Cost Savings through Virtualization

Paul JacobsenChannel Sales ManagerVMware June 2009

Agenda

Economic Environment in 2009Why VMware is a Strategic InvestmentProven Customer Success

The Rough Road Ahead….

Source: Goldman Sachs IT Spending Survey, March 9th, 2009Source: IMF World Economic Outlook Report, Nov 6th 2008

“Our IT spending indices dipped further to new lows in our latest survey, deep in contraction territory.”

- Goldman Sachs

A global economic recession is forecasted for 2009

The economic environment is a leading indicator of tech spending

71% of CIOs anticipate flat or decreasing IT spending budgets

IT budgets in developed countries set to decline by 12% in 2009 and 9% globally

The IT Dilemma

I am supposed to do the same job, but with less budget and headcount?!?

Agenda

Economic Environment in 2009Why VMware is a Strategic InvestmentProven Customer Success

Recent CIO Surveys Agree: Virtualization is the Top CIO Priority in a Tough Economic Environment

Source: Merrill Lynch CIO Survey, Oct 28th, 2008Source: Goldman Sachs IT Spending Survey, Nov 2nd, 2008

“The current environment has moved virtualization toward the top of the priority list for CIOs.”

“Total cost of ownership (TCO) reductions will be a key driver of the acceleration in server virtualization deployments as CIOs are forced to cut capital spending and reign in management, administrative and power/ cooling costs.”

Customers Are Still Moving Ahead with Virtualization in 2009

CIOs expect to double the percentage of servers virtualized in 2009Source: Goldman Sachs IT Spending Survey, Nov 2nd, 2008

Which software providers are gaining share of your IT spending dollars?

113 Quarters#

Source: Goldman Sachs IT Spending Survey, March 9th, 2009

VMware Continues to be the #1 Software Investment for CIOs in a Tough Economy

Gaining

1. VMware2. Citrix

Systems3. Cisco

Software/ Security

4. Oracle5. Symantec

VMware

Source: Goldman Sachs IT Spending Survey, Nov 2nd, 2008

“VMware’s incumbent position at the top of the rankings demonstrates that server virtualization momentum remains alive and well with a strong ROI case for a declining budget environment.”

- Goldman Sachs

Which software providers are gaining share of your IT spending dollars?

VMware is the Proven, Trusted Leader Providing the Highest ROI and Lowest TCO

Top 3 Reasons Why VMware is the Right IT Investment in a Tough Economic Environment

Minimize Lost Revenue Due to Downtime3

Reduce Datacenter Operating Cost (e.g. Power & Cooling)2

Reduce Physical Infrastructure Cost1

Before AfterBusiness Loss Due to Datacenter Outage**Sys Admin per 100 Apps*

* Source: IDC and VMware TAM program** Source: VMware customer – a $2bn insurance company. Estimates based on 40 hrs needed to recover before virtualizing and 4.5 hrs needed for the same recovery after virtualization.

Infrastructure Cost per App

Before After

Reduction in Datacenter Capital Expense

2.0-3.0

Before After

$14,235

$5,6940.3 – 1.0

Reduction in Datacenter Operating Expense

$30 MM

$4 MM

Reduction in Risk

VMware Delivers Tangible Business Outcomes

12

Reduce Server Spend Through Consolidation

VMware…Decouples software from hardware

Encapsulates Operating Systems and applications into “Virtual Machines”

A Server or Desktop Virtual Machine

Typical Consolidation: 15:1

Typical Excess Hardware Capacity: 3

Years!

Total Savings Per Workload

Servers 1000 80 $5,816Network Switches

84 10 $296

Real Estate (Sq ft) 2053 257 $431Power (kWh) 407 52 $759Cooling (kWh) 509 64 $949Savings per Workload(Over 3 years)

$8,251*

BEFORE AFTER SAVINGS

• Actual customer savings per application; represents typical savings• Includes estimated cost of VMware licenses, Support and Subscription

VMware consolidates servers, storage and networking infrastructure to safely achieve higher utilization

Reducing Capital Cost1

Reducing Operating Cost

2

Copyright © 2005 VMware, Inc. All rights reserved.

Reduce Energy Consumption

Copyright © 2005 VMware, Inc. All rights reserved.

