Alinean whitepaper: Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO
Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering Total Cost of Ownership An Alinean White Paper Greg Shanker - Vice PresidentThis document was developed with IBM funding. Although the document may utilize publiclyavailable material from various vendors, including IBM, it does not necessarily reflectthe positions of such vendors on the issues addressed in this document.
EXECUTIVE SUMMARY ............................................................. 1 Financial Overview .....................................................................1 ANNUAL OPERATING EXPENSES .................................................. 2 SERVER CONSOLIDATION CASE STUDY ............................................ 2 Original Server Environment ........................................................2 Proposed Server Hardware Configurations .......................................3 Software Licensing.....................................................................4 Systems and Database Administration Labor Costs ............................4 Energy Costs and Environmental (Green) Impact...............................5 Upgrade / Migration Costs ...........................................................6 Improved Operational Agility .......................................................6 Service Level Improvements .........................................................6 CONCLUSION ...................................................................... 7 EXPLORE FOR YOURSELF .......................................................... 7 ABOUT ALINEAN .................................................................. 7Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO iiiCopyright 2001-2010 Alinean, Inc. All Rights Reserved.
EXECUTIVE SUMMARYIn these tight and uncertain economic times many organizations are exploring ways they can lower ongoingoperating costs and increase flexibility. With the economy teetering between a solid recovery and apotential double dipped recession organizations are seeking strategies that will enable them to quickly scaleoperations up or down to meet market demand. Reducing fixed operating costs and preserving cashliquidity are key financial goals for improving this flexibility. This paper discusses how a professionalservices firm recently streamlined their IT infrastructure by consolidating on IBM Power Systems servers tohelp achieve these goals.The paper examines in detail the financial case this organization put together for the decision to moveforward with a server consolidation project. The organization had grown significantly over the past severalyears through a series of mergers and acquisitions. As the organization acquired new operating companiesit migrated the financial applications for those companies onto a standard set of Oracle E-Business Suiteapplications. The organization deployed a new set of servers and application instances for each operatingcompany they acquired. This approach enabled the organization to quickly integrate new operatingcompanies with minimal interruption to ongoing operations.Most of the servers supporting critical operations were now reaching the end of their optimal life span.Performance and reliability were becoming a concern for some key functions. In examining its upgradeoptions, the organization wondered whether it would be better to maintain its current IT architecture andsimply replace existing servers, or if it could achieve greater efficiencies through server consolidation. Theorganization considered three upgrade alternatives. 1) Replace current Sun Fire servers with the latest Sun SPARC Enterprise servers. 2) Consolidate workloads onto more scalable Sun SPARC Enterprise servers using virtualization. 3) Consolidate workloads onto IBM Power Systems servers using virtualization.Financial OverviewBased on its financial assessment the organization determined that it could save $5,038,494 or 58% overthree years by consolidating its Oracle E-Business Suite onto IBM Power Systems servers compared toupgrading its current architecture with Sun SPARC Enterprise servers. With superior price performance theIBM Power Systems consolidation solution was also $2,895,109 less than a comparable Sun SPARCEnterprise consolidation configuration. The primary advantage of the IBM Power Systems configurationcompared to the Sun SPARC consolidation option came from the cost of the server hardware.Compared to upgrading the current Sun SPARC server configuration, the IBM Power Systems consolidationplan was expected to yield a broad range of savings including; server hardware costs, software costs,systems administration labor and datacenter expansion and energy costs. Table 1 shows the expectedcosts for the three alternative proposals, and the savings of the IBM Power Systems consolidation optioncompared to upgrading the Sun SPARC configuration over a three year analysis period. Sun SPARC Sun SPARC IBM Power IBM Power Savings vs. Three Year TCO Comparison Upgrade Consolidation Consolidation Sun SPARC Upgrade Number of Servers 42 4 4 38 90% Server Hardware Costs $4,036,000 $4,257,600 $1,180,000 $2,856,000 71% Server Software Costs $459,240 $169,200 $417,600 $41,640 9% Server Administration Labor $3,382,500 $1,732,500 $1,732,500 $1,650,000 49% Upgrade / Migration Costs $152,500 $173,750 $226,250 ($73,750) (48%) Energy Costs $424,913 $158,719 $40,310 $384,604 91% Datacenter Expansion Costs $180,000 $0 $0 $180,000 100% Total Three Year Costs $8,635,153 $6,491,769 $3,596,660 $5,038,494 58%Table 1: Three Year TCO Comparison ChartServer Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 1Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
