Software-Defined Data Center Case Study – Financial Institution and VMware
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In this case study, a large financial institution engaged the VMware software-defined data center team to create a three-to-five year forward-looking strategy document for its IT department. The overriding business driver for the institution was the need for a drastic reduction in IT OpEx Costs, at least a 50% OpEx annualized cost reduction over a three-year period. This presentation explains how VMware Accelerate Advisory Services established the necessary strategy, including a look at the “cloud reference architecture,” which addressed the: application plane, control plane, infrastructure layer, and management plan.
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Software-Defined Data Center Case Study – Financial Institution and VMware
- 1. ™ VMware Accelerate Advisory Services A Software-Defined Data Center Case Study Mark Sarago, Strategist, VMware Accelerate Advisory Services Confidential © 2013 VMware Inc. All rights reserved
- 2. Primary IT Business Driver Reduce infrastructure OpEx costs by at least 50% within 3 years. 2 Confidential
- 3. Initial Observations IT infrastructure overly complex, proprietary and segmented Substantial vendor lock-in with limited best-in-class pricing Low rate of automated workload provisioning Ineffective, inefficient IT infrastructure organization 3 Confidential
- 4. Assessed: People, Process, Technology Technical architecture including network and storage Assess readiness of the enabling SDDC technologies Operating model and organizational structure Workflow processes and automation Cost model focusing on CapEx and OpEx savings Migration plan 4 Confidential
- 5. Cloud Reference Architecture Application Plane Application develop Application deploy Application run Management Plane ITaaS Service design Control Plane Hypervisor ITFM Virtualized Network and Security Virtualized Storage Service automation PaaS Capacity management Monitoring and analytics Infrastructure Layer Servers 5 Network and Security Storage Confidential Service continuation IaaS
- 6. Architectural Options Considered Option 1 Converged vBlock, VCE, “cloud in the box” 2 SDDC Enabled Virtualized Network and Cloud-Aware Storage 3 6 Attributes Full SDDC Virtualized Network and Virtualized Storage Confidential
- 7. Considerations by Architectural Option X Converged X X SDDC Enabled Existing 1 Datacenter Hardware Legacy Applications 7 3 2 2 2 3 2 Legacy applications requiring high cost hardware and labor support. 5 4 5 Dynamic / right-sized provisioning of industry standard hardware. 3 4 5 Streamlined set of tools with heavy automation at service and infrastructure layer. 3 4 5 Lean silo-less org focused on design (rather than hardware config / management). Expensive and poorly scaled labor structure. 1 4 Small number of highly utilized datacenters with replication/mobility. Complex set of management and automation tools for managing environment 1 Labor 2 Massive over-provisioning of expensive proprietary infrastructure hardware. 1 Tools / Process Target Underutilized datacenters that are designed for purpose. 1 Full SDDC 3 4 5 Modern cloud-ready apps only. Confidential Transition from multiple heterogeneous facilities to fewer homogeneous facilities Reduce vendor lock-in and move to using more industry standard hardware Implement full automation and orchestration at the management and services plane. Greater use of automation and service-oriented software shifts hardware-specific engineers to be more service-oriented. To evolve from applications on proprietary platforms to applications on generic x86 platforms may require migration projects.
- 8. Cloud COE Organization Enables IT-as-a-Service Transformation Value IT Transformation Journey Reduce the Complexity Improve Cloud Operations With virtualization and standardization With management capabilities Enable Agile IT Service Delivery With SDDC and Cloud Center of Excellence ITaaS 8 Confidential
- 9. DATA CENTER OF THE FUTURE – ORGANIZATION SDDC Improves Both Organization and Processes Area Characteristics ▪ Extensive automation Process & Tools ▪ Automated application management ▪ Management plane focused ▪ Service-oriented Organization ▪ SDDC Architect heavy ▪ Rack-and-stack operations 9 Confidential
- 10. Financial Analysis — Dramatic Sustainable Cost Reduction Estimated TCO Reduction by Option 2013 vs 2016 100% -38% -54% -75% Baseline Converged SDDC Enabled Option Considered 10 Confidential SDDC
- 11. Dramatic Sustainable Cost Reduction SDDC is Projected to Deliver 75% in Steady-State IT Infrastructure Savings* Savings Contribution 6% 17% Servers 12% 37% Storage Networking Labor Other 28% * Actual results may vary by organization 11 Confidential
- 12. Workload Costs Reduce Over Time Cost Per Virtual Machine Will Experience a Significant Drop Over Time with Increased Scale and Maturity of Processes $14,000 $12,000 $10,000 Approximate Cost of Amazon/Google per VM $8,000 $6,000 $4,000 $2,000 $0 2014 12 2015 Confidential 2016 2017 2018
- 13. Key SDDC Takeaways 1. SDDC is part of the journey to ITaaS 2. Projected cost reductions from SDDC can be dramatic 3. Management plane software is mature 4. Network virtualization software is ready 5. Storage virtualization software is maturing quickly 6. Cloud COE org transformation is a challenge 7. The time to start is NOW 13 Confidential
- 14. Thank you! Confidential © 2013 VMware Inc. All rights reserved
Editor's Notes
- Primary Business Issue or Key DriverWhen the SDDC engagement team reviewed the three-five year forward-looking strategy document for the financial institution’s IT department, the overriding Business Issue or key value driver was the need for a drastic reduction in IT OpEx Costs.The institution had survived the “great recession” and became increasingly focused on cost reduction. The goal expressed by the IT teamw as at least a 50% OpEx annualized cost reduction over a three year period. The three year period compared fiscal year 2013 to fiscal year 2016.
