FOCUS VIRTUALISATION
Issue 6, Oct/Nov 2009
CREATE A FINANCIAL ANALYSIS Finally, the crucial element of the business case is the financial analysis of the benefits.
Chris Gebelin: Don’t be afraid of your CFO. The fi nancial business case (for virtualisation) is really strong
“For most IT organisations this is one of the toughest parts and it can be more of a mental process,” says Gebelin. “The skills you have for solving technical challenges may not be appropriate for putting together financial analysis. Don’t be afraid to ask for help from the finance team. If you have a quality
organisation, your Six Sigma team [or an equivalent] will be really good at helping out here.”
The analysis should include a comprehensive review of the total project costs and benefits. It helps to provide cost per units of compute: CPU; memory; storage; and network. Return on investment, internal rate of return or net present value must also be calculated.
HARD COSTS VERSUS SOFT COSTS One of the biggest challenges in formulating costs and benefits of a virtualisation project is separating the hard costs from soft costs. “Your CFO will care a lot about hard costs.”
Infrastructure purchases and staff additions are hard costs. A staff reduction is a hard benefit, while redeploying a member of staff to a different part of the organisation is considered a soft cost. “This is
organisational agility, but your CFO will not give you a hard benefit for that.”
Ability to quickly provision capacity according to need can be sold as a hard benefit. Ecommerce businesses are a good example. If an online store can boost capacity during the Christmas period it can capture more business, so the ability to “spin up workloads” becomes a hard benefit.
It is important to formulate yearly costs and benefits for a three-to- five-year period, since virtualisation’s value increases after the initial capital expenditures have been made.
EVALUATE PERFORMANCE Gebelin found that taking a snapshot view of the process six months after implementation was helpful in solidifying the financial case. He took into account all components of deploying a virtual server: ESX hosts; copper connections; switches; patch bays; cabinets; racks; power; resources; and consulting. The cost was about $3,600 per virtual server. The cost for a physical machine was about $11,000.
Being able to demonstrate this kind of savings “speaks volumes and I really don’t have too much of a challenge anymore in selling [virtualisation] to the senior management”, says Gebelin.
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