Venyu Blog

With sincere apologies to the Apache nation, unlike the “Geronimo” approach to cloud computing where most sky-diving data administrators often take the leap of faith without the perceived benefit of a parachute to slow their descent, the jump to virtualizing servers not only is perceived as safe (in that the parachute is deployed almost immediately after virtual migration), but also a sure thing that almost always ends up in the same place you started: safely landed back at your newly-minted, cost-efficient (and hopefully) suddenly server-light datacenter.

But as a CIO or data administrator how do you begin to know when the cost benefit to virtualize your servers outweighs the bottlenecks that continue to clog your organization’s productivity?

This article in CIO magazine, “Calculating Virtualization” offers up a quartet of approaches based on the findings of a study funded by a systems-automation vendor for the Worldwide Executive Council which, according to its website enables senior executives responsible for Information Technology (and other disciplines) to facilitate communication between these executives and Wall Street analysts. In other words, industry heavy-hitters who you hope know what they’re talking about.

Among their findings:

• 64 percent of IT managers believe detailed tracking and analysis of virtualization costs will be important in 2011; 20 percent finding it critical.

• 48 percent say they report the cost/benefit of virtualization projects as a single lump sum while 25 percent track the cost but say their numbers aren’t accurate enough to use for budgeting or audits. Ten percent don’t track the costs at all.

One of the conclusions drawn from these figures, according to James Staten, principal analyst at Forrester Research is that most IT managers don’t know how they should measure or report the results of virtualization projects. His colleague, Galen Schreck, vice president and principal analyst at Forrester, suggests this disconnect between project initiation and cost outcomes occurs because few companies use chargeback to track IT spending by particular departments, let alone chargeback for cloud or virtualization

While emerging methodologies such as “showback”, where IT reports what the cost of a business unit’s virtual-IT would have been without actually charging for it is beginning to show some traction in some quarters, the debate around how to charge for computing services —minus hardware, storage and networks — continues to elude IT managers and organizations alike.

The article includes analysis from a former analyst at Enterprise Management Associates and a solution development manager at VMWare who offer up four basic approaches to reconciling cost with performance-based measurement including:

Activity-based costing. Also known as consumption-based costing, where the total IT costs are divided according to the volume of transactions, number of servers, users or other measure of the volume of IT’s work as consumed by a particular business unit.

Tiered pricing. Where branch offices that don’t need huge storage, high bandwidth or additional support could pay a lower “base rate” than larger, more resource-intensive business units.

Service costs vs. infrastructure costs. One way to account for unused capacity is to separate “base” costs like WAN bandwidth or data- center real estate from the applications, network-access or other services a business unit uses. Base cost to the business unit would remain relatively stable, while service costs would vary according to consumption.

Weighting: Direct or indirect weighting is a way of dividing costs according to an external calculation of the demands from a particular business unit. This can involve calculating a department’s IT cost according to the percentage of the company’s total operating budget required, for example, or total headcount.

Which methodology is best for you depends on how your financial strictures are interwoven and dependent on individual business unit consumption shaded by the IT components that support it. In other words, this isn’t a one-size fits all approach. However, the final word in this article from Gary Chen at IDC, is virtually unimpeachable: “Until business units know what IT resources they’re using and have the ability to change usage based on their own needs, they won’t see nearly the direct, tangible benefit of the flexible capacity of either virtualization or cloud computing.”

Which, to be both truthful and fair, is an excellent best practice for any business unit in which you, as an IT Manager, are “charged” to support.

For further information on server virtualization solutions for your business, contact Venyu today.