VMware Virtualization: The Right Investment For a Tough Economy VMware March 2009

Agenda Economic Environment in 2009 Why VMware is a Strategic Investment Proven Customer Success

Economic Environment in 2009

Why VMware is a Strategic Investment

Proven Customer Success

The Rough Road Ahead…. Source: Goldman Sachs IT Spending Survey, March 9th, 2009 Source: IMF World Economic Outlook Report, Nov 6 th 2008 “ Our IT spending indices dipped further to new lows in our latest survey, deep in contraction territory.” - Goldman Sachs A global economic recession is forecasted for 2009 The economic environment is a leading indicator of tech spending 71% of CIOs anticipate flat or decreasing IT spending budgets IT budgets in developed countries set to decline by 12% in 2009 and 9% globally

A global economic recession is forecasted for 2009

The economic environment is a leading indicator of tech spending

71% of CIOs anticipate flat or decreasing IT spending budgets

IT budgets in developed countries set to decline by 12% in 2009 and 9% globally

The IT Dilemma I am supposed to do the same job, but with less budget and headcount?!?

Agenda Economic Environment in 2009 Why VMware is a Strategic Investment Proven Customer Success

Economic Environment in 2009

Why VMware is a Strategic Investment

Proven Customer Success

Recent CIO Surveys Agree: Virtualization is the Top CIO Priority in a Tough Economic Environment Source: Merrill Lynch CIO Survey, Oct 28 th , 2008 Source: Goldman Sachs IT Spending Survey, Nov 2nd, 2008 “ The current environment has moved virtualization toward the top of the priority list for CIOs.” “ Total cost of ownership (TCO) reductions will be a key driver of the acceleration in server virtualization deployments as CIOs are forced to cut capital spending and reign in management, administrative and power/ cooling costs.”

Customers Are Still Moving Ahead with Virtualization in 2009 CIOs expect to double the percentage of servers virtualized in 2009 Source: Goldman Sachs IT Spending Survey, Nov 2 nd , 2008

Which software providers are gaining share of your IT spending dollars? Source: Goldman Sachs IT Spending Survey, March 9th, 2009 VMware Continues to be the #1 Software Investment for CIOs in a Tough Economy 1 13 Quarters # Gaining VMware Citrix Systems Cisco Software/ Security Oracle Symantec VMware

VMware

Citrix Systems

Cisco Software/ Security

Oracle

Symantec

Source: Goldman Sachs IT Spending Survey, Nov 2 nd , 2008 “ VMware’s incumbent position at the top of the rankings demonstrates that server virtualization momentum remains alive and well with a strong ROI case for a declining budget environment .” - Goldman Sachs Which software providers are gaining share of your IT spending dollars? VMware is the Proven, Trusted Leader Providing the Highest ROI and Lowest TCO

Top 3 Reasons Why VMware is the Right IT Investment in a Tough Economic Environment Minimize Lost Revenue Due to Downtime 3 Reduce Datacenter Operating Cost (e.g. Power & Cooling) 2 Reduce Physical Infrastructure Cost 1

Business Loss Due to Datacenter Outage** Sys Admin per 100 Apps* * Source: IDC and VMware TAM program ** Source: VMware customer – a $2bn insurance company. Estimates based on 40 hrs needed to recover before virtualizing and 4.5 hrs needed for the same recovery after virtualization. Infrastructure Cost per App Reduction in Datacenter Capital Expense 2.0-3.0 $14,235 $5,694 0.3 – 1.0 Reduction in Datacenter Operating Expense $30 MM $4 MM Reduction in Risk VMware Delivers Tangible Business Outcomes

Reduce Server Spend Through Consolidation VMware… Decouples software from hardware Encapsulates Operating Systems and applications into “Virtual Machines” A Server or Desktop Virtual Machine Typical Consolidation: 15:1 Typical Excess Hardware Capacity: 3 Years!

