o l o g y

In the fall of 2010, IDC interviewed eight midsize companies, referred by HP, that had

migrated 19% to 100% of their server environment to blades. These United States–

based organizations represent experiences from the education, healthcare, media,

retail, research, and telecommunications (service provider) industries.

T h e R e s u l t s : B l a d e s D e l i v e r 2 5 % C o s t S a v i n g s

Efficiencies Across the IT Environment

The customer interviews and IDC ROI modeling make clear that blades deliver cost

savings in several areas (see Table 1); yet there are three main categories of

efficiency improvements:

IT staff time and resources. The integrated nature of the blade platform allows

for centralized management of all servers and components within the chassis.

The centralized management results in more efficient methods of provisioning,

monitoring, and managing. These efficiencies in turn reduce the amount of IT

staff time required for IT infrastructure administration, allowing companies to

apply that newly available staff time to other activities more directly related to the

business, such as business application expansion or enhancement. As stated

previously, companies implementing HP BladeSystem in their environment saved

an average of $55 per user per year in reduced IT infrastructure staff time.

IT hardware infrastructure. Migrating to a blade environment enables

customers to consolidate physical servers while maintaining the same workload

capacity and performance, which reduces capital expenditure on hardware. IT

organizations are able to improve IT resource utilization rates by reducing the

numbers of servers, a factor that is further enhanced through virtualization.

Companies implementing blades saved an average of $56 per user per year in

reduced hardware and software costs.

IT facilities. Blades reduce power and cooling consumption due to the integrated

platform and efficiencies gained through shared power and cooling components.

On average, companies in this study reduced power costs and avoided facilities

expansion, saving an average of $17 per user per year.

6 #227508R1 ©2012 IDC

T A B L E 1

S a m p l e D em o g r a ph i c s

Category Average

Employees 747

IT users (internal) 682

IT users (external) 166,792

Servers 179

% traditional physical 24

% blades physical 43

% blades virtualized 32

IT staff 43

Applications 15

Installed storage (terabytes) 429

Storage growth (average per year) 168%

Industries Education, healthcare, media, retail, research,

telecommunications (service provider)

Note: Values represent the mean for all respondents (8).

Source: IDC, 2011

As the data in Table 2 illustrates, IT organizations that migrated to HP BladeSystem

reduced their annual IT infrastructure cost per user by 24.9%. The greatest areas of

savings included facilities (56.8%), server hardware (49.5%), network hardware

(49.5%), and power and cooling (37.5%). Figure 2 presents the relative reduction in

various datacenter costs — facilities, hardware, software, power and cooling, etc. —

that survey participants experienced after implementing bladed infrastructures.

T A B L E 2

I T I n f r a s t r u c t u r e E x p en s e : A n n u a l C o s t p e r U s e r

Traditional

Environment ($)

Blade

Environment ($) Savings ($) % Savings

% of Additional

Savings from

Virtualizing

Blades

Server hardware 49 25 24 50 26

Software* 25 21 4 15 23

Facilities 26 11 15 57 10

Network hardware 20 10 10 50 0

Power and cooling 6 4 2 38 0

Management tools* 8 6 2 24 26

Storage 159 143 16 10 0

Total 293 220 73 25 17%

*Note: The software category includes license and maintenance fees for infrastructure software (exclusive of management

tools), application development, collaboration, business applications, etc. The management tools category includes

infrastructure software to manage (deploy, configure, monitor, etc.) systems, virtual environments, network, and storage.

Source: IDC, 2011

©2012 IDC #227508R1 7

F I G U R E 2

I T S a v i n g s f r o m B l a d e I n f r a s t r u c t u r e

Source: IDC, 2011

Virtua l izat ion Further Enhances IT Eff ic iencies

IDC has always believed that blades represent an excellent consolidation platform,

but they also excel in virtualized environments. IT organizations running virtualization

on blades were able to further reduce IT infrastructure, which resulted in additional

cost savings of 17.1% (refer back to Table 2). As an increasing number of VMs are

deployed per physical server blade, IT is able to further reduce hardware expenditure,

as well as licensing fees and the cost of tools, by purchasing the appropriate amount

of system software for the reduced hardware footprint.

