School project: benefits of virtualization

1. TREND Business Case
Executive Summary
Technology Revitalization and Efficiency at NewwDeal (TREND). The TREND project will
increase service quality for customers while reducing overall power and cooling requirements.
TREND will catalog the services provided and the IT platforms on which they reside; identify
candidates for virtualization; optimize current platforms, replace older systems with new efficient
systems; and provide end users with thin clients.
Table of Contents
TREND Business Case ................................................................................................................................... 1
Executive Summary ................................................................................................................................... 1
Table of Contents ....................................................................................................................................... 1
Introduction ................................................................................................................................................ 2
Subject ...................................................................................................................................................... 2
Background .............................................................................................................................................. 2
Scope & Boundaries ................................................................................................................................... 3
Scope ........................................................................................................................................................ 3
Location ................................................................................................................................................... 3
Equipment ................................................................................................................................................ 3
Business Impacts ........................................................................................................................................ 4
Estimated Cost ......................................................................................................................................... 4
Estimated Hardware, Software, and Virtualization Costs........................................................................ 5
Estimated Savings .................................................................................................................................... 6
Total Cost of Ownership .......................................................................................................................... 6
Options ..................................................................................................................................................... 7
Analysis of Results................................................................................................................................... 8
Assumptions & Methods ........................................................................................................................... 9
Assumptions ............................................................................................................................................. 9
Data Sources & Methods ......................................................................................................................... 9
Financial Metrics...................................................................................................................................... 9
Sensitivity & Risks ................................................................................................................................... 10
Risks ....................................................................................................................................................... 10
Constraints ............................................................................................................................................. 10
Sensitivities ............................................................................................................................................ 10
Project Management ................................................................................................................................ 10
Stakeholder Communications and Collaboration .................................................................................. 10
Managing scope, cost, and schedule variables ....................................................................................... 11
Quality assurance methods..................................................................................................................... 11
Conclusion and Recommendations......................................................................................................... 11
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2. Introduction
Subject
This case examines the likely costs and benefits to NewwDeal from consolidating Information
Technology (IT) services provided through virtualizing servers and desktops. This will
significantly reduce the number of physical machines needed to provide the services, reducing
power consumption and increasing reliability through better backup management. Further
savings will result from replacing legacy units with Green IT. End user thin clients will run
virtualized desktops.
Existing and projected services will be cataloged and managed through IT Infrastructure Library
(ITIL) to sustain and improve customer satisfaction. The ITIL tactical framework increases the
efficiency of planning, delivering, and supporting IT services.
The advantage of such virtualization is that there are far fewer hardware servers to maintain. This
results in less workload for administrators, simplified backup and restoration processes, smaller
“footprint” in the server room, lower power consumption, and less heat for air conditioning to
remove. The intended result is at least a 25% reduction in power requirements.
Further, cataloging services will provide NewwDeal with a clearer picture of actual service
demand and a better ability to forecast peak loads both in terms of processor power and network
throughput. Administrative workload is also reduced because consolidation simplifies the task of
backing up critical files and other administrative chores.
The selection of services to virtualize plus the acquisition of Green IT systems will require
diligence in researching options, gathering requirements, evaluating products, negotiating
contracts, training the staff on the new configuration as well as end users on the thin clients.
Background
This transition is regarded as necessary in order to improve efficiency in IT services and meet
business growth targets for the next five years.
As a growing IT company, NewwDeal faces a choice. In our estimation, current server space is
nearing capacity, with maybe one or two years left at the current growth rate before expansion
will be needed. The heating, ventilation, and air conditioning (HVAC) equipment and ducting, as
well as power feeds to the building effectively preclude an expansion in place. Therefore a major
capital investment in another facility will be required.
The major cost of owning and running servers is no longer the purchase of the server itself. In its
2007 report to Congress, the EPA (EPA, 2007) states: “The purchase price of a new (1U) server
has been exceeded by the capital cost of power and cooling infrastructure to support that server
and will soon be exceeded by the lifetime energy costs alone for that server” (p. 30).
Therefore the most cost-effective course of action is for NewwDeal to maximize the efficiency of
its current server complement through virtualization on “Green IT” power-efficient platforms.