In addition to the direct hard cost savings identified in the TCO Comparison Table, the organization alsoexpected to achieve significant benefits through improved performance, systems availability and greateragility from the server consolidation effort. Because the measurement of these benefits was moresubjective, the organization elected to exclude them from the financial analysis. All of these benefits areexplained in further detail in subsequent sections of this paper.ANNUAL OPERATING EXPENSESIn addition to lowering its total costs of ownership (TCO) over time, the organization was also interested inreducing annual operating expenses and preserving precious cash reserves. Once it determined that theIBM Power Systems solution provided the lowest cost option, it discussed financing options with IBM GlobalFinance. Based on the cash flow analysis the organization decided to enter into a three year lease for theserver hardware and to finance the software and migration services costs for a three year period. Byspreading its payments over time with attractive financing rates, the organization was able to improve its IToperations and lower annual operating costs by 30% saving over $525,000 per year. Interestingly, thesavings in annual energy costs and software expenses were almost the same as the additional costs for thenew server hardware, basically offsetting those costs. Table 2 shows the annual operating cost comparisonbetween the original server environment and the IBM Power Systems solution leveraging the three yearcontract with IBM Global Finance. Original Server IBM Power Annual Savings Annual Operating Costs Environment Consolidation with IBM Server Hardware Costs $232,400 $355,000 ($122,600) Server Software Costs $181,500 $150,000 $31,500 Server Administration Labor $1,127,500 $577,500 $550,000 Upgrade / Migration Costs N/A $84,000 ($84,000) Energy Costs $104,755 $13,437 $91,318 Datacenter Expansion Costs $60,000 N/A $60,000 Total Annual Operating Costs $1,706,555 $1,179,937 $526,218Table 2: Annual operating costsSERVER CONSOLIDATION CASE STUDYOriginal Server EnvironmentThe original server environment consisted of five sets of servers, one for each operating company, and aset of servers for test and development. Each set of servers supported three tiers; a database tier, anapplication tier and a web user interface tier. The configurations varied slightly based on the scale requiredfor the different operating companies. Overall, there were 8 Sun Fire v890 servers with 8 dual-coreUltraSPARC IV processors, 20 Sun Fire v490s with 2 dual-core UltraSPARC IV processors and 14 older SunFire v440s with 4 single-core UltraSPARC IIIi processors. The Sun Fire v890s were used exclusively for thedatabase tier. The Sun Fire v490s were used for all three tiers. The older Sun Fire v440s were used forthe web tier. Table 3 below shows the original server configurations, original purchase prices and annualhardware maintenance costs per server. Number of Cores per Memory Purchase Annual Server Type Servers Server per Server Price Support Sun Fire v890 – UltraSPARC IV 8 16 32 GB $125,000 $11,500 Sun Fire v490 – UltraSPARC IV 20 8 16 GB $47,000 $4,950 Sun Fire v440 – UltraSPARC IIIi 14 4 6 GB $36,500 $3,850 Total All Servers 42 344 660 GB $2,451,000 $244,900Table 3: Original server configurationsServer Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 2Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
Proposed Server Hardware ConfigurationsGoing forward the organization considered three upgrade alternatives: 1) Replace current Sun Fire servers with the latest Sun SPARC Enterprise servers. 2) Consolidate workloads onto more scalable Sun SPARC Enterprise servers using virtualization. 3) Consolidate workloads onto IBM Power Systems servers using virtualization.The organization worked with engineers representing both hardware vendors to size the appropriateconfigurations based on current workloads and the desire for greater processing power. For the firstoption, the Sun Upgrade Configuration, the organization would replace the current Sun Fire v890 serverswith Sun SPARC Enterprise M5000 servers. Each M5000 server would be configured with 8 quad coreSPARC64 VII (2.53 GHz) processors and 64 GB of memory. The Sun Fire v490 servers would be replacedwith Sun SPARC Enterprise M4000 servers, each with 4 quad core SPARC64 VII (2.53 GHz) processors and32 GB of memory. The Sun Fire v440 servers would be replaced with Sun SPARC Enterprise M4000servers, each with 2 quad core SPARC64 VII (2.53 GHz) processors and 16 GB of memory.For the server consolidation options the organization expected to be able to increase average systemutilization from 18.7% to over 45% by moving current processes from separate physical