- Underlying Business ProblemsSubordinate to the key business issue were a number of problems that the IT leadership team considered as key contributors to the high OpEx spend. The four identified problems were:IT infrastructure overly complex, proprietary and segmentedThe IT infrastructure used across the five business lines was highly siloed, unique, and contained many instances of proprietary technologies including mainframes and Unix platforms. Virtualization technology was implemented at a very low percentage – the estimate was that only 8% of the IT organizations entire compute platform was virtualized using x86 technologySubstantial vendor lock-in with limited best-in-class pricingThe IT team felt that since their legacy platform used proprietary technology, they were locked into specialized hardware that provided high profit margins to their hardware vendorsLow rate of automated workload provisioningProvisioning of application workloads was very manual. The institution wanted to achieve nearly 100% automated provision over the three-year goal attainment periodIneffective, inefficient IT infrastructure organizationThe IT organization was formed over several years and its size was the result of a number of mergers & acquisitions with each bringing in specialized technology and support teamsThe organization was very large and costly, in fact, the IT management team felt that it was bloated and needed to be trimmed
- Scope of the EngagementThe Accelerate team engaged for the study considered people, process, and technology with the goals of increasing efficiency and achieving dramatic cost reductions.Technical architecture including network and storagePropose technical architectures that supported a move to Cloud solutions using generic, readily available hardwareFocus on SDDC specifically in the areas of networking, security, and storageAssess readiness of the enabling SDDC technologiesAssess if SDDC network and security virtualization technology is ready for production usage or still in need of enhancements to become matureAssess if SDDC data storage virtualization technology is ready for production usage or still in need of enhancements to become matureOperating model and organizational structurePropose classes of software tools, an organizational structure, and procedures to ensure that the IT organization is efficient and focused on key servicesWorkflow processes and automationPropose classes of software tools to facilitate near-100% automated provisioning and orchestration of workloadsCost model focusing on CapEx and OpEx savingsPrepare a cost model to estimate CapEx and OpEx spend once all of the software tools, organizational structure, and processes were in placeObtain the current OpEx and CapEx spendEstimate the OpEx and CapEx savings to result from moving to an SDDC implementationMigration planAssuming that the projected cost savings are substantial, develop a migration plan to archive the envisioned organizational structure, processes, and technology stack
- Cloud Reference Architecture (screen build)For this engagement, the team prepared a “cloud reference architecture” that contained the following four areas:Application Plane – all business application software in development, deployment (test, promote, etc.), and running in the live, production environmentControl Plan – all SDDC software that interacts with the underlying hardware and infrastructure; the SDDC software included server hypervisor (virtualization), virtualized network and security, and virtualized storageInfrastructure Layer – underlying hardware and infrastructure including network cables, switches, routers, load balancers, servers, storage platforms, etc.Management Plane – all “cloud management” software tools such as IT financial management (charge-back / show-back), service automation, service catalog, automated provisioning, orchestration, predictive capacity management, operational monitoring and SLA management, and service continuation (disaster recovery / business continuity)Also worth noting is that IT organizations are looking to improve their maturity as cloud “service brokers” in support of their businesses. They have set the goal to move up the maturity curve from IaaS to ITaaS:IaaS – Infrastructure as a Servce –to-PaaS – Platform as a Service –to-ITaaS – IT as a Service
- Considered Architecture StacksThe team considered three different technical architectures and their impact on hardware choices, organizational structures, and annualized IT OpEx and CapEx spend. The three options considered were:ConvergedReadily available technology in the current market (circa 2013)Cloud in the Box appliancesBest case example is vBlock VCE from VMware, Cisco, EMC partnershipSDDC EnabledReadily available x86 server technologyVirtualized network software technology using standard switches and routersCloud-ready storage technology using tier 1 or new tier 1 storage platformFull SDDCReadily available x86 server technologyVirtualized network software technology using standard switches and routersVirtualized storage software technology using cloud-ready industry standard storage technology or direct attached drivesFor cost estimation purposes, the client wanted option 3 – Full SDDC to consider “white box” hardware solutions to maximize potential cost savings.
