virtualization.info

Cost Models and Chargeback's

Continuing from the last post covering data metrics, a solid cost model is needed to sell the program and saves from virtualization. The company needs to see a significant save to offset the investment and disruption from virtualization.

Most corporations have a cost model in place for technology, some purchase hardware and software centrally and charge the businesses via a rate card based model. Other models allow the businesses to purchase the hardware and software and charge centrally for shared services like network, email, etc.

Regardless of the model in place, virtualization cost for the company must show a save in order to sell the program. If the cost model in place does not show a signification save by moving from one physical server running one OS instance to one physical server running many OS instances, then there is an issue with the existing model that needs to be addressed. Fundamentally, virtualization should save money.

Almost every cost model will have pros and cons, a pure usage model can cause under recovery unless fully utilized while a dedicated model can cost more for the business in the initial ramp up period.

There are ways to incent virtualization through the cost model. Look at the long term advantages and saves of virtualization, not the short term cost. Concessions upfront can help open the door and not have initial cost be negative factor for moving to virtualization for the businesses.

As an example, a larger company that has multiple businesses and high volumes of virtual candidates may look at a model of building dedicated virtual farms or clusters by business sector. Using the existing cost model for physical environments, the business would pay the cost of all the infrastructure (servers, network, virtualization software, etc.) for a full environment. Actual charges can be applied at the Virtual instance level based on the total cost of the environment divided by the number of virtual instances (with some logical per instance calculations for the numbers of virtual CPU’s, RAM, storage, etc.). With a concession of no charges for the first 90 or 180 days of the life of the environment, the more the businesses virtualize in that time period, and beyond, the cheaper the per virtual instance cost.

Whichever cost model is used, it is imperative that the cost model incents the businesses and company to move to virtualization. If a virtual technology that has a perception of performance degradation, cost the same or more than physical servers it will be difficult to get buy in to move to the technology.

The next post will discuss Cultural Impacts, also known as “Change” that comes with implementing virtualization.

Meanwhile, please share your comments and feedback related to cost models for virtualization.