servers to virtualmachines on larger more scalable servers. For the Sun SPARC Consolidation configuration the organizationwould need a cluster of four Sun SPARC Enterprise M8000 servers, each with 16 quad core Sun SPARC64VII (2.53 GHz) processors and 256 GB of memory.The IBM Power Consolidation configuration would have a similar architecture with four clustered IBM Power780 servers. Each of the IBM Power 780 servers would be configured with 2 eight core IBM POWER7(3.8GHz) processors and 256 GB of memory. Table 4 shows the configurations, purchase prices and annualhardware support costs for the various options. Number of Processors Memory Purchase Annual Server Type Servers (Chips/Cores) per Server Price Support Sun SPARC Upgrade Configuration Sun SPARC Enterprise M5000 8 (8 / 32) 64 GB $150,000 $11,500 Sun SPARC Enterprise M4000 20 (4 / 16) 32 GB $65,000 $7,000 Sun SPARC Enterprise M4000 14 (2 / 8) 16 GB $45,000 $5,000 Total Sun SPARC Upgrade 42 (172 / 688) 1376 GB $3,130,000 $302,000 Sun SPARC Consolidation Configuration Sun SPARC Enterprise M8000 4 (16 / 64) 256 GB $900,000 $54,800 Total Sun SPARC Consolidation 4 (64 / 256) 1024 GB $3,600,000 $219,200 IBM Power Consolidation Configuration IBM Power 780 4 (2 / 16) 256 GB $250,000 $15,000 Total IBM Power Consolidation 4 (8 / 64) 1024 GB $1,000,000 $60,000Table 4: Proposed server configurationsThe lowest cost option was the IBM Power Systems configuration. With a powerful system architecture andhighly efficient virtualization solution the IBM Power 780 servers were able to deliver superior performanceto the larger Sun SPARC Enterprise M8000 servers at 72% lower cost per server. Similarly, the higherefficiency of the clustered IBM Power configuration resulted in $2,130,000 lower hardware costs than theSun SPARC Upgrade configuration.Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 3Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
Software LicensingIn addition to the server hardware costs, the organization also examined the software costs associated withswitching platforms. Changing platforms to IBM Power Systems would require new IBM AIX operatingsystem and IBM PowerVM virtualization software licenses, which would cost $64,000 per server for thelicenses and $16,000 per year for annual support. Compared with current annual software support costs of$181,500, it turned out that the consolidation would actually reduce annual software maintenance costs by59% per year. These savings would compensate for the additional license fees in just over two years andreduce overall software costs by 23% over the three year analysis period saving $126,600.The software cost comparison included the upfront license fees and ongoing annual support for operatingsystem software as well as systems management software. Typically database and application serversoftware are also included in the cost comparison. However, the costs for these components were thesame for all three configurations, since the Oracle database and Oracle application server licenses werebundled with the Oracle E-Business Suite application software, which was priced on a per user basis ratherthan a per server basis. Table 5 shows the upfront license costs for the new IBM AIX and PowerVMlicenses and the annual software support costs for all three options. Sun SPARC Sun SPARC IBM Power Software License and Support Costs Upgrade Consolidation Consolidation Number of Servers 42 4 4 Operating System License Cost per Server N/A N/A $64,000 Total Operating System License Costs N/A N/A $256,000 Annual Operating System Support per Server $2,211 $8,500 $16,000 Annual Systems Management Support per Server $1,433 $5,600 $2,800 Total Annual Software Support Costs $153,080 $56,400 $75,200 Total Three Year Software Costs $459,240 $169,200 $417,600Table 5: Three Year Software License and Support Cost ComparisonSystems and Database Administration Labor CostsOne of the major objectives for the server consolidation was to reduce ongoing operating expenses. Whilethe original architecture of separate standard implementations per operating company simplified systemsmanagement, maintaining multiple servers required considerable overhead. Upgrades and patches neededto be applied consistently to all servers. Performance tuning, availability management and access controlwere also performed separately for each individual server.The organization anticipated that it could reduce the server and database administration workloads by 50%through server consolidation, reducing current staffing levels from nine down to four and a half staff. Thiswould allow the organization to shift these freed up resources from daily administration and operationsfunctions to more proactive roles of data management and reporting in support of business initiatives.Table 6 shows the current staffing levels for Systems Administration, Database Administration andOperations along with expected levels for a consolidated environment. By reducing the labor requirementsfor infrastructure management from nine staff to four and a half, the organization expected to reduceannual operating costs by $550,000 per year, saving $1,650,000 over the three year analysis period.Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 4Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