- Considerations by Architectural Option or Various Identified Hardware StacksThe team assessed the impact of the various architectural options on:Data Center homogeneityHardware – from specialized to industry-standardTools and Processes – from one-off, specialized to highly automated and repeatableLabor (personnel) - from siloed and poorly scaled to integrated, highly efficient, and exhibiting a high degree of service orientationLegacy Applications – from focus on customized solutions to utilization of cloud-ready software and tool sets
- Organizational impact of SDDCIntroduces the concept of maturing the organization from an organization that is an “order taker” and is siloed and inefficient, to one that is operating as a business partner and exhibits a high degree of service-orientation. The service-oriented organization uses software tools to make itself more efficient, transparently shares costs and operational (SLA) metrics.VMware terms this service-oriented organization the Cloud Center of Excellence or Cloud COE.As would be expected, the transformational activities to transition from a traditional IT organization to a Cloud COE organization is highly complex and may be more complicated than migrating to a new hardware architectural stack.
- Processes and OrganizationProcess and ToolsExtensive automation: Processes are heavily automated to minimize human involvement for provision / deploy / maintainAutomated application management: Greater tools for developers to perform application configuration and performance managementControl plane focused: Vastly simplified hardware configurations so tools and processes focused on defining and maintaining software-defined constructsOrganizationService oriented: Lean service management function focused on service catalogs, billing/chargeback and relationship managementSDDC Architect heavy: High-cost labor centered around software-defined architects and away from large high-cost infrastructure siloesRack-and-stack: Physical infrastructure labor primarily limited to rack-and-stack functionality with small “operator” function
- Financial AnalysisThe engagement team performed a financial analysis to determine the potential cost savings from the three technical architecture options that were considered.The financial analysis considered the following items:The current spend by major category for the current (pre-SDDC environment)The projected spend for each of the categories based on the three technical configurations under considerationThe financial categories that were considered were:Annual Depreciation (amortized CapEx spend for new hardware, SDDC software, etc.)Labor Spend (Personnel costs: salary, benefits, fully loaded)Data Center (electricity, cooling, etc.)Data Transmission (network, telco, etc.)Old World Costs (costs of legacy systems that have not yet been migrated to the new SDDC)Areas not included in the study were:Estimated cost to migrate legacy business software applications to become cloud-ready applicationsApplication development and support costsBusiness application database team costsBusiness application middle-ware team costsData Analytics (big data) team costsNotesThe annual depreciation calculation assumes a 5-year linear depreciationThe total investment includes total costs to build SDDC technology “pods”The labor spend multiples the expected number of FTEs with the average annual salary of approximately $148KThe ‘old world’ costs represent the portion of the workload non-migrated into the new SDDC environmentThe percentage savings calculation is based on current annual in-scope spend and potential future spendThe annual run rate estimated for 2016 – fully implemented and steady state
- Dramatic Sustainable Cost ReductionThe projected costs savings are shown by major cost area in a graphical pie chart plot. This comparison is for one of the three technical architectures under consideration. This specific review compares the pre-SDDC baseline costs to the third option – the full Software-Defined Data Center.These estimates are PROJECTED.Results will vary by organization. The financial institution under review was fairly early in its migration to cloud technologies. The legacy environment had considerable mainframe and proprietary UNIX platforms in place. Please notice the high level of savings in the personnel/labor area.
- Workload Costs Reduce Over TimeThis financial institution has approximately 94,000 workloads (applications) that are projected to be moved into their private cloud SDDC environment.“Cost per workload per year” is becoming a KPI for mature cloud-base organizations. They also now use the KPI to compare their private cloud workload costs to pricing from public cloud providers such as Amazon AWS or Microsoft Azure.Note that the “cost per workload per year” shown here on the dark blue curved line also incorporates a 40% profit margin. The intention of the financial institution’s IT department’s is to run IT like a business and to “charge back” for services provided. The IT department will use the profit margin to be able to afford future equipment and software refreshes (new equipment & software).
- Key TakeawaysSDDC is part of the journey to ITaaSProjected cost reductions from SDDC can be dramaticManagement plane software is matureNetwork virtualization software is readyStorage virtualization software is maturing quicklyCloud COE org transformation is a challengeThe time to start is NOW