VMware Virtualization:The Right Investment For a Tough Economy

VMware June 2009VMware June 2009

Agenda

Economic Environment in 2009

Why VMware is a Strategic Investment

Additional Cost Savings with vSphere 4.0

Proven Customer Success

The Rough Road Ahead….

Source: Goldman Sachs IT Spending Survey, March 9th, 2009Source: IMF World Economic Outlook Report, Nov 6th 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

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

Additional Cost Savings with vSphere 4.0

Proven Customer Success

Recent CIO Surveys Agree: Virtualization is the Top CIO Priority in a Tough Economic Environment

Source: Merrill Lynch CIO Survey, Oct 28th, 2008Source: 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 2nd, 2008

Which software providers are gaining share of your IT spending dollars?

113 Quarters

#

Source: Goldman Sachs IT Spending Survey, March 9th, 2009

VMware Continues to be the #1 Software Investment for CIOs in a Tough Economy

Gaining

1. VMware2. Citrix

Systems3. Cisco

Software/ Security

4. Oracle5. Symantec

VMware

Source: Goldman Sachs IT Spending Survey, Nov 2nd, 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 Downtime3

Reduce Datacenter Operating Cost (e.g. Power & Cooling)

2

Reduce Physical Infrastructure Cost1

Before After

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

Before After

Reduction in Datacenter Capital Expense

2.0-3.02.0-3.0

Before After

$14,235$14,235

$5,694$5,6940.3 – 1.00.3 – 1.0

Reduction in Datacenter Operating Expense

$30 MM$30 MM

$4 MM$4 MM

Reduction in Risk

VMware Delivers Tangible Business Outcomes

12

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: 10:1

Typical Excess Hardware Capacity: 3

Years!

Copyright © 2005 VMware, Inc. All rights reserved.

Reduce Energy Consumption

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

Total Savings Per Workload

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

• Actual customer savings per application; represents typical savings• Includes estimated cost of VMware licenses, Support and Subscription

• 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

1

Reducing Operating Cost

2

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 Cost2

Double the time for innovation: from 28% to 55%!

Achieve OpEx Savings of $40k per Admin Annually

-5.4% -2.7% -5.4% -2.7% -2.8%

-13.9%-8.1%

0.0% 0.0% 0.0% -2.8% -5.6% -2.9%

8.1%

59.5%

45.9%

13.5% 11.1%19.4%

56.8% 56.8%

37.8%

61.8%

16.7%

41.7%

11.4%5.4%

8.1%

13.5%

16.2% 16.7%5.6%

8.1%13.5%

5.4%

8.8%

5.6%

19.4%

20.0%10.8%

8.1%

5.4%

2.7% 2.8% 11.1%

5.4%

8.1%

27.0%

8.8%

33.3%

8.3%

37.1%

18.9%

13.5%

16.2%

13.5% 16.7%

19.4%

13.5%

13.5%

8.1%

8.8%

16.7%

11.1% 14.3%

51.4%

8.1%13.5%

51.4% 50.0% 30.6%

8.1%

8.1%

21.6%11.8%

25.0%13.9%

14.3%

-20%

0%

20%

40%

60%

80%

100%

VMs take >75% less time

VMs take 51 - 75% less time

VMs take 26 - 50% less time

VMs take 0 - 25% less time

SameMore Time

66%

Over 66% of VMware customers state their Admin staff is 25%+ more efficient. This is equivalent to 1.25 days saved per week or 65 workdays per year per Admin.

Source: VMware TAM program survey, January 2009

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 Revenue3

A Typical VMware Customer…

VMotion – Avoided downtime due to planned server maintenance

Storage VMotion – Avoided planned storage downtime

DRS – Automated monitoring and load balancing

Update Manager – Automated host and guest patching

= $ 450,000

= $ 430,000

= $ 390,000

= $ 360,540HA – Simple, cost effective high availability

SRM – Automated site recovery

= $ 480,000

= $ 615,385

A typical VMware customer has 1000 VMs, realizing over $2,725,925 of savings annually, or $8,177,774 over 3 years

See Appendix and ROI/ TCO calculator for detailed models

Agenda

Economic Environment in 2009

Why VMware is a Strategic Investment

Additional Cost Savings with vSphere 4.0

Proven Customer Success

Introducing VMware vSphere 4.0

EFFICIENCY

CONTROL

CHOICE

CapEx reductions• 100% greater consolidation ratios• Up to 50% in storage savings OpEx Reductions• Up to 20% additional energy savings• Saves more than half person/year in sys admin time

Business Risk Mitigation• One-mouse-click control over application service

levels• Continuous availability with Fault Tolerance• Security with vShield Zones

