Server Virtualization

Virtualization provides companies with cost avoidance savings as it improves the use and scalability of the entire infrastructure and avoids having to purchase additional hardware. It helps IT to be more responsive and agile when handling changing business needs. Virtualization is not limited to servers, but also is applicable to desktops, network, application, and storage environments. Implementing virtualization is an innovative way to use newer technology to reduce costs. Even though it is newer technology, server virtualization has similarities to the old days of partitioning mainframes.
Server virtualization saves money on rack space, power and cooling requirements, maintenance and support, and disaster recovery. Virtualization consolidates an average of six servers, but it can be 15 or more. Server virtualization is now mainstream technology and most IT shops use it to streamline capacity management, use resources more efficiently, save money, and provide improved scalability. In fact, just about every company interviewed had implemented some degree of server virtualization and had realized significant cost reductions. Many companies estimated that server virtualization saved them at least 35 percent of their server costs. If you have not investigated and started using server virtualization, you need to do so. Although it will require an initial upfront investment, virtualization savings are not necessarily short term (unless you are at server capacity), but more a long-term cost of ownership savings and cost avoidance when buying additional servers in the future.
Top Tip: Virtualization

"Virtualization does not immediately reduce costs but provides a future reduction. We anticipate $1M savings starting in 2010 due to server virtualization as we won't have to refresh aging servers."
Energy Company

Be sure to investigate the impact of virtualization on all your software licenses as it could increase or decrease your license costs depending on how you have agreements structured. You may be able to reduce the license costs for applications that you rarely access. Microsoft has made some modifications in software licensing to accommodate the move to virtualization. In September 2008, Microsoft changed the 90-day reassignment rule except for server operating systems. Previously, you had to assign server and other software to one server for at least 90 days before you could assign it to another server. For a virtualized server farm environment with load shifting between multiple servers, you would need to assign licenses to both servers, making it cost prohibitive. The new terms allow some Microsoft products to be assigned within a server farm in up to two data centers as long as they are in time zones no more than four hours apart. For example, if you were running Microsoft Exchange Server on a Virtual Machine (VM) and wanted to migrate the VM to two other servers in the farm, you would need three exchange server licenses and three Windows server licenses, which would be very expensive. With the rule change, you only need one exchange service license, which is a 66 percent savings, and enough Windows server licenses to cover the operating system running on the physical server and the VM machine. Therefore, you are able to take advantage of the VM failover capabilities and increase the utilization rate and capacity of the machines. From a licensing perspective, you can see by these examples that moving to a VM configuration can be confusing.
Virtualization also affects the type, or edition, of Microsoft licensees that is the most cost-effective for your needs. For example, Windows Server 2008 is available in five different editions with significant cost variation: Standard, Enterprise, Datacenter, and two other niche methods. The Standard edition comes with one physical instance and one virtual instance. The Enterprise edition has one physical instance and up to four virtual instances. The Datacenter version includes an unlimited number of operating system instances. If you plan to host more than three VMs on a server, the Enterprise or Datacenter editions are the most cost-effective. The Datacenter version is most cost-effective when the maximum number of VMs is greater than four times the number of physical processors in the server. Server licenses for all editions of Windows Server are assigned to physical servers, not to VM machines. Therefore, an enterprise edition on a physical server running two Windows Server VMs runs up to two more VMs without requiring additional operating system licenses. The bottom line is you need to determine the most cost-effective edition based on the number of VMs you have. Of course, you need to check with Microsoft, or any other vendor, for current licensing configurations and rules, but the examples outlined above show the complexity in Microsoft and virtualization licensing. It definitely is not for the faint of heart and takes time to understand and design the most cost-effective solution for your environment.
In addition to reviewing software licenses, the following are additional considerations that you should review when considering virtualization as they may have an impact on costs:
  • Impact to the network. Once an organization implements server or storage virtualization, the impact may be significant enough that you need to redesign the network to handle the new network traffic pattern.
  • Impact to storage. Virtualization impacts the storage architecture, particularly for direct-attached storage systems.
  • Server workloads. You need to have a good understanding of the server workloads and business priority to determine what you should consolidate into the virtualization platform and what you should not.
  • Tools for management of the infrastructure. You may require additional tools to manage the virtualized environment.
  • Training of support personnel. The virtualized environment adds a layer of complexity. Make sure you train the technical staff to cover design, implementation, and support. Identify these costs in the initial financial analysis of implementing virtualization.
  • Book life of assets. Equipment that is nearing the end of the life cycle and end of book life is the best candidate for virtualization.
  • Compliance and security requirements. Virtualization may not be the best option for heavily regulated industries or applications.
  • Consider virtualization testing. Microsoft's free Virtual Server and Virtual PC (see allow you to test virtualization, for example.
  • Consider open source options. For example, FreeVPS provides some free open source virtualization options.