Highest consolidation rates on most secure and reliable virtualization platform

Safely improve utilization rates

80% energy reduction

Dynamic server and storage migration

Power off unneeded servers in real-time

Migrate storage dynamically

25% energy reduction

Host desktop PCs in the datacenter

Use thin clients, double refresh cycle

Reduce storage for similar desktop images

70% energy reduction

Improving Operational Efficiency

Source: IDC and VMware TAM program

Do more work with the same number of people = operating cost savings

Free up resources and budgets from day-to-day maintenance to focus on future innovation and strategic projects

Drivers of productivity improvements:

Instant provisioning

Dynamic patching

Zero downtime maintenance

Reducing Operating Cost2

Value of Zero Downtime Server Maintenance

Server Maintenance is required forUpdates to component hardwareUpdates / patches to the hypervisorMigration to newer servers

Cost savings from zero downtime server maintenance with VMotionAvoid overtime cost to perform maintenanceAvoid administrative time in scheduling downtime

Business costs of downtime is specific to each industry and not included here

For a 10 physical server, 150 VM environment, assuming:

2 hardware/ BIOS upgrades per server + 4 hypervisor patches = 6 maintenance activities per server per year

10 X 6 X +X $150/hr2 hrs

Overtime Cost

Time to performupgrade

Overtime$/hr

0.75 hr15

Scheduling Downtime

# ofapps perserver

Time spentscheduling

downtime per app

$60/hr

$/hr

X X = $ 58,500

VMware VMotion

# of servers

# of updates

( )

Value of Zero Downtime Storage Moves Maintenance

Storage Maintenance is usually required forLUN optimizationUpgrades to better hardware

Cost savings from zero downtime storage maintenance with Storage VMotionAvoid overtime cost to perform maintenanceAvoid administrative time in scheduling downtime and planning the moveAvoid cost of buying an alternate data mover tool

For a 10 physical server, 150 VM environment (50GB per VM of storage), assuming:

Storage is moved once in 3 yrs, annualize 1/3 of the 7.5TB environment every year (2.5TB). ~20GB can be moved an hour.

X $150/hr124 hrs

Overtime Cost

Time to move 2.5TB

each yr

Overtime$/hr

X $60/hr248 hrs

Scheduling Downtime

Time spentschedulingdowntime

Admin$/hr

X $60/hr500 hrs

Planning Move

Time spent planningthe move

Admin $/hr

$5000

Alternate Tool Cost

+ + + = $ 68,113

VMware Storage VMotion

Value of Dynamic Load Balancing

Customers report that without DRS automatically balancing their environments, they would either

Decrease their consolidation ratio – this means that the full HW cost savings are not realized. Customers report up to 30% decrease in consolidation ratios.Have to manually monitor VMs to place them appropriately.

For a 10 physical server, 150 VM environment, assume that the consolidation ratio decreases by 30% from 15:1 to 10. Alternatively, administrators would have to spend time monitoring the cluster or responding to customer calls every day

Cost of increased

monitoring time

Decreased consolidation ratio means

OR

X $8,0005 servers

Increased Hardware Cost

More servers needed

Hardware, license, power/ cooling, space costs per server

2602.5 hrs.

Cost of Extra Admin Time

Hours per day Days in a year

$60/hr

Admincosts/hr

X X

= $ 40,000

= $ 39,000

OR

VMware DRS

Offline machine patchingReduces exposure from non-compliant offline/suspended virtual machinesSystems have NICs disabled during patching to reduce risk

Value of Automated Patching

Guest PatchingAdministrative time – 2448 hrs, $147,744 saved annually

Calculated for 150 virtual machines, assuming 40 patches per machine

> Scan machines> Assess patch

requirements

> Remediate systems> Troubleshoot> Rollback – 10%

Manual24 min

Automated15 min

Annual Savings for 150 VMs900 hrs, $54,000

Manual156 min

Automated21 min

Annual Savings for 150 VMs1548 hrs, $93,744

Manual180 min

Automated36 min

Annual Savings for 150 VMs2448 hrs, $147,744

Per virtual machine Per patch

VMware Update Manager

$147,744

Ensuring Business Continuity

Source: IDC and VMware TAM program

Reduce business risk without increasing costs or complexity

Minimize lost revenue from and avoid costs of business downtime

Drivers of productivity improvements:

Built-in high availability

Automated recovery

Reducing Operating CostMinimize Lost Revenue3

Value of Automated Site RecoverySRM cost savings can have several contributions:

Cost of lower disaster recovery site investmentCost of lower recovery plan planning and management timeCost of less lost business revenueCost of less lost wages

The below only captures a conservative estimate of savings from lost business revenue and lost productive time

Company that does $5M in revenue a year = ~$20k / weekday. Assume a disaster strikes. Assume that SRM can achieve RTO of 24 hours instead of 72 hours compared to traditional DR plan.

