Rightsizing Your Business through Virtualization
Business owners continue to alter their corporate landscapes by trimming budgets, pruning staff and limiting growth in low return areas. One of the techniques employed by clever business owners is virtualization. Virtualization is part of the overall plan to run businesses lean. Lean, as it's defined here, means to clear out unnecessary overhead from the payroll, from the data center and from third-party support. This process is called, rightsizing, and virtualization, including cloud computing, is a key technology driving those efforts.
And, yes, virtualization broadly means application virtualization, network virtualization, storage virtualization, server virtualization and desktop virtualization. It also means using cloud computing services such as SaaS, IaaS and DaaS.
From a business owner perspective, labor is a cost. Generally speaking, it is an expenditure that cannot be recouped. If the business is retail sales, IT is pure overhead that subtracts directly from revenues. The only case where IT is not an unrecoverable expense is if those services are charged back to customers in some way. Most businesses don't have this ability.
Whether you like it or not, your salary and benefits are costing your company and subtracting from its profits.
A business owner's job is to maximize profits. If the business is a large corporation, the executive team has a responsibility to the shareholders to increase profits so that investors in that business enjoy a return on their investment. That's the way business works. If a business can't make a profit, there's no reason to be in business. You can complain all you want about corporate greed and the idealistic view of a socialistic society where everyone loves each other and makes the same salary regardless of job title or performance.
Once whatever drug it is you're on wears off, I invite you to return to reality.
Virtualization helps businesses decrease their hardware footprints, decrease the number of needed support personnel and increase management capabilities of those computing assets. There's nothing wrong with doing more with less. Therefore, rightsizing a business through virtualization is very compelling.
Look at the following scenario: A retail sales business with 800 employees, 150 servers, 350 desktop and laptop computers and 200 networked POS systems. The IT staff consists of a CIO, an IT architect, four full-time desktop support techs, four full-time help desk support techs, two full-time network engineers, two full-time database engineers, six full-time system administrators and two full-time storage engineers.
So far, the scenario sounds lean on IT staff doesn't it? It's lean but try to calculate how much the IT staff costs this business per year. Did you come up with approximately $2 million per year?
Now calculate the cost of the server hardware, data center space, desktop computers, POS systems, software and service contracts. This one is a bit more difficult to calculate but for simplicity, use another $1 million.
The $3 million in IT overhead is probably an underestimate but it's a good number to play with in the scenario given. How could virtualization change the landscape of this business? Would rightsizing through virtualization save a significant amount of money?
Do the math.
Decrease 150 physical servers to 80 physical servers via a server consolidation and decommissioning project.
Migrate 70 of the 80 remaining servers to virtual machines. The ten servers not migrated are eight Oracle servers and two primary AD servers. The hardware footprint went from 150 individual servers to ten physical non-migrated servers plus the virtual infrastructure consisting of four virtual host systems for a total of 14 physical systems. That's a reduction of 90%. That move alone reduces hardware, support, service contract and data center rack space by a huge amount.
This reduction also results in a decreased need for two system administrators.
I think you can see that this single move reduces costs in a significant way.
Further reductions could be made by moving to a hosted desktop solution, using a SaaS provider for the POS systems and the eventual move to cloud-hosted services for the remaining virtual infrastructure.
There are still overhead costs of a computerized business but those are predictable monthly budget expenditures. For approximately the cost of three or four IT personnel, the business owner can enjoy tremendous savings over localized services and personnel. The retail business owner can now focus efforts on the business of retail and rely on connected services for IT.
Is it time to rightsize your business through virtualization? It's OK to take the baby steps necessary to get there. Start with a consolidation effort and work toward the ultimate goal of outsourcing* your IT.
* Outsourcing is not offshoring. They're different. Outsourcing means to move your IT infrastructure to hosted services and your IT work to leveraged personnel. Offshoring means moving that work outside your home country to "cheap" labor locations.
Related Stories: