Virtualization ROI Rises, But Cloud Confusion Steals Spotlight

Most disruptive technologies deliver big savings only when they're first implemented, but enterprise customers keep wringing more ROI from virtualization, analysts say. As for how to get the most from virtualization plus cloud, confusion still reigns.

By Kevin Fogarty
Wed, July 21, 2010

CIO — While the newest version of VMware's (VMW) vSphere virtualization suite (see review here) represents a big step toward practical cloud computing, virtualization technology continues to spread based on the same basic benefits that made it popular in the first place, analysts say.

Virtualization makes it so much easier to consolidate a company's inventory of servers and maintain them that it sometimes justifies its own cost through more than one cycle of upgrades.

"We had one client that was able to justify a complete server hardware refresh because it could upgrade without having to buy any additional VMware server licenses," according to Chris Wolf, infrastructure analyst for Gartner Group. "They moved from servers with four cores to servers with 12 cores and were able to run more VMs on fewer servers at a significant cost savings."

[ Need metrics to demonstrate cloud computing's ROI to the business? See CIO.com's related article, 8 Ways to Measure Cloud ROI. ]

Most disruptive technologies deliver big savings only when they're first implemented. Improvements in the power of x86-based servers, better virtual-server acceleration mechanisms in Intel (INTC) and AMD (AMD) chipsets, and the increasing number of VM-specific products is delivering cost benefits even in second- or third-generation virtual infrastructures, according to Paul McWilliams, editor of NextInnings.com, a financial-analysis service focused on technology investments.

"In the first round of virtualization the chipsets took some advantage [of virtualization], but now people are building hardware designed to leverage it and you see how you get more benefit from virtualizing other things -- switches and networks and storage working more effectively," McWilliams says.

An IDC report released in June estimated that in 2009 cloud-based services accounted for $16 billion of the approximately $2.5 trillion in global spending on IT. The report forecast that number would rise to $55.5 billion by 2014—12 percent of all spending on IT.

Many of the customers whose money might go to cloud-based IT, however, are "suffering from cloud confusion," according to a July 6 report from Forrester Research.

Some of the confusion is due to vendors who apply the term "cloud" to everything in their inventories; the rest is the failure of vendors to explain the technology's potential clearly, the report concludes.

That confusion makes many companies leery about cloud computing, but not about the concrete benefits they get from the virtualization technologies on which cloud services would have to be built, according to Bernard Golden, CEO of consultancy Hyperstratus and a CIO.com blogger.

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