Virtualization Costs, Virtualization Advantages and the Case for Multi-Hypervisors

Last week I came across an interesting blog post from Mark Thiele. The idea of the article is that, as virtualization becomes a relevant cost for IT, it becomes a target for savings. I tried to engage with Mark on twitter but discussing a matter like this in 140 chars becomes a bit frustrating. So I decided to share my thoughts in a more structured way in this (hopefully) brief post.

Mark posted these two tables to demonstrate his theory:

His theory is that, as virtualization now accounts for roughly 30% of the entire IT budget, it becomes a target for cost reduction within organizations. Perhaps I am reading too much into what Mark wrote but my understanding is that he is pointing fingers towards VMware for that “virtualization cost” and, while he is not calling this out specifically, he is alluding to the usage of competitor products. Perhaps in a mixed environment. Mark is welcome to chime in and set the record straight if that is not correct. However I’ll just go ahead and assume that. There are a lot of people thinking along these lines anyway.

I believe the numbers are plain wrong, the premises are plain wrong and, subsequently, the conclusions are wrong. The following is a list of counter arguments to this theory I’d like to throw onto the table.

Wrong numbers

I am wondering what that 30% of virtualization cost includes. If one thing is sure that is NOT the cost of the virtualization licenses alone. I used to work for a hardware vendor and when we were selling 10K$ / 15K$ worth of hardware for a new SMB virtualization project that would have been paired with a 3K$ VMware Essentials Plus license. And that 15K$ for the hardware was just a fraction of the entire IT budget. SAP or Oracle anyone? While I am not going to disclose anything particularly sensitive let’s just say that, on average, an Enterprise buying “a few M$ worth of VMware ELA” usually has an IT budget that is in the ballpark of “a few hundreds M$ in total”. I guess it is somewhat fair to say that the entire IT budget of an organization is roughly two orders of magnitude bigger than the VMware virtualization license costs. Either that 30% is a typo (perhaps it should be 3%) or there is a 27% additional hidden cost when you deploy a virtualization solution? As usual “in medio stat virtus”. More on this later.

Wrong premise

In Mark’s theory, if you adopt virtualization your bottom line remains the same. You are basically shifting costs. If you used to spend “100” a few years ago, you are now spending “100” if you sum up the virtualization costs with the savings in the other areas. My first reaction was “why would you want to do that then?”. My second reaction was “this is plain wrong”. I have been working with customers implementing virtualization solutions for the last 10 years and all of them told me that the savings are enormous and many times the ROI associated to implementing virtualization is measured in months, not even in years. Once you reached that milestone, it’s all savings from that point on. Unfortunately I can’t quantify what’s the bottom line “after virtualization” but my gut feeling is that:

  • it’s less (far?) than 100

  • the virtualization cost is still peanuts compared to many other areas of the IT budget.

In Mark’s table the “virtualization cost” is twice as much as the cost of the “people”. Really? That is beyond me. We must be kidding.

Wrong metric

Or at least partially wrong metric I should say. You can virtualize for many reasons. One is to lower IT costs (not shifting them). Another one is to achieve what you cannot achieve without virtualization. More agility and more business alignment someone would say. I’d like to stick on practical examples and I’ll say better DR and High Availability for your legacy applications.

Or, for example, how much ($) can you associate to the ability to deploy an application in a matter of minutes Vs a matter of weeks / months? I’ll give credit to Mark to recognize this when he says “Now, please don’t read this the wrong way, I’m not an advocate of the thinking that IT is merely a place that helps us cut the cost of IT”.


A lot of people think that a proper multi-hypervisor strategy would help to lower the cost of virtualization. This is a very important  matter and one that would require a very detailed analysis. Not something I am going to do in this blog post anyway. “Multi-hypervisor” may mean a lot of things to different people as there are a lot of layers where you can integrate different stacks. People sometimes trivialize this complexity.

I am not conceptually against the theory of multi-hypervisors. I find however weird the idea that a multi-hypervisor strategy could save you on license costs. There are situations where a multi-hypervisor strategy may make sense (I may end up writing something about it) but for the majority of the Enterprise organizations out there it just makes little sense. In my opinion at least.

This ties back to the numbers we have discussed at the beginning. If we all agree that virtualization license costs are in the range of 3 to 5 % (or less?) of the total IT budget than it doesn’t make any sense to target that as an opportunity for savings. On the other hand I can see that the “virtualization cost” category doesn’t only account for the license costs but associated training, tooling and skills that manage the solution you are building with those licenses.

Now, I still believe that these hidden costs aren’t 27% of the whole IT budget (they could be another good 3% to 5% perhaps) but the point is that the higher this latest number is, the more expensive it becomes for an organization to have multiple hypervisors and virtualization stacks deployed to manage. This usually means duplicating tools, skills and, in the final analysis, duplicating efforts and costs.

