VMware TCO / ROI Methodology

Table of Contents
1 Executive Summary.............................................................................................................................. 3
1.1 VMware Infrastructure TCO / ROI Analysis Overview................................................................. 3
1.2 Lab Manager TCO / ROI Overview ............................................................................................. 4
1.3 VDI TCO / ROI Overview............................................................................................................. 5
2 VMware Infrastructure ROI/TCO Methodology .................................................................................... 7
2.1 Data Center Server Hardware ..................................................................................................... 7
2.2 Data Center Server Storage ........................................................................................................ 8
2.3 Data Center Server Networking................................................................................................. 10
2.4 Data Center Server Power and Cooling .................................................................................... 11
2.5 Data Center Server Space......................................................................................................... 14
2.6 Data Center Server Provisioning ............................................................................................... 17
2.7 Data Center Server Administrative Costs.................................................................................. 18
2.8 Reduced Business Risks ........................................................................................................... 19
2.8.1 Data Center Server Disaster Recovery............................................................................. 19
2.8.2 Data Center Server Unplanned Downtime ....................................................................... 20
2.9 VMware Infrastructure Investment............................................................................................. 21
2.9.1 VMware Infrastructure Licensing ...................................................................................... 21
2.9.2 VMware Infrastructure Design, Plan and Deployment Services ....................................... 22
2.9.3 VMware Infrastructure Training......................................................................................... 23
3 Lab Manager TCO / ROI Methodology............................................................................................... 24
3.1 Improved Lab System Consolidation......................................................................................... 25
3.1.1 Lab System Consolidation Savings .................................................................................. 25
3.1.2 Future System Expenditure Cost Avoidance .................................................................... 28
3.1.3 Improved Labor Productivity ............................................................................................. 29
3.1.4 Improve Lab / Test System Provisioning Efficiency.......................................................... 29
3.1.5 Improve Bug Reproduction Efficiency............................................................................... 30
3.1.6 Customer Support / Help Desk Efficiency Improvements................................................. 32
3.2 Improved Business Agility.......................................................................................................... 32
3.2.1 Improve Application Time to Market ................................................................................. 33
3.3 VMware Lab Manager Investments........................................................................................... 34
3.3.1 VMware Lab Manager Software Licensing Costs............................................................. 34
3.3.2 VMware Lab Manager Storage Investment ...................................................................... 36
3.3.3 VMware Lab Manager Services........................................................................................ 37
4 VDI TCO / ROI Methodology.............................................................................................................. 38
4.1 Desktop Capital Expenditure Avoidance ................................................................................... 38
4.2 Desktop Operating Expenditure Cost Avoidance ...................................................................... 38
4.3 Capital Investment for Implementing VMware VDI.................................................................... 40
5 Conclusion.......................................................................................................................................... 43

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1 Executive Summary
This document provides a methodology for capturing the reduction in Total Cost of Ownership (TCO) and Return on
Investment (ROI) from implementing any of VMware’s virtualization products and solutions, including:
1. VMware Infrastructure (VI);
2. VMware Lab Manager;
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3. VMware Virtual Desktop Infrastructure (VDI).

The TCO / ROI methodology was validated with ex-Gartner ROI / TCO experts at consultancy Alinean, Inc. to
quantify the cost savings and business value of VMware solutions. The methodology uses proven financial
techniques, industry research, VMware field and customer data and user provided metrics to quantify and compare
the TCO savings, required investments and business benefits of implementing VMware virtualization solutions. This
methodology is applied in the VMware TCO / ROI Calculator, an on-line tool designed to help organizations collect
key information about their assets and opportunities for improvement, and quantify the value they can personally
achieve via deployment of VMware solutions. Using user-specific data, metrics and this methodology, all key
financials as to TCO opportunities, savings, investments, ROI, NPV savings and payback period are calculated.
Users can also rely on industry standard metrics where data is not available and with a few simple inputs can get a
detailed report.

The TCO /ROI methodology first helps organizations quantify the current “Before VMware (As Is)” cost of ownership
for server infrastructure, development / test lab and desktop infrastructure management. Against the current
opportunities, the methodology creates an “After VMware (To Be)” simulation, quantifying the cost savings,
productivity improvements, risk reduction and business benefits of VMware Infrastructure, Lab Manager and VDI, and
tallies any incremental investments to setup and deploy the proposed VMware solutions.

These financial results are tallied into three key financial analyses over the analysis period – set for three years:
• The TCO analysis formula subtracts the “After VMware (Projected – To Be)” scenario from the “Before
VMware (As Is)” scenario to achieve the change in TCO – the net benefits from the VMware solution. These
scenarios are referred to as To Be and As Is respectively in the analysis details.
• The ROI analysis formula compares the net benefits with the incremental investment as a percentage to
illustrate the ratio of returns versus investment (ROI = net benefits / investment).
• The payback period formula determines the duration from project kickoff whereby the net benefits of the
proposed solution exceed the cumulative investment in the project.

1.1 VMware Infrastructure TCO / ROI Analysis Overview

For most organizations, Data Center Servers are under-utilized and more expensive than anticipated initially to run /
manage. Examining the initial acquisition cost of a typical 2xCPU server, it is estimated to be a list price of $6,500,
while the annual operating cost is more than $3,927 per year including:

• $975 in additional annual maintenance and support contract costs,

• $671 in annual server provisioning labor costs
• $3,773 in annual server administration labor costs,
• $650 in annual power and cooling costs per year, and

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© VMware, Inc. All rights reserved. Protected by one or more of U.S. Patent Nos. 6,397,242, 6,496,847, 6,704,925, 6,711,672,
6,725,289, 6,735,601, 6,785,886, 6,789,156, 6,795,966, 6,880,022, 6,961,941, 6,961,806, 6,944,699, 7,069,413; 7,082,598 and
7,089,377; patents pending.