VoIP has become a mature product. Configurations to support VoIP are standard. Vendors are now able to distinguish the VoIP traffic from normal data traffic with MPLS and provide the high priority service it requires. It simplifies and saves costs for moves. Although VoIP can be a cost effective solution when implementing a new site, or if you need to replace an end-of-life PBX system, it may not always be the most cost-effective solution.
The answer to questions regarding the feasibility of migrating to VoIP services from traditional telephony services is, it depends. You need to understand your current costs. Capture your monthly phone charges, long distance charges, including costs for on-network and off-network, plus the costs for additions, moves, and deletions. For larger companies where it may be a difficult task assembling all the costs, pick a number of locations to represent the typical locations within your organization. This will give you a representative cost structure that you can apply with some accuracy over the remaining locations.
Review various options for implementing VoIP systems. The options range from doing everything yourself to having the voice and data network portions fully managed (as shown in Figure 1). Of course, there are numerous options between these two.

Figure 1: VoIP options
If you have capable staff that could easily pick up the technical skills needed, implementing and managing VoIP yourself may be the best option. If skilled staff is missing or workloads prevent picking up the additional responsibility, a partially or fully managed system may be the best option. Vendors will often propose one option, typically a fully managed system, as that is more profitable for them. However, they should be willing to tailor a system for a partially managed solution if you desire. Discuss various alternatives with them so you fully understand all your options and the associated costs and benefits.
To help determine your planned solution, build a VoIP business case. Ideally, the costs associated with converting to your VoIP solution, including on-going costs, are low enough to justify replacing the legacy voice system without any other factors. Many times this is not the case and you will need to consider other cost savings factors that are possible with VoIP solutions. VoIP cost savings include:
  • Elimination of conference call costs
  • Productivity improvements by combining voice mail with e-mail, plus implementing other unified communications services which eliminate the need for people to leave multiple messages when contacting staff for priority action items
  • Improvements in business services where some companies find they can reduce staffing requirements while improving customer service by implementing new telephony applications
  • Simplified technology that supports the infrastructure needed for staff to work at home, which has several cost savings such as higher productivity and reduced office space needs
  • Minimal cabling requirements for new implementations as you run voice and data over the same cable
For business cost analysis, be sure to include all VoIP costs. Some are not necessarily apparent at the beginning of the effort and can substantially reduce savings. Be sure that you do not end up with a VoIP solution that costs more than the current legacy system. Some VoIP costs include:
  • Data network upgrade costs. The data network may require upgrades to support voice traffic. These costs can include hardware replacement and software upgrades. Also, make sure to include costs to support network bandwidth increases needed to support voice traffic.
  • Training costs. You will need to train voice staff on how to configure voice options with a VoIP system. You will need to train network staff to configure network equipment to support voice traffic, and you will need to train support staff to debug problems encountered with the VoIP service. You may be able to reduce training costs with a fully managed VoIP service, but you should still have some trained staff to manage the vendor.
  • Security. You will need to address security concerns on a continuous basis with a VoIP system. Security concerns are virtually non-existent in a legacy telephony system, but you now have to consider security as many viruses can now attack IP phone systems.
  • Hidden fees. Providers can charge hidden fees. While vendors may not always mention these fees in the discovery phase, these charges can show up on the invoices.
  • Merging services. Tying the data and voice network services together can have some operational impact. Data network upgrades or outages can now affect voice services. Business units that were accustomed to using phones as a backup when data network services were not available will find themselves without phone service.
Implementing VoIP systems provide long-term cost savings at best. It can require a substantial cost investment for a do-it-yourself approach. The payback may be multiple years out so make sure the company is ready for this type of investment. Although a fully managed system may save money given the costs of change, it may not be a high priority item for meeting overall cost reduction goals.