Beneficial byproducts of this transition include (1) meeting suggested EPA goals for power
efficiency and (2) participation in the Green movement to reduce carbon emissions. The latter is
a positive public relations factor and could sway potential customers in the current climate.
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3. This project is being developed and undertaken at the request of NewwDeal Vice President for
Technology
Scope & Boundaries
Scope
The TREND project proposes to replace 150 servers at NewwDeal by virtualizing the services
onto 15 new Green IT servers. Based on initial survey at NewwDeal, this is the minimum
number of servers that will be needed. Trend will also virtualize NewwDeal’s 500 desktops onto
3 high-end servers and replace the personal computer (PC) workstations with “thin clients.”
Using ITIL and its tactical framework for identifying, planning, delivering and supporting IT
services, TREND will improve the energy and computational efficiency of NewwDeal through
the following Green IT initiative:
1. Reduce energy costs and consumption by up to 50% through virtualization.
2. Inventory services provided to identify redundancies (ITIL).
3. Identify areas to improve quality of services provided (ITIL).
4. Train NewwDeal IT staff on ITIL to use in their daily activities.
5. Using advanced resource and memory management features of VMWare, enable
consolidation of servers from 15 to 1 and get hardware utilization to 75%
(Virtualization).
6. Reduce desktop acquisition, operating and management cost by replacing end of life
desktop machines with thin clients and desktop virtualization.
7. Acquire new IT needed for this project based on newest most efficient power
supplies and power management schemes that reduce both electricity consumption
and cooling load. (Green IT)
8. Concentrate new and existing IT servers into fewer racks: reducing data center
sprawl and HVAC resources.
Location
The TREND project will take place within the NewwDeal enterprise server facility at Hibbing,
and include end user equipment in New York, California, Dublin, and Tuvalu.
Equipment
Table 1 shows the number of servers in the current state and the end state after virtualization.
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4. Table 1 Servers Virtualized
Table 2 shows the number of personal computers in the current state and the number of
virtualized end state after virtualization. The servers shown in Table 4 are not included in the
number of servers in Table 3.
Table 2 Desktops Virtualized
Business Impacts
Estimated Cost
Table 3 shows the comprehensive project costs, including labor and equipment. Note that the
major outlays come in year 1 when new equipment is purchased, and again in year 5 (final outlay)
when replacements need to be purchased.
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5. Table 3 Cost and Schedule Estimates
Estimated Hardware, Software, and Virtualization Costs
Costs of server and desktop virtualization are shown in table 5. Note that desktop virtualization
requires purchase of servers to host the virtualized desktop, but the combination of ”thin client”
and virtualized server is far more efficient than a single desktop PC per workstation.
Table 4 Estimated Hardware and Software Costs
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6. Estimated Savings
Table 4 breaks out overall savings by year. Note the difference between outlays in table 3. Major
savings come in year 2 when there is almost no hardware to buy. Table 4 thus emphasizes year 2
savings, and years 3-5 are totaled under “residual savings.”
Table 5 Overall Project Savings Estimates
Total Cost of Ownership
To compare the cost of doing business as is, Figure 1 shows the total cost of ownership (TCO) for
the current server complement with the red bars. This can be easily compared to the TCO for
virtualized servers, shown in blue. As the categories show, there are many aspects to running a
“server farm,” and the ease of maintenance of virtualized servers is quite evident.
Figure
1
TCO
Physical
Servers
vs
Virtualized
Servers
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7. The comparison for “as is” desktop operation is similarly striking. While each desktop consumes
less power than a server, the aggregate of 500 units is not trivial. Figure 2 shows the TCO for the
current desktop complement with the red bars. Thin clients have no moving parts, no disk drives
to crash, no data to lose, no Windows licenses, and probably most importantly, hardly ever need a
system administrator to visit the workstation. This can be easily seen in figure 2 by the blue bars.
Figure
2
TCO
Desktop
PC
vs
Thin
Client
Options
The hardware and desktop virtualization portions of TREND implementation were intentionally
kept separate so NewwDeal management can compare and assess the business case for each
section. “Bang for the buck” is clearly with the servers because of server space crawl, cooling
load and overall power consumption. However, without virtualizing desktops there is
considerable administrative workload running the help desk and visiting workstations.