Enhanced Connect iv ity

The blade platform is an integrated architecture that matches well with the goals of

virtualization, yet the running of a higher number of virtual machines on physical

servers can introduce challenges in the form of I/O bottlenecks. To eliminate these

obstacles, HP Virtual Connect enables up to four FlexNICs per physical NIC port.

Because only one HP Virtual Connect interconnect module is needed for four

FlexNICs, compared with the four switches that would have been previously required,

blade infrastructure costs and support burden are reduced. Customers can ensure

more efficient use of networking resources through the HP Virtual Connect capability

of throttling bandwidth at increments of up to 100MB, matching the application to the

appropriate amount of bandwidth.

With HP Virtual Connect, we avoid having a lot of switches, a lot of

cables, and a lot of additional gear. But it more or less pays for

itself within the first year of implementation. I'm avoiding a whole lot

of cabling and a whole lot of external switches to then switch back

into the chassis themselves. For a fully loaded chassis, I think we're

avoiding 2–3 switches that would cost about $500 each. — Vice

President, Sales and Operations, Opus Interactive

0 10 20 30 40 50 60

Storage

Software

Management tools

Power and cooling

Server hardware

Network hardware

Facilities

(% savings)

"I could only put in about 8 servers per rack because of power constraints. So I was consuming about 20 racks total. I was essentially going to have to double my physical footprint at my other datacenter. This was going to be very, very costly, increasing operational costs by another $260,000 per year. Two years ago, I switched to HP ProLiant BL490c blades. That was the technology that was going to allow me to build the plant with the horsepower necessary to ensure better performance." — Manager of Infrastructure, Healthcare Provider

8 #227508R1 ©2012 IDC

Blade Management Tools Drive IT Staff Productivity

Figure 3 examines how customers that migrated to a blade environment were able to

increase the efficiency of their IT staff. The wire-once, ready-to-deploy nature of blades

reduced the physical deployment by 75.1% and system setup and configuration by

46.1%. The ongoing operations of IT also become more efficient as problem

management was reduced by 52.3% and maintenance was reduced by 49.4%.

F I G U R E 3

I T S t a f f R e du c t i o n p e r T a s k

Source: IDC, 2011

Blade platforms, such as the HP BladeSystem c-Class, which utilizes HP Insight

Management software, help IT organizations reduce their overall server management

complexity and respond more efficiently to change. HP Insight Management is a suite

of management tools designed to enable simple and reliable provisioning, monitoring,

and control of the HP BladeSystem infrastructure. Because key management

processes are automated, less staff time is required. This ensures that IT resources

are focused on more value-added initiatives. Elements of HP Insight Software

include:

HP Systems Insight Manager (SIM) provides a single, integrated view of all

infrastructure resources and delivers core management services for discovery,

monitoring, and control.

HP Insight Control software provides comprehensive server health monitoring,

imaging, power management, remote management, and vulnerability

management.

0 10 20 30 40 50 60 70 80

Incident management

Network management

Change management

System setup and conf iguration

Maintenance

Problem management

Server deployment (physical)

(% improvement)

"The average full chassis that we've got pulls about 8–15 amps of power running full load. If I were to take those same 16 servers and put them in rack and stack, I'd need almost double the amount of power. I'd need close to 30-plus amps to power all of it. So I've got about half of the power consumption." — Vice President, Sales and Operations, Service Provider

©2012 IDC #227508R1 9

HP Matrix Operating Environment provides advanced management

capabilities, enabling physical and virtual resources to be managed in exactly the

same way and automated resource provisioning through a self-service portal.

Power and Cool ing

HP BladeSystem incorporates HP Thermal Logic technology to help HP customers

achieve greater power and cooling efficiencies in their IT environments. HP Thermal

Logic includes technologies from system to enclosure, enables server infrastructures

to pool and share power and cooling resources, and then utilizes management to

efficiently deliver those resources based on the performance level required.

