Can a few virtual servers save a company?

Without server virtualization, Netkeepers Inc. CEO Shaul Swartz said his company wouldn’t stand a chance at surviving the ongoing economic recession.

The Markham, Ont.-based IT managed services provider turned to the emerging technology two years ago when faced with the costly prospect of expanding its data centre to meet growing customer demand.

“The data centre expansion was probably going to cost us an extra $120,000 every year going forward,” Swartz said.

With server sprawl and aging equipment as the primary issues, the company began to explore whether server virtualization would be more cost effective in the long run. Because the company does a lot of dedicated server Web hosting, Swartz said, many of its servers fit the consolidation build of five per cent or less CPU and memory utilization.

The company quickly decided to take the virtual plunge.

“We purchased a few new servers, VMware virtualization software and the SAN for about $80,000,” Swartz said. “That saved us about $40,000 out of the gate. Plus we would be able to divert funds from purchasing new equipment to deploy customers’ infrastructure.”

Swartz added that the company is currently using VMware Inc.’s Infrastructure 3 suite to power its server virtualization capabilities.

In terms of existing physical boxes, Netkeepers has virtualized about 80 to 100 servers, and continues virtualizing about four to 10 servers each month, the company said. Over the last two years, Swartz estimates that Netkeepers has virtualized another 100 boxes for new customers.

“We’re currently 56 per cent virtualized and are slated to be 90 per cent virtualized at the end of 2010,” he said.

The technology has also allowed the company to rework its entire business model and incorporate the cost savings with virtualization right into its product offerings.

“If somebody has a business model like ours and they haven’t virtualized yet, they better start,” Swartz said. “It’s the difference of being in the industry or not. We’re seeing customers hammering us on prices right now and virtualization gives us the flexibility to respond.”

“Looking at all the contracts we’ve negotiated over the last year, if we didn’t have the technology as a tool in our data centre, I don’t know if we would be around right now,” he added.

Chris Wolf, a senior analyst covering virtualization for the Burton Group Inc., was unsurprised at Netkeepers’ savings and said that it represents a growing trend during the recession. He added that the average VMware shop probably virtualizes about 40 per cent of their overall workload.

“It’s not surprising because the technology is there today to do this,” Wolf said. Most customers are seeing an ROI in about eight to 14 months, which makes the capital, up front investment a lot easier during these cash strapped times, he added.

Wolf said that because every organization is different IT shops will encounter some problems with performance intensive workloads. A lot of enterprises have UNIX workloads that are not going to run on x86 VMs, he added.

“But at the end of the today, with the mobility you’re getting – plus the recovery and management benefits – the good far outweigh the bad.”

As for what advice Swartz had for server virtualization newbies, the CEO stressed the need for a total corporate commitment and a strong emphasis on education.

“We committed to training our staff and getting them certified,” he said. “I would highly recommend that if an organization is going down this path, they give their people in the trenches the background and skills required to manage this infrastructure.”

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