Freedom of choice• Any server• Any storage• Any OS• Numerous partners products• And soon – on- and off-premise

100% Higher Consolidation Ratios

Unparallel performance improvements:

Over 100% greater consolidation ratio with new hardware*

For our customer example:

Consolidation ratio of 20:1 instead of 10:1 with new hardware. This eliminates an additional 50 servers

… representing approximately $66,667 in annual hardware savings

… and $61,578 annual power and cooling savings

Based on VMmark benchmark studies

Additional 20% Reduction in Power Costs

Assumptions: 50% of 50 servers can be powered down for 8 hrs/d ay on weekdays and 16 hrs/day on weekends.Total power consumption per server ( operating power + cooling power) = 1424 watts/hrCost of energy = $ 0.11 per kWH (source: Energy Information Administration)

$48, 048

$37,752

Before DPM After DPM

DPM Savings for 50 Hosts For our customer example:

Additional power and cooling savings of $10,296

NOTE: vSphere 4.0 model is based off 50 servers due to the 100% better consolidation achieved

Up to 50% Storage Savings

Assumptions:50% storage deferred due to thin provisioning

Storage costs are $3/GB and RAID5 is used

Storage savings with Thin Provisioning:

Reduced storage purchases due to less over provisioning

50% reduction in storage costs: $99,750 (over 3 years)

Upgrading to vSphere 4.0

Higher Consolidation Ratio

Distributed Power Management

Storage Savings

Avoided downtime

Configuration Efficiency

= $ 128,245

= $ 10,296

= $ 99,750

= $180,000

= $ 56,338

By upgrading to VMware vSphere 4 this customer will:•Save additional $575,599 annually or $1,726,678 over 3 years•Free up more than half person/year in sys admin time•Reduce business downtime by additional 30 min a year

By upgrading to VMware vSphere 4, this customer will:Save an additional $408,129 annually or $1,224,386 over 3 years

See Appendix and ROI/ TCO calculator for detailed models

Agenda

Economic Environment in 2009

Why VMware is a Strategic Investment

Additional Cost Savings with vSphere 4.0

Proven Customer Success

26

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

Customer Testimonials

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

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/

Thank You!

Appendix

Detailed CapEx and OpEx models

Value of Zero Downtime Server Maintenance

Server Maintenance is required forUpdates to component hardware

Updates / patches to the hypervisor

Migration to newer servers

Cost savings from zero downtime server maintenance with VMotionAvoid 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 100 physical server, 1000 VM environment, assuming:

2 hardware/ BIOS upgrades per server + 4 hypervisor patches = 6 maintenance activities per server per year

100 X 6 X + X $150/hr2 hrs

Overtime Cost

Time to performupgrade

Overtime$/hr

0.75 hr10

Scheduling Downtime

# ofapps perserver

Time spentscheduling

downtime per app

$60/hr

Admin $/hr

X X = $ 450,000

VMware VMotionVMware VMotion

# of servers

# of updates

( )

Value of Zero Downtime Storage Moves Maintenance

Storage Maintenance is usually required forLUN optimization

Upgrades to better hardware

Cost savings from zero downtime storage maintenance with Storage VMotionAvoid 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 100 physical server, 1000 VM environment (50GB per VM of storage), assuming:

~20GB can be moved an hour. Storage is moved once in 3 yrs, annualize 1/3 of the 50TB environment every year (16.67TB).

X $150/hr833 hrs

Overtime Cost

Time to move 16.67 TB each yr

Overtime$/hr

X $60/hr1667 hrs

Scheduling Downtime

Time spentschedulingdowntime

Admin$/hr

X $60/hr3333

hrs

Planning Move

Time spent planningthe move

Admin $/hr

$5000

Alternate Tool Cost

+ + + = $ 430,000

VMware Storage VMotion

VMware Storage VMotion

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.

Spend more time to manually monitor and manage VMs.

For a 100 physical server, 1000 VM environment, assume that the consolidation ratio decreases by 30% from 10:1 to 7:1. Alternatively, administrators would have to spend time monitoring the cluster or responding to customer calls every day

Cost of monitoring time

Decreased consolidation ratio means

OR

X $8,00043 servers

Increased Hardware Cost

Additional servers needed

Hardware, license, power/ cooling, space costs per server

2602.5 hrs

Cost of Extra Admin Time

$60/hr

Admin$/hr

X X

= $ 342,857

$ 390,000

OR

VMware DRSVMware DRS

Hours per day

Workdays in a year

=

10X

Number of 10-host clusters

Offline machine patchingReduces exposure from non-compliant offline/suspended virtual machines