The HP BladeSystem chassis utilizes Platinum Power supplies with 94% efficiency for

increased energy efficiency. Additionally, the HP Dynamic Power Saver mode

enables more efficient use of power in the server blade enclosure. During periods of

low server utilization, the HP Dynamic Power Saver places power supplies in standby

mode, incrementally activating them to deliver the required power as demand

increases. HP Power Regulator, built for ProLiant, dynamically changes each server's

power consumption to match the needed processing horsepower, thus reducing

power consumption automatically during periods of low utilization.

A datacenter is built with a specific maximum power capacity, and power and cooling

— not floor or rack space — is often the limiting factor in determining the compute

power in any given facility. Unfortunately, power in the datacenter is rarely efficiently

allocated, and the full power budget envelope is seldom used. HP Dynamic Power

Capping enables IT to allocate power to individual servers based on actual usage

versus faceplate estimates, thereby reclaiming unused energy in the datacenter.

Blades Reduce IT Risk and Increase Availability

Today, the availability of IT applications and services is critical to the business;

unplanned downtime of IT can lead to the interruption of business operations and

even loss of revenue. This ROI analysis demonstrates how blade environments can

reduce IT risk by lowering the number of server incidents as well as the time needed

to bring the system back online.

As Figure 4 illustrates, customers involved in this study reported that bladed

infrastructures, versus traditional environments, reduced server incidents per year by

over 36%. Virtualizing OS images on bladed infrastructures reduced the number of

incidents even more. Running virtualized OS images on blades reduced by over

76% the average number of annual server incidents experienced in a traditional

environment. It likewise reduced server downtime hours by over 84%. Overall migration

to HP BladeSystem generated benefits of over $13,000 per 100 users annually.

"We are in a high-availability configuration and, by far, more stable with the blades. With a traditional server, we used to schedule about 5 hours per year for complete blackouts. And now the blades have none. We do suffer unplanned downtime 3–4 times per year for traditional servers, but no unplanned [downtime] for the blades." — Director of IT, Excelled Sheepskin & Leather Coat Corp.

10 #227508R1 ©2012 IDC

F I G U R E 4

R i s k R e d u c t i o n o f K e y P e r f o r m an c e I n d i c a t o r s

Source: IDC, 2011

Blade Environments Deliver Improved ROI

IDC interviewed eight companies, referred by HP, that had implemented

HP BladeSystem to record their results. IDC used the following three-step method for

conducting the ROI analysis:

Gathered quantitative benefit information during the interviews using a

before-and-after assessment. In this study, the benefits included IT staff

productivity increase, user productivity increase, and IT cost reduction.

Created a complete investment (three-year total cost analysis) profile

based on the interviews. Investments go beyond just the solution's hardware

and software. IT departments spent staff time installing and configuring the new

solution, removing old equipment and/or software, and then maintaining the new

solution over three years. Ancillary costs directly related to the solution, such as

user input to planning, outsourced installation, configuration or maintenance

costs, and IT staff or user training, are also included in the analysis.

Calculated the ROI and payback period. IDC conducted a depreciated cash

flow analysis of the benefits and investments over a three-year period.

Because the full benefits of the solution are not available during the deployment

period, IDC prorates the benefits on a monthly basis and subtracts the appropriate

amount for the deployment time from the first-year savings.

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Blades

Blades with virtualization

©2012 IDC #227508R1 11

IDC uses a discounted cash flow methodology to calculate the ROI and payback

period. ROI is the ratio of the net present value (NPV) and discounted investment.

Payback period is the point at which cumulative benefits equal the initial investment.

IDC uses a standard 12% discount factor, which allows for risk and the missed

opportunity cost that could have been realized using that capital.

The three-year ROI analysis shows that on average, the companies in this study

spent $8,074 per 100 users deploying and maintaining HP BladeSystem and received

$28,326 per 100 users in benefits for an NPV of $20,252. The companies saw

payback in 10.2 months and achieved an ROI of 251% (see Table 3 and Figure 5).

