Virtualization costs include software, hardware and labor

Virtualization software, hardware and labor will all affect your TCO and ROI calculations. Consider them all to get a true picture of your virtualization costs.

Understanding virtualization costs -- both tangible and intangible -- is the key to a successful analysis of total cost of ownership (TCO) or return on investment (ROI). Many tangible virtualization costs are readily apparent. Typically, they include the hardware, software and labor needed to make server virtualization work.

Server virtualization hardware costs

New servers are probably the easiest tangible items to identify.

Server virtualization hardware costs should include the initial purchase price for the preferred configuration, i.e., the desired CPU, memory, I/O and network connectivity setup -- as well as complete installation, anticipated power costs, maintenance and service contracts for the system's working life, and reasonably anticipated upgrades for the future, such as additional memory or CPUs.

Be realistic about your anticipated server virtualization hardware costs and savings.

More on virtualization costs

  • Initial virtualization costs could outweigh benefits
  • Virtualizing may cost more, but the benefits are worth it
  • Desktop virtualization not all about cost savings

"The capital costs for fewer servers may appear to be an immediate gain," said Allen Zuk, president and CEO of Sierra Management Consulting LLC, an independent technology consulting firm based in Parsippany, N.J. "However, fewer machines may very well cost more because the fewer machines will have to be more powerful to support the additional workload of the box."

In other cases, redundant server purchases may erase most, if not all, savings. Existing servers can certainly still be virtualized, but they'll rarely provide the computing power and redundancy features best suited for a virtual environment. As new servers are introduced to the environment, existing servers are normally relegated to secondary or nonessential tasks, reassigned to remote offices or relocated to backup and disaster recovery (DR) sites.

Server virtualization software costs

Virtual servers also require a virtualization platform, which adds in server virtualization software costs. There are numerous products to choose from, including Citrix XenServer 5.5, VMware vSphere 4 and Microsoft Windows Server 2008 R2 with Hyper-V. In addition to server virtualization software costs, there are also costs associated with tools that can help manage the infrastructure. There are vendor-centric products like Citrix Workflow Studio and VMware vCenter Server, as well as third-party management products like AppSense Management Center and others from vendors such as Kaseya.

You may need other software to enable features like high availability, clustering, failover, virtual server migration or backup. The needs will vary with each organization. Regardless of the actual products selected, server virtualization software costs should include the initial purchase and licensing price along with annual maintenance fees. Careful management is essential to prevent virtual machine (VM) licensing costs from spiraling out of control.

"VM licensing may increase if there is no good management of the environment," Zuk said. "On the other hand, administration costs should decrease."

Cost of obsolescence

Although it's relatively easy to identify new tangible virtualization costs, there are also business costs incurred when removing old or obsolete equipment from service. Examples of such write-offs include old servers that are not being reused or old cooling and power handling/distribution equipment that is no longer needed to support fewer physical servers. Some of this retired equipment may be covered under service contracts, and the unused portion of those contracts may add to this decommissioning cost.

Cost of labor

The last of the tangible virtualization costs to address when you calculate return on investment is labor, which is normally broken down into implementation and management and maintenance. Don't forget testing -- organizations often test the hardware and software together in a lab environment to ensure interoperability before making a purchase commitment.

"Failover software for VM solutions will also need to integrate with existing tools to support DR capability as well," Zuk said.

The labor expense involved in testing is often omitted from an ROI calculation, but its value cannot be ignored for training and process refinement.

Virtualization ROI guide

  • Why virtualization projects need ROI calculations
  • Calculate return on investment before deploying virtualization
  • Virtualization costs: Hardware, software and labor
  • Hidden virtualization costs: hardware upgrades, security and more
  • How to calculate ROI and TCO for virtualization
  • Case study: Server consolidation strategy
  • Using a virtualization ROI calculator to convince management

About the author
Stephen J. Bigelow, a senior technology writer at TechTarget, has more than 15 years of technical writing experience in the technology industry. He has written hundreds of articles and more than 15 feature books on computer troubleshooting, including Bigelow's PC Hardware Desk Reference and Bigelow's PC Hardware Annoyances. Contact him at [email protected].

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