Taking Virtual Servers to the Next Level

Smart CIOs are using virtualization for much more than data center consolidation. They're becoming masters of flexibility—delivering results for the business like lightning-fast provisioning and greatly improved disaster recovery.

There isn’t much about Tom Sanzone that bespeaks drama. The CIO of Credit Suisse is direct, meticulous and practical, and it doesn’t seem as if he’d suffer fools gladly, an impression partly informed by his New York accent, nearly shaven head and confident demeanor.

But ask him what virtualization has helped him deliver to Credit Suisse, and you’ll get a dramatic answer: tremendous results. He’s not just talking about savings reaped from data center consolidation—which was what the first wave of virtualization projects was all about. Sanzone and other leading CIOs are taking virtualization to the next level. They’re using it to become the fast, flexible business partners that CEOs have always wanted.

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One example: Virtualization has radically changed the way Sanzone’s IT group delivers computing power to the company’s application-hungry line of business units.

The old process of allocating a server box for a business unit—including purchasing, provisioning and configuring the hardware—took weeks or months. Now, Sanzone says, with his growing number of virtualized servers, “it can be done in one day.

“And we want to move to be even quicker.”

This, he notes, is the kind of benefit his business partners understand loud and clear. “They can see the impact of this type of technology and what it can mean to the business,” he says. Such as? “Such as a quicker time to market for the products that they need, competitive advantage and driving revenue growth.”

Virtualization, he continues, “is a beautiful combination: It’s cheaper and offers a lot more capability.”

Sprung out from server farm savings and spreading to Credit Suisse’s four core business units, virtualization has become a central piece of the $67 billion financial services company’s future.

Stephen Elliot, a research manager in the enterprise systems group of IDC (a sister company to CIO’s publisher), says this piece of technology can be vital for CIOs who are struggling with the business side’s expectations (one recent Forrester survey found that just 28 percent of CEOs think their CIOs are proactive business leaders). “Virtualization is an opportunity to strike more of a partnership with the business because you can drive out a more agile infrastructure and meet those [business] requirements faster,” Elliot says.

CIOs and analysts agree that IT departments need to move beyond simple “data center consolidation” thinking. Virtualization can enable dramatically faster provisioning of equipment and computing resources, better chargeback systems and stronger disaster recovery capabilities. It all adds up to a more flexible infrastructure that’s less a problem and more a solution.

“That’s when a CIO moves from tactical to strategic,” Elliot says.

First, Thou Shalt Save A Lot of Money

Like Sanzone, many CIOs have realized that virtualization is much more than a cost-saving tool. But almost every CIO’s journey to a virtualized environment will start with a data center consolidation project—and big savings that provide a pleasant starting point with the business side.

Virtualization technology from vendors such as VMware (which owns about 80 percent of the Fortune 1000 market) acts as an “abstraction layer” between physical server boxes and the operating systems and software running on them. This means that up to 30 virtual servers can be housed on just one physical server, though that number varies widely from data center to data center (depending on how resource-hungry a company’s applications are, for example). CIOs can then create a virtual pool of computing power, which reduces the need for a huge number of servers and allows for much better CPU utilization rates (which typically run anywhere from 5 percent to 15 percent) in servers.

How Savings Add Up

Out on the edge of the virtualization frontier are IT chiefs like David Siles, CTO of the Kane County government in Illinois. In addition to his server virtualization, data consolidation and disaster recovery successes, which he started in 2005, Siles has embarked on an ambitious desktop virtualization project.

Siles is about a quarter of the way through deploying VMware’s virtual desktop infrastructure to the county’s user base, which accounts for 2,000 PCs.

Those users who have started to switch over, including administrative folks, politicians and sheriffs, use thin-client terminals that are hosted back in the data center on virtual machines.

Although Siles says it’s still early in the changeover to calculate exact savings, he will eventually be able to cut maintenance, hardware and service costs because everything is controlled inside the data center. For example, each terminal cost him $600. But since he has been able to get 50 to 60 hosted desktops on each four-processor server, he has been able to cut in half each terminal’s cost. And, he notes, terminals boast an eight-year lifecycle, rather than a four-year one for a PC.

In addition, his four desktop staffers no longer have to make service calls to the four corners of the growing county (which accounted for two hours of driving time, in most cases).

Those thin clients—especially the 55 mobile units—now pose less of a security concern. “We had a couple laptops stolen out of police cars,” Siles says. “Now [with the virtualized thin clients], you essentially just lose a dumb terminal.”

At Credit Suisse, Sanzone will remove more than 2,500 of the company’s servers (which total more than 20,000) by year’s end. In the development environment, he’s been able to realize a 20-to-1 ratio for consolidating servers, meaning he consolidated 20 physical servers onto one new server. He’s also upped utilization rates on those servers from some as low as 7 percent up to 40 percent.

