Virtualisation savings can be quantified: IDC

By Edwin Yapp September 27, 2013

New study suggests server virtualisation deriving real monetary gains for enterprises in Asia
CIOs still need to be convinced though; but now easier to prove savings use cases

Virtualisation savings can be quantified: IDC THE deployment of server virtualisation in Malaysia over the past decade could have resulted in potential cost savings of up to US$262 million, according to new research by IDC.

Sponsored by VMware, the study measures server virtualisation’s positive economic impact across two time periods: between 2003 and 2012, using historical data; and between 2013-2020, using forecast data.

The four major areas of savings in the study include server spending, power and cooling, data centre floor space, and server administration costs, noted the research firm in its study entitled, 'Vision 2020: Impact of server virtualisation in Malaysia.'

The study required IDC to build a server-centric model called the IDC Server Economies Index, which estimates the additional x86-based server spending that the industry would otherwise have incurred if virtualisation technology did not exist in the world today.

The model assumes that with virtualisation technology, fewer servers were purchased as compared to a universe where virtualisation never existed. With fewer servers in data centres, floor space as well as power and cooling requirements would also be reduced. Lastly, administration costs would also decline due to the economies of scale gained from virtualisation, IDC said.

Realising that this model creates a hypothetical view of an alternate universe where virtualisation did not exist, IDC noted that there are multiple variables that can be taken into consideration.

Because of this, the research firm said it has based as much of these data points on existing established data as possible and has given some consideration to any likely changes in the industry and market that would impact a purely statistical model.

According to IDC’s Server Economies Index, the attempt to create this hypothetical version of server shipments, assuming that there had been no impact of virtualisation for the period between 2003 and 2012, resulted in the following findings:

Server spending savings due to servers avoided: US$156 million;

Power and cooling savings due to servers avoided: US$40 million;

Floor space savings due to servers avoided: US$2million; and

Server administration savings due to resource costs avoided: US$64 million.

Correspondingly, for the period between 2013 and 2020 using IDC’s forecast data, the savings that could potentially be gained are: US$496 million for server spending; US$88 million for power and cooling; US$7 million for floor space; and US$186 million for server administration.

Virtualisation savings can be quantified: IDC “Malaysian companies appear to be embracing the concept of, and adopting, virtualisation as they realise the benefits that include better business agility and flexibility, a reduction in operational expenses and greater environmental sustainability,” said Laurence Si (pic), country manager, VMware Malaysia.

When asked what was the impact of such a study in the real world, especially when dealing with customers considering virtualisation, Chin Jun Fwu, research manager, data centre and virtualisation, IDC Asia/Pacific, acknowledged that such numbers are big and there are limitations to appreciating them.

“The study is supposed to generate general awareness of the amount of savings that virtualisation can bring, or cost that can be avoided if there were no server virtualisation [in this world],” said Chin, who was also one of the eight authors of the study.

“If you want to go into specifics as to how a telco or a bank is gong to gain from virtualisation, you’ll have to break it down to the specific vertical to show the savings.”

VMware’s Si said that as a vendor, it would not be hard to break these figures down by verticals and show potential customers the gains that virtualisation can bring.

“CIOs today are struggling with budgets but at the same time asked to do more,” he said. “If we can show them tangible savings through fewer server deployments, floor space and power and cooling, I believe they will be able to relate to this.”

Asian savings

The IDC Study is part of a larger white paper entitled: 'Vision 2020: Virtualisation’s potential US$98 billion impact' that covered seven other Asian countries: Australia, India, Indonesia, Japan, China, Singapore and Thailand.

The study showed that China gained the greatest in terms of savings on server spending avoided at US$21.6 billion, followed by Japan (US$16.6 billion). For power and cooling, China gained the most (US$8.5 billion) followed by Japan (US$6 billion)

Virtualisation savings can be quantified: IDC Meanwhile for floor space, Japan benefited the most (US1.5 billion) followed by China (US$326 million) and for server administration, China benefited the most (US$15.2 billion) followed by Japan (US$8.8 billion).

IDC also noted that Australia is the most advanced market in the region when it comes to the adoption of x86-based server virtualisation and as a result of this, yielded the lowest difference in savings between historical data and hypothetical forecast data. Still, the savings were significant, equating to almost US$8.9 billion in avoided cost between 2003 and 2020.

At the other end of the scale, IDC said China, which has some of the lowest levels of server virtualisation, resulted in the most significant differences between historical and forecast savings – US$7.2 billion between 2003-2012 but potentially saving a whopping US$38.5 billion between 2013 and 2020.

“While the IDC [modelling] scenario has demonstrated that there could be a US$98 billion economic impact to the server industry in the eight markets covered within this study, we also believe there is a significant compounding effect to adjacent industries as we did not include storage, network and client virtualisation,” the report concluded.

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