In Conclusion…

As you can see it’s easy to make up numbers and draw wrong conclusions from them. I have tried to give you a slightly different perspective assuming different numbers and different premises. Run your own numbers and feelings against this and Mark’s blog posts and come up with your own conclusion as whether you should actually lower those costs.

My way to look at this is that reducing the cost of virtualization in an organization is like trying to save on a 3% cost of the total cost of IT and, in doing so, potentially implementing something technically inferior that will drive up management costs and will lower the business advantages you have achieved. At the end of the day what you are buying is not licenses but “value for the money” and if many people are still buying VMware solutions in bulk numbers it may mean that people are not interested in saving 1% of the IT budget by dumping an excellent infrastructure solution that is delivering so much for them.

You have a right to disagree. I’d love to continue this discussion in the comments section if you want, certainly there is a lot left to say and argue over these numbers.


10 comments to Virtualization Costs, Virtualization Advantages and the Case for Multi-Hypervisors

  • Dominic Wellington

    I think your numbers for the cost of virtualization might be low – customers have been telling me numbers more in Mark Thiele’s range. However, for one thing I don’t have their breakdown, and for another the plural of “anecdote” is not “data”.

    Also, your statement about duplication of tools assumes that the management layer is not capable of addressing multiple hypervisors. There are tools on the market today that deliver abstraction, not just between x86 hypervisors but even between hypervisors and Unix-platform partitioning solutions like LPAR. Once such a tool is in place, the overhead involved in adding a new platform to the mix or changing the mix of platforms is vastly reduced. It doesn’t go quite to zero, of course, as some low-level actions still need knowledge of each unique platform, but the opportunity cost of high-level changes gets very close to zero.

    Finally, cost is only one reason people might consider a heterogeneous approach. One company might buy or merge with another which made different platform choices, or they might just prefer not to put all their eggs in one basket. Several companies I know of have actually instituted MBOs to move a percentage of workload off what was previously their sole hypervisor platform, purely to build in-house skills and experience with an alternative platform in case they want to change platforms one day. This is similar to the way in which only the most hardcore run 100% Windows datacenters. Most admins will own up to having a few Unix boxes tucked away for something mission critical, which in turn keeps at least some skills in-house as a backup plan.

    • Massimo

      Dominic, making a parallel between Windows and virtualization is a tough call. Windows (as a development platform) was really a control point (I am avoiding the usage of the word lock-in). You can actually switch virtualization platforms fairly easily as there isn’t any specific binding between applications + operating systems and virtualization platforms (any) these days. Sometimes I hear people complaining about the fact that they can’t (or don’t want) to change virtualization platform because the alternative isn’t up to the task. Most people confuses this (which is “value”) with lock-in. Of course I am not saying that moving off VMware to adopt, say, Hyper-V or Xen is transparent and can be done over night but comparing this move to the problem of moving 300 windows based applications off Windows (or 300 cobol based applications off the mainframe for that matter) isn’t really cutting it.

      As per the “single pane of glass” to manage it all. I talk from experience, that is more marketing than anything. I spent 15 years working for a vendor whose mantra was “heterogeneity” (see my About) so I guess I know what I am talking about. If you are referring to the capability of generating an alert for a disk failure so that an operator at 2AM can see a problem regardless of the platforms where it occurs I am with you. However if you are referring to the fact that people actually deploying / managing / maintaining the infrastructure on a daily basis can forget about the various element managers (vCenter being the one for vSphere for example) then we couldn’t disagree more. What I have seen happening at customers that wanted to move to such a model is that they started with a single element manager and ended up having to learn a number of other element managers plus the overlaying/above tools to manage them.
      IMO these “above” tools can actually do a fraction of what the element managers can do and the people will still spend their day in all the other interfaces (except perhaps the operators monitoring disks failures).

      I am perhaps exaggerating a bit but that is the point I am trying to make. Your mileage I am sure will vary.


      • Dominic Wellington

        Yeah, I threw in the Windows comparison as hyperbole 🙂 I will say though that while the hypervisor itself might not be too sticky, there is a lot of other stuff that plugs into one hypervisor but not another, or that is fully supported here but only best-effort there, and other shenanigans.

        Also, I’m not saying the *admins* will use the single pane of glass; in the same way that Unix admins spend very little time at the GUI but quickly dive into the command line, I don’t see much reason why an expert vCenter guru would spend too much time in tools that are designed to abstract away and shield him from the very complexity he needs to do his job. The users of the “manager of manager” tools are different: they are junior admins and help-desk people, application owners who need limited functionality and couldn’t really tell you what hypervisor their app runs on, or maybe they aren’t even human: third-party systems which have a convenient single point of contact rather than spaghetti-APIs. This gets into the grey area between pure platform virtualization and IaaS cloud.