In turn, he expects to save millions on reductions in maintenance, hardware capital, networking, migration, real estate, and data center power and cooling costs. Credit Suisse is on track to reduce its data center power consumption by 1 megawatt by year’s end—all courtesy of virtualization. (Recent virtualization research from Aberdeen Group shows that 83 percent of “best in class” companies have increased their server utilization rates, 57 percent have decreased capital costs, and 52 percent have reduced staffing overhead.

David Siles, who is CTO of the Kane County government in Illinois, has realized massive savings since he started virtualizing in 2005. Those savings have come from a 30-to-1 utilization ratio, the elimination of 110 servers and licensing fees (more than $100,000); server renewal costs that he avoided ($370,000); and power and HVAC savings (nearly $300,000). Siles says that virtualization has not only become a strategic piece of Kane County’s infrastructure but, thanks to annual budget cuts, it is how he’s been able to provide “the same level of services to the county with less money.”

In fact, if CIOs haven’t virtualized at least a part of their server populations by now, they are woefully behind the curve. When Arch Coal CIO Michael Abbene began investigating virtualization products in 2006, “I tried to get a sense of who else was doing it,” he recalls. “It turned out to be everybody.”

According to IDC, 75 percent of companies with 1,000 or more employees are employing virtualization today. And more than half of the respondents to the Aberdeen Group survey on virtualization were using it in their production environments (meaning, everyday user applications), “a clear sign that end users trust that the technology is mature enough for mission-critical systems.”

Data center consolidation is a critical first step toward unlocking virtualization’s potential because it demonstrates to the business that IT can run more cost-effectively—slashing server costs plus tackling expensive power, cooling and real estate expenses. IDC says enterprises spend 50 cents to power and cool servers for every one dollar in server spending today (that number will increase to 70 cents by 2010), and new data center costs run $1,000 per square foot. Abbene says that consolidation has enabled him to defer a major data center upgrade that would have cost him around $400,000.

According to Abbene, as long as you don’t overburden physical servers with too many VMs, you won’t notice any degradation in application availability. And as long as applications are running just fine, “they don’t need to know what box [their applications] are running on.” Despite serious growth at the $2.5 billion company over the past three years, Abbene reduced his overall budget by 10 percent to 15 percent a year, largely due to his server virtualization efforts.

In fact, Abbene says that at his company, many businesspeople have become enamored of the virtualization concept. “They’ll say, ‘I want a virtualized server,’” he says.

What the Business Doesn’t Need to Know

That first win and proof of concept with server consolidation invariably lead to more virtualization conversations, say CIOs and analysts. CIOs should seize on these second-round discussions to expand upon how virtualization can provide greater flexibility and speed in provisioning computing power to lines of business (LOBs), allow for greater utilization of idle CPUs, speed up business continuity and disaster recovery operations, and improve application and system availability.

But, experts and practitioners say, you should take it slow and keep it simple. That’s because even many who work inside IT still have difficulty understanding all of virtualization’s complex terminology—just imagine how your CFO or marketing VP will feel if you start discussing hypervisors and CPUs. (Hint: Eyes glazing over, furious typing on BlackBerry.)

“They have no idea what that all means,” says Matt Wilson, vice president of IS at Chevy Chase Bank, which has $14 billion in assets. “As long as [their servers] perform well, they have no input into it.” When Wilson has moved Windows-based servers over to virtual machines in the past, he says, “it’s not something that we’ve advertised to the business.”

In fact, IDC’s Elliot says he’s talked to some CIOs who have hidden the fact that they have virtualized their servers (and realized cost savings) altogether. “They don’t want to spook anybody with tech jargon,” Elliot says. In a rather subtle way, he says, it’s conceivable that those CIOs who don’t inform the LOBs about their virtualized savings are actually able to make a “profit” on those services because of the virtualized savings. “If you can get away with that,” Elliot cautions.

This sneaking around is, in part, a response to the fact that some LOB chiefs have become married to their servers. These executives are “server huggers,” and they can be very territorial about their boxes. But it’s those server huggers, and their demands for loads of computing power for their applications, who are one of the chief causes of server sprawl in the CIOs’ data centers.

At Arch Coal, Abbene was feeling the heat. “We were just getting inundated—one application, one server, one application, one server, and it was again and again,” he recalls.

He’s tried to keep the virtualization conversations simple. “When I explained to management about virtualization as a concept, it was just as easy to say, ‘You take 30 computers and run them on one,’” he says. Their response: “Oh, OK.”

CIOs don’t need to delve into the technological specifications of virtualization, as Sanzone and Abbene’s examples prove. Businesspeople can easily understand getting their servers faster—from weeks or months down to just hours or one day.

Using VMware-based virtualization, AIG Technologies, which makes insurance-related IT products, has cut server provisioning time by 50 percent—from six hours (when a physical server already was available onsite) to just three hours. Whereas provisioning a new server from offsite typically takes six to eight weeks, CIOs like Sanzone can now answer business requests for new server power with responses like, “How about tomorrow?”

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