Decouples software from hardware

Encapsulates Operating Systems and applications into “Virtual Machines”

Total Savings Per Workload Actual customer savings per application; represents typical savings Includes estimated cost of VMware licenses, Support and Subscription VMware consolidates servers, storage and networking infrastructure to safely achieve higher utilization Reducing Capital Cost Reducing Operating Cost Servers 1000 80 $5,816 Network Switches 84 10 $296 Real Estate (Sq ft) 2053 257 $431 Power (kWh) 407 52 $759 Cooling (kWh) 509 64 $949 Savings per Workload (Over 3 years) $8,251* BEFORE AFTER SAVINGS 1 2

Actual customer savings per application; represents typical savings

Includes estimated cost of VMware licenses, Support and Subscription

Reduce Energy Consumption Copyright © 2005 VMware, Inc. All rights reserved. Copyright © 2005 VMware, Inc. All rights reserved. Highest consolidation rates on most secure and reliable virtualization platform Safely improve utilization rates 80% energy reduction Dynamic server and storage migration Power off unneeded servers in real-time Migrate storage dynamically 25% energy reduction Host desktop PCs in the datacenter Use thin clients, double refresh cycle Reduce storage for similar desktop images 70% energy reduction

Highest consolidation rates on most secure and reliable virtualization platform

Safely improve utilization rates

80% energy reduction

Dynamic server and storage migration

Power off unneeded servers in real-time

Migrate storage dynamically

25% energy reduction

Host desktop PCs in the datacenter

Use thin clients, double refresh cycle

Reduce storage for similar desktop images

70% energy reduction

Improving Operational Efficiency Source: IDC and VMware TAM program Do more work with the same number of people = operating cost savings Free up resources and budgets from day-to-day maintenance to focus on future innovation and strategic projects Drivers of productivity improvements: Instant provisioning Dynamic patching Zero downtime maintenance Reducing Operating Cost 2

Do more work with the same number of people = operating cost savings

Free up resources and budgets from day-to-day maintenance to focus on future innovation and strategic projects

Drivers of productivity improvements:

Instant provisioning

Dynamic patching

Zero downtime maintenance

Value of Zero Downtime Server Maintenance Server Maintenance is required for Updates to component hardware Updates / patches to the hypervisor Migration to newer servers Cost savings from zero downtime server maintenance with VMotion Avoid overtime cost to perform maintenance Avoid administrative time in scheduling downtime Business costs of downtime is specific to each industry and not included here For a 10 physical server, 150 VM environment, assuming: 2 hardware/ BIOS upgrades per server + 4 hypervisor patches = 6 maintenance activities per server per year 10 X 6 X + X $150/hr 2 hrs Overtime Cost Time to perform upgrade Overtime $/hr 0.75 hr 15 Scheduling Downtime # of apps per server Time spent scheduling downtime per app $60/hr $/hr X X = $ 58,500 VMware VMotion # of servers # of updates ( )

Server Maintenance is required for

Updates to component hardware

Updates / patches to the hypervisor

Migration to newer servers

Cost savings from zero downtime server maintenance with VMotion

Avoid overtime cost to perform maintenance

Avoid administrative time in scheduling downtime

Business costs of downtime is specific to each industry and not included here

Value of Zero Downtime Storage Moves Maintenance Storage Maintenance is usually required for LUN optimization Upgrades to better hardware Cost savings from zero downtime storage maintenance with Storage VMotion Avoid overtime cost to perform maintenance Avoid administrative time in scheduling downtime and planning the move Avoid cost of buying an alternate data mover tool For a 10 physical server, 150 VM environment (50GB per VM of storage), assuming: Storage is moved once in 3 yrs, annualize 1/3 of the 7.5TB environment every year (2.5TB). ~20GB can be moved an hour. X $150/hr 124 hrs Overtime Cost Time to move 2.5TB each yr Overtime $/hr X $60/hr 248 hrs Scheduling Downtime Time spent scheduling downtime Admin $/hr X $60/hr 500 hrs Planning Move Time spent planning the move Admin $/hr $5000 Alternate Tool Cost + + + = $ 68,113 VMware Storage VMotion

