VMware Cost Savings Through Virtualization

Cost Savings through Virtualization Paul Jacobsen Channel Sales Manager VMware June 2009

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

The Rough Road Ahead…. 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 “Our IT spending indices dipped further to new lows in our latest survey, deep in contraction territory.” - Goldman Sachs Source: Goldman Sachs IT Spending Survey, March 9th, 2009 Source: IMF World Economic Outlook Report, Nov 6th 2008

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

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

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 2nd, 2008

VMware Continues to be the #1 Software Investment for CIOs in a Tough Economy 1 VMware Gaining 1. 2. VMware Citrix Systems # 3. 4. Cisco Software/ Security Oracle 13 Quarters 5. Symantec Which software providers are gaining share of your IT spending dollars? Source: Goldman Sachs IT Spending Survey, March 9th, 2009

VMware is the Proven, Trusted Leader Providing the Highest ROI and Lowest TCO “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? Source: Goldman Sachs IT Spending Survey, Nov 2nd, 2008

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

VMware Delivers Tangible Business Outcomes Reduction in Datacenter Reduction in Datacenter Reduction in Risk Capital Expense Operating Expense $14,235 2.0-3.0 $30 MM $5,694 0.3 – 1.0 $4 MM Before After Before After Before After Business Loss Due to Infrastructure Cost per App Sys Admin per 100 Apps* Datacenter Outage** * 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.

Reduce Server Spend Through Consolidation Typical VMware… Consolidation: 15:1 Decouples software from hardware Encapsulates Operating Systems and applications into “Virtual Machines” Typical Excess A Server or Desktop Hardware Capacity: 3 Virtual Machine Years! 12

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

Reduce Energy Consumption 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 Copyright © 2005 VMware, Inc. All rights reserved.

Improving Operational Efficiency Reducing Do more work with the same number of 2 Operating Cost 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 Source: IDC and VMware TAM program

Value of Zero Downtime Server VMware VMotion 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 Overtime Cost Scheduling Downtime 10 # of X 6 # of X ( 2 hrs Time to X $150/hr + 15 # of X 0.75 hr Time spent X $60/hr ) = $ 58,500 Overtime servers updates perform apps per scheduling $/hr $/hr upgrade server downtime per app

Value of Zero Downtime Storage VMware Moves Maintenance 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 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. Overtime Cost Scheduling Downtime Planning Move Alternate Tool Cost 124 hrs X $150/hr + 248 hrs X $60/hr + 500 hrs X $60/hr + $5000 = $ 68,113 Time to Time spent Time spent Overtime Admin Admin move 2.5TB scheduling planning $/hr $/hr $/hr each yr downtime the move

Value of Dynamic Load Balancing 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. 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 Increased Hardware Cost Decreased consolidation 5 servers X $8,000 = $ 40,000 ratio means More servers Hardware, license, power/ needed cooling, space costs per server OR OR Cost of Extra Admin Time Cost of increased 2.5 hrs. X 260 X $60/hr = $ 39,000 monitoring time Admin Hours per day Days in a year costs/hr

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

Ensuring Business Continuity Reducing Lost Minimize 3 Operating Cost Revenue 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 Source: IDC and VMware TAM program

Value of Automated Site Recovery 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 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. Value of Lost Revenue Value of Lost Time by Workers 2 X $20,000 X X + 2 X 40 X $300/dy = $ 64,000 Days of Lost revenue Days of Number of Cost of worker faster recovery per day faster recovery workers wages (Per disaster)

Value of High Availability VMware HA 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: Value of Reduced Lost Productive Time 4 hrs. X X 10 X 15 X $50/hr X 2 = $ 60,000 Hours of Number of Number of Cost of User Failures downtime users per VM VMs per host productive time per year in 10- host cluster

Value of Fault Tolerance 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 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. Value of Lost Revenue Extra Hosts for FT 4 X $7000/min X X 15÷10 X 2 - $15000 Cost per X 1 Number of = $ 69,000 Minutes of Lost revenue Avg. number of Failures downtime per minute FT-protected VMs per year in 10- host extra hosts prevented per host host cluster

Customer Testimonials 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 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 25

VMware is Lowest TCO Per VM VMware’s cost-per-VM beats even “free” products… VMware VI3 VMware VI3 Other Foundation Enterprise Solutions 2-way server (16GB RAM) $7,000 $7,000 $7,000 Cost: Guest Windows licenses1 $5,998 $5,998 $5,998 Cost: Virtualization license $995 $5,750 $0 Subtotal $13,993 $18,748 $12,998 Total VMs2 (2GB each) 15* 15* 7 Cost per VM $933 $1,250 $1,857 plus … 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. 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

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/why vmware/

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VMware Cost Savings Through Virtualization

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