Original and IBM or Sun Server Administration Labor Costs Upgrade Labor Consolidation Annual Savings Number of Servers 42 4 38 Database Administrators 2.5 1.5 1.0 Average Annual DBA Salary * $145,000 $145,000 $145,000 Systems Administrators 4.0 2.0 2.0 Average Annual System Administration Salary $135,000 $135,000 $270,000 Systems Operations Staff 2.5 1.0 1.5 Average Systems Operations Salary $90,000 $90,000 $135,000 Annual Administration Costs $1,127,500 $577,500 $550,000 Total Three Year Admin Costs $3,382,500 $1,732,500 $1,650,000Table 6: Three Year Server and Database Administration Labor Costs* Note: All salaries reflect the fully burdened costs for staff including base salary, benefits, payroll taxes,paid time off, and office expenses.Energy Costs and Environmental (Green) ImpactWith the recent focus on global warming and fluctuating energy costs the organization was interested inreducing its energy requirements. This was particularly important because the datacenter had startedrunning rather warm in the past two years. If the organization could not reduce the energy consumptionand corresponding heat generation they would be forced to undergo a costly datacenter expansion and airconditioning system upgrade.The datacenter expansion and HVAC upgrade was expected to cost $600,000. Using a simple ten yearstraight line depreciation schedule the amortized cost of the expansion came to $60,000 per year. Forevery year to organization could avoid the upgrade they would save this $60,000 expense.The proposed IBM Power solution was expected to reduce total energy consumption by an impressive 87%,saving over 950,000 kWatts per year or $91,318 in electrical costs. This reduction in power consumptionand heat generation was sufficient to postpone the expansion of the datacenter. The alternative SunM8000 consolidation solution would also reduce energy requirements by almost 50%, but this configurationwould still require nearly three times more energy than the IBM proposal. Table 7 below shows the energyrequirements for the original server configuration and the three alternative proposals. Original Sun SPARC Sun SPARC IBM Power Annual Energy Consumption Environment Upgrade Consolidation Consolidation Number of Servers 42 42 4 4 Average Power Consumption per Server (Watts) 1,188 1,606 6,300 1,600 Annual Operating Hours 8766 8766 8766 8766 Data Center PUE Factor* 2.5 2.5 2.5 2.5 Annual Power Consumption (kWatts) 1,1093,471 1,478,474 552,258 140,256 Average Price per kWh $0.0958 $0.0958 $0.0958 $0.0958 Annual Power and Cooling Costs $104,755 $141,638 $52,906 $13,437 Average CO2 Emissions (lbs/kWatt) 1.341 1.341 1.341 1.341 Annual CO2 Emissions (tons) 733 991 370 94Table 7: Annual Energy Consumption and Cost ComparisonServer Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 5Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
* PUE – Power Usage Effectiveness is the measure of energy required by the data center as a whole foreach unit of energy delivered to servers. This measure includes cooling and other data center equipment.Finally, from an environmental perspective, the reduction in energy consumption for power and coolingwould result in a decrease of approximately 639 tons of CO2 per year, or the equivalent of eliminating theemissions of 106 cars per year. (On average cars produce 6 metric tons of CO2 per year.)Upgrade / Migration CostsThe installation of the new IBM Power Systems servers and application migration would be performed by acombination of external professional services personnel and internal staff. The initial installation of the newservers and application migration would take ten weeks including system design and planning. Systemverification and testing would take an additional six weeks. Overall the organization budgeted $120,000 forexternal professional services fees. They estimated internal migration costs at $106,250, based on 1700hours of internal labor at an average fully burdened hourly rate of $62.50.Improved Operational AgilityWhile the organization had a sound process in place for integrating new operating companies, thedeployment of new systems for each new acquisition or merger required considerable time and effort.First, the organization would need to assess the current workload for the new operating company toproperly size the required servers. Since the operating companies were typically running different financialapplications, this required some analysis to translate current workloads over to the Oracle E-Business Suite.To compensate for any sizing errors and to account for growth, the IT organization generally inflated thesystem specifications and purchased larger servers than were truly needed.In addition to the time and effort required for system sizing the organization also needed to procure theservers, install the hardware and configure the systems. Once the physical hardware was in place andoperational, then the IT group could begin the application configuration and data migration. This processtook six to nine months on average.With the new virtualized server infrastructure the organization could simply define new virtual servers onthe existing physical server cluster to accommodate