        My point is not “nobody will ever need to learn vCenter” but “not everybody has to learn vCenter”. There should be a Center of Expertise that knows vCenter (and Hyper-V, and Xen, and LPAR, and AWS, and and and), but they live in their ivory tower(s) and are Not To Be Disturbed with trivial questions. Day-to-day stuff can be accessed through ShinyPortal (TM), apps talk to an orchestrator that then sorts out what they need and who they need to talk to for it, and the gurus can do what they do best: think, plan and strategise, instead of fire-fighting all the time.

        • Massimo

          Dominic, yours is, IMO, the polished marketing version of what should happen. My point is that this doesn’t happen for a variety of reasons that we can discuss. What I have seen happening is customers spending a considerable amount of money (and time) to put in place that “manager of managers” only to get to a point where some of the things you are mentioning would work but ending up being stuck at the mercy of “you can’t update this module because it doesn’t work with this other module which in turns would need yet another module which we would need to upgrade if you want this other feature”. Net net you stay where you are or you invest another 2 years / 2M$ in vendor’s professional services to get to the next level of the spaghetti mess. Where you will be then stuck again. Goto 10.

          That’s my view and what I have seen happening. I appreciate your view is different though. Ultimately the market will drive what makes more sense. We’ll see.

          Thanks for chiming in.


          • Dominic Wellington

            It’s true, it’s a lovely vision! I admit that I’ve seen it fail, but I’ve also seen it work. IME the difference is the squishy human factor more than a technological magic wand – but if I invent a magic wand that can fix that, I’ll sell you shares.

    • Massimo

      > I think your numbers for the cost of virtualization might be low – customers have been telling me numbers more in Mark Thiele’s range.
      > However, for one thing I don’t have their breakdown, and for another the plural of “anecdote” is not “data”.

      Unfortunately the breakdown is the only thing that matters here along with the definition of “virtualization” and its scope in the IT budget. Of course this cannot be “virtualization software licenses” unless you think that an SMB buying 3K$ of Essentials Plus has an overall IT budget of 10K$ do you?


  • Generally speaking I love a good debate, but unfortunately, most of your concern about my blog is unfounded. A little background;
    – I really like VMware products: Not only did I work there, but I’ve been using them in production since 2003
    – I’ve never once, ever, said that virtualization costs as much or more than the technology it replaces (unless you own it improperly)
    – In my blog I (obviously not clearly enough) attempted to high light the fact that the numbers (percentages) weren’t meant to be “real” numbers as is indicated by this quote from my blog “The above tables are only meant to be a means to show that the costs that make up your infrastructure have shifted. The shift in costs is important if for no other reason than the simple fact that the areas with the biggest percentage of cost are also the areas that get targeted the most for savings. As some might say “a target of opportunity”.

    When virtualization is done correctly, even the most expensive solution is still more cost effective (not to mention operational improvements) than staying physical. However, there’s no way to hide the fact that virtualization (especially in larger enterprise) when combined with the increased storage, network, security and other tools has become a fairly significant cost. Because it’s becoming a “noticable” portion of the IT budget, it will become a “target of opportunity” for cost management at some point.

    A last note: While I have occasionally had my differences with VMware pricing strategies (as have many), I’m still very much a supporter of the technology. My blog was not a shot at VMW, but rather a wake up call to the fact that the enterprise buyer will come calling.

    I hope this clears up the misunderstanding regarding my blog.


    • Massimo

      Mark, I was expecting you to chime in. Thanks for clarifying that. I apologize if I (ab)used (of) your blog post to make “a point” but i can guarantee you that my interpretation of your writing is really what’s in many people’s mind. I am still kind of unclear on your numbers though. I appreciate they are not “real” numbers. However a percentage tells a lot. If you say something costs me 30% of my entire budget of course I need to take action. If it costs 2% I know my “saving opportunity” is elsewhere. In other words a percentage is a “real” (although not “absolute) number used that way.

      Thanks. Massimo.

  • For Service providers trying to sell VMware based cloud solutions, you’ll find that the “chunk” that is virtualization is considerable. In most cases when I’ve build VMs they’ve been a minimum of 2GB of RAM each, with higher end VMs requiring 4GB. Well, VMware licensing costs $20 per month per GB of RAM used. So, if you’re trying to charge ~200 per month for a VM w/3GB of RAM, you’re going to be paying $60 of it to VMware. I would say that that is a pretty big chunk of the cost.

    • Massimo

      I’ll stay away from commenting about the VSPP pricing as it’s not my territory (although I spent a reasonable amount of time with SPs in the last couple of years). I met SPs that are very price sensitives and I found out that they were pleased with the economics of the VSPP program. I stayed away from those discussions so I can’t get into details I don’t know. It may very well be that what SPs are paying to VMware is more than the 3 to 5% I was mentioning but we also need to discuss what falls into the “virtualization” bucket we are discussing. The VSPP bundle (the big one at least) includes vSphere Ent Plus, Chargeback, vShield, vCloud Director and production S&S. One may argue this is slightly more than “virtualization”.

      I have seen many SPs scouting alternatives and then resort back to VMware as the “cheapest” (overall, not only licensing costs) alternative.

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