Storage Maintenance is usually required for

LUN optimization

Upgrades to better hardware

Cost savings from zero downtime storage maintenance with Storage VMotion

Avoid overtime cost to perform maintenance

Avoid administrative time in scheduling downtime and planning the move

Avoid cost of buying an alternate data mover tool

Value of Dynamic Load Balancing Customers report that without DRS automatically balancing their environments, they would either Decrease their consolidation ratio – this means that the full HW cost savings are not realized. Customers report up to 30% decrease in consolidation ratios. Have to manually monitor VMs to place them appropriately. For a 10 physical server, 150 VM environment, assume that the consolidation ratio decreases by 30% from 15:1 to 10. Alternatively, administrators would have to spend time monitoring the cluster or responding to customer calls every day Cost of increased monitoring time Decreased consolidation ratio means OR X $8,000 5 servers Increased Hardware Cost More servers needed Hardware, license, power/ cooling, space costs per server 260 2.5 hrs. Cost of Extra Admin Time Hours per day Days in a year $60/hr Admin costs/hr X X = $ 40,000 = $ 39,000 OR VMware DRS

Customers report that without DRS automatically balancing their environments, they would either

Decrease their consolidation ratio – this means that the full HW cost savings are not realized. Customers report up to 30% decrease in consolidation ratios.

Have to manually monitor VMs to place them appropriately.

Value of Automated Patching Guest Patching Administrative time – 2448 hrs, $147,744 saved annually Calculated for 150 virtual machines, assuming 40 patches per machine Offline machine patching Reduces exposure from non-compliant offline/suspended virtual machines Systems have NICs disabled during patching to reduce risk Scan machines Assess patch requirements Remediate systems Troubleshoot Rollback – 10% Manual 24 min Automated 15 min Annual Savings for 150 VMs 900 hrs, $54,000 Manual 156 min Automated 21 min Annual Savings for 150 VMs 1548 hrs, $93,744 Manual 180 min Automated 36 min Annual Savings for 150 VMs 2448 hrs, $147,744 Per virtual machine Per patch VMware Update Manager $147,744

Guest Patching

Administrative time – 2448 hrs, $147,744 saved annually

Calculated for 150 virtual machines, assuming 40 patches per machine

Offline machine patching

Reduces exposure from non-compliant offline/suspended virtual machines

Systems have NICs disabled during patching to reduce risk

Scan machines

Assess patch requirements

Remediate systems

Troubleshoot

Rollback – 10%

Ensuring Business Continuity Source: IDC and VMware TAM program Reduce business risk without increasing costs or complexity Minimize lost revenue from and avoid costs of business downtime Drivers of productivity improvements: Built-in high availability Automated recovery Reducing Operating Cost Minimize Lost Revenue 3

Reduce business risk without increasing costs or complexity

Minimize lost revenue from and avoid costs of business downtime

Drivers of productivity improvements:

Built-in high availability

Automated recovery

Value of Automated Site Recovery SRM cost savings can have several contributions: Cost of lower disaster recovery site investment Cost of lower recovery plan planning and management time Cost of less lost business revenue Cost of less lost wages The below only captures a conservative estimate of savings from lost business revenue and lost productive time Company that does $5M in revenue a year = ~$20k / weekday. Assume a disaster strikes. Assume that SRM can achieve RTO of 24 hours instead of 72 hours compared to traditional DR plan. = $ 64,000 (Per disaster) X $20,000 Value of Lost Revenue Days of faster recovery Lost revenue per day X + X 40 Value of Lost Time by Workers Days of faster recovery Number of workers X X $300/dy Cost of worker wages 2 2 VMware SRM

SRM cost savings can have several contributions:

Cost of lower disaster recovery site investment

Cost of lower recovery plan planning and management time

Cost of less lost business revenue

Cost of less lost wages

The below only captures a conservative estimate of savings from lost business revenue and lost productive time

Value of High Availability High Availability cost savings can have several contributions: Cost of lost business, lost work Cost of lost productive time The sheer simplicity of VMware HA and reduced time & effort compared to other clustering solutions is not captured The below only captures a conservative estimate of savings from lost productive time For a 10 physical server, 150 VM environment, assuming 2 failures a year: X 10 4 hrs. Value of Reduced Lost Productive Time Hours of downtime Number of users per VM 15 Number of VMs per host X X $50/hr Cost of User productive time X 2 X = $ 60,000 VMware HA Failures per year in 10-host cluster

