With David Vellante and Michael Versace
Wikibon has developed a model of IT spending, using as a base an organization with revenues or total budget of $1 Billion, and an IT spend of 4% of revenue or budget. This model was extended for this research to include infrastructure Management, backup and security as orthogonal line items taking a percentage from some of the original line items.
The breakout of this budget is shown in Figure 1.
.The impact of virtualization was analyzed and projected out over 10 years. Virtualization was defined as any of the current virtualization offerings, with VMware being used as the base assumption for functionality over time.
The key constraints in the adoption of a virtual infrastructure are improved functionality in the areas of Backup, Storage, Networking, Management and Security, with Management and Security on the critical path. The assumptions assume that the roadmap of functionality laid out in the previous sections is implemented. The computing requiring for higher levels of performance, management and security will use proportionally more budget per server, and be migrated later when the required functionality is available.
Figure 2 shows the results of that this analysis in terms of the penetration of Virtualized Infrastructure within a typical IT installation, both in terms of overall spend and servers. Wikibon projects that 80% of servers will be in a virtualized infrastructure over the next 10 years, representing about 60% of IT spend
Figure 3 shows the projected cumulative IT Budget Savings in the Wikibon Standard IT Organization budget. Over the next 5 years the projected cumulative savings are $20M, and over 10 years the cumulative saving are projected to be $57M.
Figure 4 shows the breakout of the savings within the IT budget over five years. Operations accounts for the largest percentage (25%) with server and storage savings being 21% and backup being 13% of a total of $20 Million.
Wikibon believes that this reflects an average adoption rate, and many organizations will drive adoption harder and increase the savings significantly.
Figure 5 shows the IT budget items broken out for a non-integrated stack, and for an integrated stack which implements the road maps that were detailed earlier.
From the table at the bottom of Figure 5, the major benefits come from operational savings, which come from the integration of all the infrastructure components. Significant savings come from the server, storage and network infrastructure, and from lower facilities cost. Wikibon does not see any impact of client infrastructure costs (virtualization using VDI and other techniques are outside the scope of this report). Application software costs are unlikely to come down. Although it is temping to try to reduce application software costs with tactical use of virtualization, software vendors have the upper hand in this arms race and will respond with changed charge-back models that will preserve the value of the solution. However, the use of SaaS resources to outsource some components of the “Hybrid Cloud” and retained the ability to integrate the application with the rest of the applications could be an effective way of reducing application software costs.
Not included in Figure 5 are the potential benefits to the organization of a full virtualized infrastructure stack. This includes the value of better availability of all applications (improved productivity for application end-users), the value of greater agility (greater user productivity because of earlier implementation, potential for revenue increases because of faster time to exploit new business opportunities), the value of greater business integrations (improved productivity and improved business cycle times) and reduced risk (reduction in expected losses because of business discontinuities and fraud).
Action Item:
Footnotes: This research is an expansion of a section of research looking into The Value of the VMware Integration Journey.
Additional assumptions used in the projections are shown in Table 1.