= $ 64,000(Per disaster)

X$20,000

Value of Lost Revenue

Days offaster recovery

Lost revenue per day

X + X 40

Value of Lost Time by Workers

Days offaster recovery

Number ofworkers

X X $300/dy

Cost of workerwages

22

VMware SRM

Value of High Availability High Availability cost savings can have several contributions:

Cost of lost business, lost workCost of lost productive time

The sheer simplicity of VMware HA and reduced time & effort compared to other clustering solutions is not capturedThe below only captures a conservative estimate of savings from lost productive time

For a 10 physical server, 150 VM environment, assuming 2 failures a year:

X 104 hrs.

Value of Reduced Lost Productive Time

Hours ofdowntime

Number ofusers per VM

15

Number ofVMs per host

X X $50/hr

Cost of Userproductive time

X 2X = $ 60,000

VMware HA

Failures per year in 10-

host cluster

Value of Fault ToleranceFault Tolerance (FT) cost savings is primarily in preventing lost business revenue from when mission-critical, high-revenue applications go downFault Tolerance prevents lost business revenue by providing zero downtime, zero data loss continuous availability for your applicationsThe simplicity of FT and reduced time & effort compared to other hardware-based solutions is not captured

For a 10 physical server, 150 VM environment, assume ~10% of VMs are protected by FT (15 VMs). 2 host failures in the clusterper year. Lost revenue per minute of high-revenue apps can range from $2000-15000 per minute depending on type of transactions being processed.

X$7000/min4

Value of Lost Revenue

Minutes ofdowntime prevented

Lost revenue per minute

15÷10

Avg. number ofFT-protected VMs

per host

X X X = $ 69,0002

Failures per year in 10-

host cluster

X 1$15000

Extra Hosts for FT

Cost per host

Number of extra hosts

-

VMware FT

Agenda

Economic Environment in 2009Why VMware is a Strategic InvestmentProven Customer Success

25

Meet Service Levels Efficiently

Using VMware virtual infrastructure, we can offer the same levels of service and more flexibility for up to 40 percent lower server and operating costs.”

Rob Jones, Director of Technology, ALSTOM

Reduce Costs“Using VMware software has brought a huge cost benefit to IT - avoiding costs by $1.1 million is fantastic. For every production virtual machine, we estimate a $7,500 cost avoidance per server. We multiply 150 applications by $7,500 and estimate a $1.1 million cost avoidance.

Barry Naber, Technology Manager at International Truck and Engine Corporation

Customer Testimonials

Simplify Management

The net impact of utility computing with VMware Infrastructure 3 for the business is higher service levels, for IT - it is simplified and easier to manage infrastructure.

Fazil Habibulla, Vice President and System Architect, NATIXIS Capital Markets

VMware is Lowest TCO Per VM

VMware VI3Foundation

VMware VI3Enterprise

Other Solutions

2-way server (16GB RAM) $7,000 $7,000 $7,000Cost: Guest Windows licenses1 $5,998 $5,998 $5,998Cost: Virtualization license $995 $5,750 $0Subtotal $13,993 $18,748 $12,998Total VMs2 (2GB each) 15* 15* 7Cost per VM $933 $1,250 $1,857

1 List price for 2-socket Windows 2003 Server Datacenter Edition2 Assumes a 2:1 memory overcommit ratio based on VMware advanced memory mgmt technologies

* Assumes 1GB of memory used by “host virtualization SW” for all vendors

VI3 Enterprise includes advanced functionality such as live server and storage migration, dynamic workload balancing,

built in high availability, data protection, and power management which competitors don’t have.

VMware’s cost-per-VM beats even “free” products…

plus …

Available Resources

Online ROI/ TCO Calculator: Robust and customizable analysis of virtualization’s impact on your IT budget and datacenter costs

www.vmware.com/calculator

Why Choose VMware: Vendor selection checklist to ensure a Complete, Robust, Proven Virtual Infrastructure

www.vmware.com/technology/whyvmware/

Thank You!