Last week I came across an interesting blog post from Mark Thiele. The idea of the article is that, as virtualization becomes a relevant cost for IT, it becomes a target for savings. I tried to engage with Mark on twitter but discussing a matter like this in 140 chars becomes a bit frustrating. So I decided to share my thoughts in a more structured way in this (hopefully) brief post.
Mark posted these two tables to demonstrate his theory:
His theory is that, as virtualization now accounts for roughly 30% of the entire IT budget, it becomes a target for cost reduction within organizations. Perhaps I am reading too much into what Mark wrote but my understanding is that he is pointing fingers towards VMware for that “virtualization cost” and, while he is not calling this out specifically, he is alluding to the usage of competitor products. Perhaps in a mixed environment. Mark is welcome to chime in and set the record straight if that is not correct. However I’ll just go ahead and assume that. There are a lot of people thinking along these lines anyway.
I believe the numbers are plain wrong, the premises are plain wrong and, subsequently, the conclusions are wrong. The following is a list of counter arguments to this theory I’d like to throw onto the table.
I am wondering what that 30% of virtualization cost includes. If one thing is sure that is NOT the cost of the virtualization licenses alone. I used to work for a hardware vendor and when we were selling 10K$ / 15K$ worth of hardware for a new SMB virtualization project that would have been paired with a 3K$ VMware Essentials Plus license. And that 15K$ for the hardware was just a fraction of the entire IT budget. SAP or Oracle anyone? While I am not going to disclose anything particularly sensitive let’s just say that, on average, an Enterprise buying “a few M$ worth of VMware ELA” usually has an IT budget that is in the ballpark of “a few hundreds M$ in total”. I guess it is somewhat fair to say that the entire IT budget of an organization is roughly two orders of magnitude bigger than the VMware virtualization license costs. Either that 30% is a typo (perhaps it should be 3%) or there is a 27% additional hidden cost when you deploy a virtualization solution? As usual “in medio stat virtus”. More on this later.
In Mark’s theory, if you adopt virtualization your bottom line remains the same. You are basically shifting costs. If you used to spend “100″ a few years ago, you are now spending “100″ if you sum up the virtualization costs with the savings in the other areas. My first reaction was “why would you want to do that then?”. My second reaction was “this is plain wrong”. I have been working with customers implementing virtualization solutions for the last 10 years and all of them told me that the savings are enormous and many times the ROI associated to implementing virtualization is measured in months, not even in years. Once you reached that milestone, it’s all savings from that point on. Unfortunately I can’t quantify what’s the bottom line “after virtualization” but my gut feeling is that:
it’s less (far?) than 100
the virtualization cost is still peanuts compared to many other areas of the IT budget.
In Mark’s table the “virtualization cost” is twice as much as the cost of the “people”. Really? That is beyond me. We must be kidding.
Or at least partially wrong metric I should say. You can virtualize for many reasons. One is to lower IT costs (not shifting them). Another one is to achieve what you cannot achieve without virtualization. More agility and more business alignment someone would say. I’d like to stick on practical examples and I’ll say better DR and High Availability for your legacy applications.
Or, for example, how much ($) can you associate to the ability to deploy an application in a matter of minutes Vs a matter of weeks / months? I’ll give credit to Mark to recognize this when he says “Now, please don’t read this the wrong way, I’m not an advocate of the thinking that IT is merely a place that helps us cut the cost of IT”.
A lot of people think that a proper multi-hypervisor strategy would help to lower the cost of virtualization. This is a very important matter and one that would require a very detailed analysis. Not something I am going to do in this blog post anyway. “Multi-hypervisor” may mean a lot of things to different people as there are a lot of layers where you can integrate different stacks. People sometimes trivialize this complexity.
I am not conceptually against the theory of multi-hypervisors. I find however weird the idea that a multi-hypervisor strategy could save you on license costs. There are situations where a multi-hypervisor strategy may make sense (I may end up writing something about it) but for the majority of the Enterprise organizations out there it just makes little sense. In my opinion at least.
This ties back to the numbers we have discussed at the beginning. If we all agree that virtualization license costs are in the range of 3 to 5 % (or less?) of the total IT budget than it doesn’t make any sense to target that as an opportunity for savings. On the other hand I can see that the “virtualization cost” category doesn’t only account for the license costs but associated training, tooling and skills that manage the solution you are building with those licenses.
Now, I still believe that these hidden costs aren’t 27% of the whole IT budget (they could be another good 3% to 5% perhaps) but the point is that the higher this latest number is, the more expensive it becomes for an organization to have multiple hypervisors and virtualization stacks deployed to manage. This usually means duplicating tools, skills and, in the final analysis, duplicating efforts and costs.
As you can see it’s easy to make up numbers and draw wrong conclusions from them. I have tried to give you a slightly different perspective assuming different numbers and different premises. Run your own numbers and feelings against this and Mark’s blog posts and come up with your own conclusion as whether you should actually lower those costs.
My way to look at this is that reducing the cost of virtualization in an organization is like trying to save on a 3% cost of the total cost of IT and, in doing so, potentially implementing something technically inferior that will drive up management costs and will lower the business advantages you have achieved. At the end of the day what you are buying is not licenses but “value for the money” and if many people are still buying VMware solutions in bulk numbers it may mean that people are not interested in saving 1% of the IT budget by dumping an excellent infrastructure solution that is delivering so much for them.
You have a right to disagree. I’d love to continue this discussion in the comments section if you want, certainly there is a lot left to say and argue over these numbers.