new application instances. The organization expectedthat eliminating the sizing, procurement, installation and configuration of additional servers would trimthree months off the time it took to integrate the financial systems for new operating companies.Additionally, by leveraging a virtualized environment the organization could make more efficient use ofphysical server resources. Rather than over-sizing server requirements, the organization could now definevirtual machines to more closely match expected processing needs, and easily adjust the allocation of theseresources over time to match actual processing requirements.Service Level ImprovementsBased on benchmark tests with the IBM Power Systems servers, the organization expected to improveservice levels for the organization by accelerating key business processes and improving system availability.Over the years growth in computing requirements had started degrading the performance of bothinteractive users of the applications as well as crucial period end financial processes. The new IBM PowerSystems were able to complete many of these processes up to four times faster than the previous systems.The organization expected that these performance improvements would yield tangible productivity benefitsfor the Finance group in being able to process weekly payroll, close month end financial statements andprocess accounts receivable more efficiently.The new clustered configuration with IBM PowerHA SystemMirror would also provide higher availabilitythrough automated failover.Although improving performance and reliability were key factors in the server consolidation decision, theorganization chose not to quantify these benefits for the financial analysis.Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 6Copyright 2001-2010 Alinean, Inc. All Rights Reserved.
CONCLUSIONWhile standardization of core technologies and processes can contribute to improved operational efficiencyand increased service levels, this case study revealed that consolidation of IT resources can provide evengreater savings. By consolidating forty two servers down to only four physical servers our study participantwas able to lower ongoing operational costs for systems administration and energy by a combined 52%,saving over $641,318 per year compared to upgrading existing servers. Additionally, the IBM PowerSystems consolidation solution offered superior price performance characteristics compared to the SunSPARC Enterprise M8000 proposal.By switching architectures and consolidating on IBM Power 780 servers the organization featured in thispaper expected to reduce the total cost of ownership TCO for their server infrastructure by $526,218, or30% over a three year analysis period. By modernizing their server hardware and implementing highavailability clustering, they also expected to decrease system downtime, improving service levels for thebusiness. The implementation of a virtualized server environment would also improve average resourceutilization and accelerate the deployment of new applications, thus increasing business agility.EXPLORE FOR YOURSELFAs illustrated in this case study, the latest IBM Power Systems servers powered with the latest IBMPOWER7 processors offer tremendous opportunity for reducing energy consumption, shrinking your datacenter footprint and lowering operational costs. Alinean has developed an easy to use Server ConsolidationTCO Calculator that will allow you to explore these potential savings for your unique environment. Learnhow you can achieve similar benefits with a payback in a little as nine months. Get your customized reportat: http://www-03.ibm.com/systems/migratetoibm/whyibm/campaigns/sconevaltool1.htmlABOUT ALINEANSince 1994, the Alinean team has been the pioneering builder of tools to help quantify and improve the ROIand TCO of IT investments. Alinean was named for the Spanish word for “Align”, matching the Alineanmission as the leading developer of analytical tools to help IT vendors, consultants and IT executives alignIT investments with business strategies.The Alinean team has over a decade of experience in the practical development and application of ROI andTCO methodologies, models and tools to optimizing IT investment decision making. In 1994, the Alineanteam formed Interpose, the original pioneers of ROI tools, developing analytical software for over 50 majorIT vendors and consulting companies worldwide, and creating the industry standard TCO Manager and TCOAnalyst software. Interpose was sold to Gartner in 1998, where the team continued their developments andmarketing of ROI and TCO software tools. The original team reunited to form Alinean in 2001, once againbecoming the leading pioneers and developers of ROI sales and analytical tools. Current customers includeleading IT solution providers such as HP, IBM, Dell, Intel, Symantec, NetIQ, EMC, SAP, Oracle, SBC, andMicrosoft, as well as leading consultancies and Global 1000 companies.Additional information about Alinean and helpful ROI educational resources can be found athttp://www.alinean.com.Server Consolidation for Oracle E-Business Suite with IBM Power Systems Servers: Lowering TCO 7Copyright 2001-2010 Alinean, Inc. All Rights Reserved. POL03071-USEN-00