The virtualization phenomenon is getting too real for hardware server builders, as one Canadian research firm predicts server sales will fall by the end of next year.

More companies are now realizing the benefits of server optimization and consolidation to attain the full potential of their hardware investments. Virtualization technology has emerged as an effective way of implementing consolidation and maximizing computing capacity while reducing server count, according to Darin Stahl, research analyst at London, Ont.-based Info-Tech Research.

“The [companies] that are going to take the hit on [increasing server virtualization] are hardware builders like Dell. Obviously, from consolidating and virtualizing, [customers] are buying less hardware,” explained Stahl.

The analyst added that even the bigger margins that the manufacturers may get from selling bigger-capacity servers “is not going to make up for the loss of sales” from multiple servers.

Server virtualization tools allow organizations to reduce the number of boxes within their IT environments by creating virtual instances of servers within one or two high-capacity x86 physical servers. This effort enables organizations to efficiently utilize and manage server capacities which, according to market research firm IDC, have generally been underutilized, running only at 10 to 20 per cent capacity.

An organization with 60 distributed physical servers, for example, can implement virtualization and end up with only two multiprocessor servers running 10 virtual servers, read a recent Info-Tech research paper entitled, The ROI of Server Consolidation. And each of those virtual servers could have its processing power and storage capacity raised or lowered as necessary.

“With virtualization, the enterprise can achieve reduction in the number of physical servers by a factor of five, 10, and even 20 to one,” the report said. Such reduction, it added, spells definite cost savings in support and server maintenance.

The same research document claimed that through virtualization, organizations could reduce server asset requirements and administrative support by up to 40 per cent. “If, for example, an enterprise spends $50,000 in new server acquisitions per year, the enterprise can reduce this amount to $30,000 per year. If an enterprise were to reduce IT network operational overhead from 10 staff to six, it could realize savings of up to $400,000.”

“As server consolidation initiatives close out, x86 server builders will face a decline in server volumes by the end of 2007,” according to Stahl.

But Dell Canada does not believe the advent of virtualization will shrink the server market.

“Dell views virtualization as something that’s very critical to the go-forward plan,” said Debora Jensen, vice-president, advanced systems group for Dell Canada.

Jensen cited an IDC forecast that expects a 14 per cent year-over-year growth in the x86 server market in the second quarter, an indication that this segment is “continuing to grow even though virtualization is already well into its adoption phase.”

Virtualization software developer VMWare has developed a “relationship” with various hardware manufacturers in an effort to work on standards that enable integration between the server hardware and the virtualization tools, said Brian Byun, vice-president for products and alliances at VMWare in Palo Alto, Calif.

“You’d think that [hardware manufacturers] might not like [virtualization], but we accelerate the refresh of hardware. They may sell less hardware, but they are (now) selling them in larger configurations,” said Byun.

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