The following scenarios describe three levels of change that could result from this business
decision.
Scenario #1: Full TREND implementation – server consolidation and replacement with Green
IT, plus desktop virtualization. This is the TREND project as presented to the VP for Technology
and as described in the Subject.
Scenario #2: Server virtualization only, no desktops. This would consolidate services and
replace servers with Green IT.
Scenario #3: Business as usual. NewwDeal continues present operations. Note: expected growth
cannot be accommodated in current facilities beyond year 3, necessitating a new server facility.
This major capital expense is not included in the Table 3 figures.
Figures 3 and 4 together represent the cumulative investment and savings from the total TREND
implementation. Figure 3 displays the cumulative investment and savings resulting from
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8. virtualizing NewwDeal servers and services, and by itself (server virtualization only) depicts
Scenario 2.
Figure
3
Cumulative
Investment,
Savings,
and
ROI
-­‐
Servers
Figure 4 displays the cumulative investment and savings resulting from the virtual desktop portion of
TREND implementation. Scenario 1 includes these figures, Scenario 2 does not.
Figure
4
Cumulative
Investment,
Savings,
and
ROI
-­‐
Desktops
Analysis of Results
The payback period on servers is 1.5 years. For desktops it is 1.1 years. In other words, after
the second year NewwDeal is paying out less money in electricity and added system
administrator workload and the project has paid for itself. This can be seen by looking at the
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9. TCO in Figures 1 and 2, comparing with the savings shown in Figures 3 and 4 that will not be
realized with business as is.
Assumptions & Methods
Assumptions
1. Short downtime will be permitted to permit cutover from physical to virtual servers.
2. Task leads will remain with project for the duration.
3. NewwDeal SME’s are available for consultation, not assigned to conflicting tasks
4. Minimal incompatibilities between server applications/platforms and virtual hosts.
5. Funding will be available throughout project lifespan.
6. End users will accept virtualized desktops as equivalent to the physical systems.
7. Start time/date will not slip: Current start date of 1/3/2011 will not slip. Slippage may
affect costs to procure new equipment and make present system usage untenable as more
services are added through marketing. Scope is based on projected demand through the
agreed upon period of performance.
Data Sources & Methods
Data for power consumption and estimates of savings come from:
1. Manufacturer specification for the types of servers in use at NewwDeal and the new
Green IT units that will replace older servers.
2. EPA figures on cooling loads for server facilities
3. US Energy Administration for retail price of power to industrial customers
4. NewwDeal power invoices
Data for information throughput and transaction loads come from:
1. Interviews with NewwDeal system administrators
2. Service Level Agreements between NewwDeal and its clients
3. Server and service software specifications
4. Capacity of current network equipment and network equipment specifications
Financial Metrics
Describe to the readers on what types of measures you have based your case. These may include:
• Net present value is calculated on the capital worth of present IT systems to be included
in the TREND project.
• Payback period is calculated from total expenditures on virtualization software, plus new
hardware, minus the savings in direct (IT) and indirect (HVAC) power consumption
• Return on investment is the cumulative savings in power consumption.
• Total cost of ownership: 3 years: $HW, SW, Storage, Netwk, Training: $608,704; 5yrs:
$879, 676
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10. Sensitivity & Risks
Risks
Below are the evaluated risks from the TREND risk register and risk management plan:
R1 Information corruption/loss.
R2 Task leads: departure of one of the primary leads will create a skill vacuum
R3 Virtualization incompatibilities could prevent some applications or services from being
virtualized
R4 Loss of funding: NewwDeal could experience difficulties or become dissatisfied with
TREND work
R5 No downtime: NewwDeal may not allow downtimes to migrate from physical to virtual
servers
R6 Trial deployment failure: Beta tests may go badly
R7 End users may not accept the thin client virtualized desktops and refuse to use them
R8 Licensing – does not allow virtualization. Some applications need physical license keys;
others do not properly sync with license files when virtualized
R9 Budget or schedule overruns
Constraints
1. TREND tasks must be performed in a live environment, project cannot affect
ongoing operations.