Systems have NICs disabled during patching to reduce risk

Value of Automated Patching

Guest PatchingAdministrative time – 6,009 hrs, $360,450 saved annually

Calculated for 1000 virtual machines, assuming 40 patches per machine

> Scan machines> Assess patch

requirements> Remediate

> Troubleshoot> Rollback – 10%

Manual

24 min

Automated

15 min

Annual Savings for 1000 VMs

6000 hrs, $360,000

Manual

156 min

Automated

21 min

Annual Savings for 1000 VMs

8.6 hrs, $540

Manual

180 min

Automated

36 min

Annual Savings for 1000 VMs

6,009 hrs, $360,540

Per virtual machine Per patch

VMware Update Manager

VMware Update Manager

$360,540$360,540

Value of Automated Site Recovery VMware SRMVMware SRM

VMware Site Recovery Manager provides cost savings from:Reduced recovery infrastructure requirementsFewer hours spent creating and maintaining DR plans and processesSignificantly reduced cost of DR tests; eliminates IT staff overtime and application impactRecovery in a matter of hours, not days or weeks – greatly reducing the financial exposure a company faces during a major outage

The below captures an estimate of the cost savings provided by SRM when used to recover from a major outage or disaster

Company that does $25M in revenue a year = ~$96k/weekday. Assume that SRM can achieve RTO of 12 hours instead of 72 hours compared to traditional DR plan.

= $ 615,385(per disaster)

X $96,153

Value of Lost Revenue

Days offaster recovery

Lost revenue per workday

X + X 500

Value of Lost Time by Workers

Days offaster recovery

Number ofworkers

X X $300/day

Cost of workerwages

2.52.5

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 100 physical server, 1000 VM environment, assuming 2 failures a year:

X 104 hrs

Value of Reduced Lost Productive Time

Hours ofdowntime

Number ofusers per VM

10

Number ofVMs per host

X X $60/hr

Cost of productive

time

X 2X = $ 480,000

VMware HAVMware HA

Failures per year

10X

Number of 10-host cluster

Value of Zero Downtime, Zero Data Loss Application Availability

VMware Fault Tolerance prevents lost business revenue from mission-critical, high-revenue applications outages

Simplicity of FT reduces the time and effort required to implement complex hardware and software solutions for continuous availability

For a 77 physical server, 1000 VM environment, assume:- approximately10% of VMs are protected by FT (100 VMs). On average, number of VMs protected is 100 / 77 hosts = 1.3 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.

OpEx SavingsOpEx Savings

4

Cost of Lost Revenue

Minutes of downtime prevented

$6000

Lost revenue/ minute

X X = $ 188,0621.3

Avg number of FT protected

VM/ host

X 8$8,000

Extra Hosts for FT

Costs of hardware

Number of extra Hosts

X 1

Failures per year in 10-host

cluster

-

NOTE: vSphere 4.0 model is based off 77 servers due to the 30% better consolidation achieved

X 77/ 10

Number of 10-host clusters

Value of Thin Provisioning

For a 77 physical server, 1000 VM environment of 50GB average size (mix of web, print, email and database), assuming:

- Entire storage is RAID 5 with 4 disk and is replicated to secondary site

- Average cost for storage according to IDC in price band 3-4 is $3 per TB

1000 x X

Production Site

$3/GB

= $99,750Reduction in storage

vStorage Thin Provisioning cost savings can have several contributions:Reduce up to 50% of storage costs

Reduce time for planning and scoping

Faster deployment and higher application uptime

Thin Provisioning saving comes from:Reducing power, cooling and floor space costs

Reducing application downtime for future growth

1.33X $350 GB

RAID 5Number of VMs

CapEx savingsCapEx savings

50% xCapacity per VM

NOTE: vSphere 4.0 model is based off 77 servers due to the 30% better consolidation achieved

OpEx SavingsOpEx SavingsValue of Built-in Configuration Management

VMware Host Profiles and vNetwork Distributed Switch simplifies the provisioning, configuration and administration of Hosts and virtual machines, through centralized management.

VMware vDS and Host Profiles cost savings come from:Simplify initial setup, change management and easy auditing

Avoiding costly errors and time consuming troubleshooting and debugging

For a 77 physical server, 1000 VM environment, assuming:

- On average, 5% error rate for each change. For a 77 host environment, this is equal to 12 errors per year to troubleshoot

> Setup> Change> Audit

VI 3

10hr 20min

vSphere 4

1hr

Annual Savings

709 hrs, $53,175

VI 3

40hr

vSphere 4

30min

Annual Savings

456 hrs, $34,118

Manual

50hr 20min

Automated

1hr 30min

Annual Savings

1165 hrs, $87,293

Avg per Host or virtual machine

$87,293$87,293> Troubleshoot

NOTE: vSphere 4.0 model is based off 77 servers due to the 30% better consolidation achieved