T A B L E 3

T h r e e - Y ea r R O I A n a l y s i s p e r 1 0 0 U s e r s

Benefit $28,326

Investment $8,074

Net present value (NPV) $20,252

ROI = NPV/investment 251%

Payback 10.2 months

Discount factor 12%

Source: IDC, 2011

12 #227508R1 ©2012 IDC

F I G U R E 5

T h r e e - Y ea r P r o F o r m a B l a d e d I n f r a s t r u c t u r e I n v e s t m en t a n d R e t u r n s

Definitions and Notes:

All values are per year (12 months).

All values are per 100 connected users. We define connected users as the number of users actively linked to and

interacting on the infrastructure network.

Pro forma assumes that the initial cost of the solution occurs as lump sum outflow in year zero.

The Hardware Purchase category sums the acquisition expenditure on hardware (servers, storage, network, etc.).

The Implementation category sums the time for staff to learn and implement new technology.

The Software License/Maint. category sums the net reduction (increase) in fees for software licensing and provider's

maintenance and support.

The End-User Productivity category sums the reduction in user's lost productivity due to system/application outage and

unavailability.

The Network Equipment category sums the reduction in requirement for adding switches and cabling network equipment

given consolidation of server infrastructure.

The Storage category sums the reduction in requirement for adding storage capacity to handle demand given higher

utilization of storage capacity.

The Facilities Cost category sums the reduction in cost for power and cooling, datacenter space, etc.

The Hardware Upgrade category sums the reduction in requirement for adding server capacity to handle workload.

The Administer Datacenter category sums the reduction in IT staff time to manage and implement all aspects of datacenter

operations.

Source: IDC, 2011

©2012 IDC #227508R1 13

C H AL L E N G E S / O P P O R T U N I T I E S

While the study demonstrates the improved ROI, IDC acknowledges that blade

vendors still face some challenges. Identifying expenses may not always be as

straightforward in IT organizations as in other business units. Up-front costs, such as

the cost of hardware or software licenses, are tangible and relatively easy to see.

However, some abstract costs, such as hardware cabling costs, facilities charges,

and personnel hours needed to configure and manage the environment, are often not

accounted for with precision. A more sophisticated ROI analysis is required to

demonstrate the full benefits of and cost savings from blade environments.

A 2010 IDC study, IDC Blade Market Survey: The Dynamic Platform for the Future

Datacenter, shows how the potential obstacles to blade deployments have decreased

in recent years. The current generations of blade technologies have vastly improved

over the initial offerings of the early 2000s. Additionally, customers have a better

understanding of the technology, and the improved services from vendors have made

it easier to deploy blades into IT environments. However, the top-ranking obstacles

remain the perceived price premium over other server form factors and organizational

issues such as internal or management resistance to the platform.

This finding shows that HP and other blade vendors face a number of nontechnical

challenges as they seek to deliver blade-based solutions. IDC market data indicates

that blades represent 13.8% of the total worldwide server investment. To drive further

blade adoption, vendors will need to convey the message of how blades deliver a

better total cost of ownership than traditional environments.

C O N C L U S I O N

This IDC ROI analysis indicates that customers can achieve considerable cost savings and

improve the agility of their infrastructure by migrating to an HP BladeSystem environment.

The companies in this study were able to pay back their initial investment in less than a

year, a significant factor given the financial constraints most IT organizations are facing.

IDC believes that the datacenter of the future will require IT organizations to increase the

utilization of their hardware, simplify their management, and improve the energy efficiency

of servers. By leveraging HP BladeSystem and technologies such as HP Insight Control,

HP Virtual Connect, and HP Thermal Logic, customers will be able to reduce their

operating expenses and improve the flexibility of their IT environment. As a result, a

greater portion of IT budget and staff time can be allocated to new initiatives that drive

value back to the business.

C o p y r i g h t N o t i c e

External Publication of IDC Information and Data — Any IDC information that is to be

used in advertising, press releases, or promotional materials requires prior written

approval from the appropriate IDC Vice President or Country Manager. A draft of the

proposed document should accompany any such request. IDC reserves the right to

deny approval of external usage for any reason.

Copyright 2012 IDC. Reproduction without written permission is completely forbidden.