2. NewwDeal IPO. TREND absolutely must be complete before planned August 1,
2011 IPO event.
Sensitivities
1. TREND benefits are sensitive to price fluctuation in power costs. While this is not
expected to decrease, a reduction in cost could offset expected savings.
2. TREND costs are sensitive to equipment and virtualization software pricing. While
increases are expected and planned for, sudden spikes will reduce TREND savings.
Project Management
Stakeholder Communications and Collaboration
Major stakeholders include:
• CTO/VP for Technology – Our project manager reports directly to the CTO. The
Resource Loaded Network (RLN) will be open as needed and weekly status reports
will be delivered.
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11. • CEO – Receives status reports at major milestones.
• CFO – Receives weekly cost projections
Methods of communication and collaboration will be, in addition to the reports indicated above,
weekly meetings, and other interval as needed
Managing scope, cost, and schedule variables
TREND will manage cost and schedule variables using Earned Value Management (EVM).
Scope variables will be managed through a configuration management process: once the scope is
accepted by NewwDeal management, TREND and management will assess any changes for cost
and schedule impact via a configuration change board (CCB).
TREND will keep track of the three measures of earned value (Niwot, 2009):
• The Plan: Budgeted Cost of Work Scheduled (BCWS)
• The Performance: Budgeted Cost of Work Performed (BCWP)
• The costs of Performance: Actual Cost of Work Performed (ACWP)
Comparing these measures will allow us to keep track of deviation from planned cost and
schedule values (Niwot, 2009):
• Cost Variance = BCWP – ACWP (negative CV is “bad”)
• Schedule Variance = BCWP – BCWS (negative SV is “bad”)
TREND will use Earned Value Management to keep the IT Efficiency Upgrade project
for NewwDeal on budget and on time.
Quality assurance methods.
TREND will utilize the Lean methodology for quality and continuous improvement. Lean
concentrates on eliminating anything in a process that does not contribute to customer value.
Value stream mapping will be used to analyze the processes, and the “5S” method will keep tasks
on track by removing distractors:
1. Sort –software tools and equipment on hand are only the ones needed
2. Set in order – place the most frequently used tools where they can be easily found
3. Shine - clean up the workplace after daily work, maintain an orderly appearance
4. Standardize – handle each job the same way
5. Sustain – follow 1 through 4: keep the workplace clean and ordered. This reduces
distraction, keeping emphasis on customer value.
The process is reviewed and any items that distract from customer value are eliminated to
maintain focus on customer value.
Conclusion and Recommendations
TREND will save NewwDeal 3 MILLION DOLLARS over a five-year period, which it does by
consolidating services onto fewer computers. Fewer computers (1) consume less electricity, (2)
generate less heat to be removed through cooling; (3) are more easily managed by IT staff; (4) are
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12. easier to back up and restore; and (5) take up less server room “real estate.” Newer, more
efficient computers also achieve the same benefits, adding to the overall savings.
TREND can be reduced in scope if needed, as described in the business impact scenarios. This
will save some expenditure in the short term but the yield will also be less.
For maximum benefit to NewwDeal, we recommend full TREND implementation.
Benefits of Virtualization
• Reduces physical infrastructure footprint, consolidating excess server and desktop
hardware
• Reduce Capital and Operational Expenses because additional services likely
accommodated with existing hardware
o Increase utilization rates of existing hardware from 5-15% to up to 80%
o Defer datacenter construction costs by $1000/ sq ft *
o Attain 50-70% higher VM density per host than is possible with individual
servers
o Achieve 20-30% lower cost-per-application because no need for separate
hardware
• Reduce Operational Expenses with Better Management and Automation
o Shift staff energy from routine tasks to strategic projects and adding value to the
business. Manage what matters most - entire IT services and their service levels -
by taking the complexity out of infrastructure management, service delivery and
application management.
• Minimize Potential Lost Revenue from Business Downtime
o Any unplanned downtime adversely affects your bottom line and your corporate
perception, business relationships, and future viability.
o Eliminate business loss due to datacenter outage
o Save time by automating testing and quick/ reliable restore
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