High Availability cost savings can have several contributions:

Cost of lost business, lost work

Cost of lost productive time

The sheer simplicity of VMware HA and reduced time & effort compared to other clustering solutions is not captured

The below only captures a conservative estimate of savings from lost productive time

Value of Fault Tolerance Fault Tolerance (FT) cost savings is primarily in preventing lost business revenue from when mission-critical, high-revenue applications go down Fault Tolerance prevents lost business revenue by providing zero downtime, zero data loss continuous availability for your applications The simplicity of FT and reduced time & effort compared to other hardware-based solutions is not captured For a 10 physical server, 150 VM environment, assume ~10% of VMs are protected by FT (15 VMs). 2 host failures in the cluster per year. Lost revenue per minute of high-revenue apps can range from $2000-15000 per minute depending on type of transactions being processed. X $7000/min 4 Value of Lost Revenue Minutes of downtime prevented Lost revenue per minute 15÷10 Avg. number of FT-protected VMs per host X X X = $ 69,000 2 Failures per year in 10-host cluster X 1 $15000 Extra Hosts for FT Cost per host Number of extra hosts - VMware FT

Fault Tolerance (FT) cost savings is primarily in preventing lost business revenue from when mission-critical, high-revenue applications go down

Fault Tolerance prevents lost business revenue by providing zero downtime, zero data loss continuous availability for your applications

The simplicity of FT and reduced time & effort compared to other hardware-based solutions is not captured

Agenda Economic Environment in 2009 Why VMware is a Strategic Investment Proven Customer Success

Economic Environment in 2009

Why VMware is a Strategic Investment

Proven Customer Success

Customer Testimonials Meet Service Levels Efficiently Using VMware virtual infrastructure, we can offer the same levels of service and more flexibility for up to 40 percent lower server and operating costs.” Rob Jones, Director of Technology, ALSTOM Reduce Costs “ Using VMware software has brought a huge cost benefit to IT - avoiding costs by $1.1 million is fantastic. For every production virtual machine, we estimate a $7,500 cost avoidance per server. We multiply 150 applications by $7,500 and estimate a $1.1 million cost avoidance. Barry Naber, Technology Manager at International Truck and Engine Corporation Simplify Management The net impact of utility computing with VMware Infrastructure 3 for the business is higher service levels, for IT - it is simplified and easier to manage infrastructure. Fazil Habibulla, Vice President and System Architect, NATIXIS Capital Markets

VMware is Lowest TCO Per VM 1 List price for 2-socket Windows 2003 Server Datacenter Edition 2 Assumes a 2:1 memory overcommit ratio based on VMware advanced memory mgmt technologies * Assumes 1GB of memory used by “host virtualization SW” for all vendors VI3 Enterprise includes advanced functionality such as live server and storage migration, dynamic workload balancing, built in high availability, data protection, and power management which competitors don’t have. VMware’s cost-per-VM beats even “free” products… VMware VI3 Foundation VMware VI3 Enterprise Other Solutions 2-way server (16GB RAM) $7,000 $7,000 $7,000 Cost: Guest Windows licenses 1 $5,998 $5,998 $5,998 Cost: Virtualization license $995 $5,750 $0 Subtotal $13,993 $18,748 $12,998 Total VMs 2 (2GB each) 15* 15* 7 Cost per VM $933 $1,250 $1,857 plus …

Available Resources Online ROI/ TCO Calculator: Robust and customizable analysis of virtualization’s impact on your IT budget and datacenter costs www.vmware.com /calculator Why Choose VMware: Vendor selection checklist to ensure a Complete, Robust, Proven Virtual Infrastructure www.vmware.com/technology/whyvmware /

Online ROI/ TCO Calculator: Robust and customizable analysis of virtualization’s impact on your IT budget and datacenter costs

www.vmware.com /calculator

Why Choose VMware: Vendor selection checklist to ensure a Complete, Robust, Proven Virtual Infrastructure

www.vmware.com/technology/whyvmware /

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