VMware, the VMware “boxes” logo and design, Virtual SMP and VMotion are registered trademarks or trademarks of VMware, Inc.
in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective
companies.

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 • $718 in annual amortized data center build-out and space costs.4

Over a three year period, the on-going operating costs are a 3:1 ratio over the initial acquisition costs according to
these conservative calculations.

One way to reduce total cost of servers is to improve asset utilization and consolidation of workloads, a substantial
opportunity for most organizations where. Gartner research indicates that during a 24 hour period it is estimated that
less than 10% of x86 /x64 server computing capacity is used, and that even considering peak workloads, non-
virtualized servers are drastically underutilized, leaving much room for optimizing utilization and consolidating
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workloads for these expensive assets.

Those organizations under mandates to reduce carbon emissions or have environmental strategies to reduce
greenhouse gas emissions, may be surprised to learn that powering and cooling 100 x 2 CPU servers in the US is
equivalent to the emissions of 122 cars over an annual period of operation. Reducing the number of servers in
operations can substantially reduce emissions, help companies qualify for carbon emissions reduction credits, and
help meet “green” IT initiatives.

VMware and Alinean estimates that data center virtualization using VI can:
• Consolidate server workloads typically in the range of 8:1 to 15:1, meaning that a typical 350 server
environment can be consolidated to 42 servers, saving 308 servers (8.3:1 consolidation ratio):
o Reallocate existing servers and eliminate on-going server maintenance and support costs
o Avoid adding any / as many servers in future to support growth
o Reduce operating power by 118.4 kWatts, cooling power by 148 kWatts, and generate data center
space savings of 607 square feet.
o Avoid 3,120,893 lbs (1,416 tons) of carbon emissions, equivalent to the average emissions of
taking 260 cars off the road per year.
• Reduce server provisioning to 1.5 hours / server with virtual environment (92%+ improvement over non-
virtualized methods)
• Reduce server administration workload from 60% to 90% by reducing the number of assets to be managed
• Drive business resilience including reducing DR recovery time / risks and improving availability by 80%

Running the metrics, a typical 350 server virtualization can:

• Deliver $2,265,732 in average net on-going TCO savings per year
• Achieve $5,549,762 in net present value (NPV) savings over 3 years (10% discount rate by default)
• Result in a 4 month payback post deployment on a $621,000 initial investment
• Generate a 902% Return on Investment (ROI)

1.2 Lab Manager TCO / ROI Overview

Testing and development labs are inefficient as well in that they typically:
• Have dedicated systems which are woefully underutilized as they sit idle most of the time waiting for
particular test procedures
• Are subject to reconfiguration for testing and development support, and this reconfiguration is often labor
intensive driving longer application development lifecycles, or leading to less testing than would be possible
if the environment were easier to manage and reconfigure
• Require reconfiguration for replicating client environments during support and this can be labor intensive and
take longer than anticipated often leading to customer satisfaction issues.

VMware and Alinean estimate that virtualization for labs using VMware Lab Manager can:
• Improve net utilization of lab systems by more than 50%, resulting in a typical 60 to 95% reduction in the
number of systems required
• Reduce lab system provisioning workload by 90% or more
• Reduce the efforts in setting up environments and reproducing bug / error conditions by 80% or more.

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All subsequent calculations are based on metrics and analytics using the VMware ROI / TCO Calculator v2 and default values for
a 350 server US based financial services company. Calculated as average cost over 3 years including
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Gartner Data Center Power and Cooling Scenario Options for the World Ahead, April 2007 Pg 2-3

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 • Enable automated provisioning and rapid reproduction of software defects, accelerating cycle times and
increasing the amount of testing that can be performed in a given release – 50% improvement in quality
• Reduced application development lifecycles by 10-15% on average by reducing provisioning / reproduction
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and support time

For a typical 100 CPU system test / QA lab in support of an internal application development group, virtualization
using VMware Lab Manager can help:
• Consolidate lab / test systems by 95.0%, reducing the number of dedicated lab / test systems from 100 to 5
• Avoid 94.1% of expected lab / test system capital expenditures for growth / replacements
• Generate almost $500,000 in 3 year net cap-ex savings
• Reduce the person hours per lab / test system provisioning request by 90.0%, realizing over $150,000 in
annual productivity improvements.
• Reduce the person hours spent to reproduce bug / error conditions by 95.0%, saving $181,000 per year.
• Deliver more thoroughly tested, higher quality systems, reducing overall trouble tickets by 50.0% realizing
over $138,000 in annual support savings.
• Streamline development lifecycles, reducing development time frames by 21.6 days, generating almost
$200,000 in annual velocity to market benefits

Based on the value of the solution, and typical VMware Lab Manager costs, we found that virtualizing a typical 100
CPU system test / QA Lab can:
• Reduce annual TCO costs by over $763,000 per year
• Deliver an ROI of 1230% on an investment of $166,000
• Derive NPV Savings of $1,880,000
• Achieve payback in 3 months or less from deployment

For Lab Manager, the ROI / TCO analysis methodology supports a business case to virtualize labs for an Internal
Application Development Group, developing applications for corporate / organization use, or for an Independent
Software Vendor (ISV), developing applications as a revenue business.

The Lab Manager analysis compares current (as is) development / test lab costs versus proposed (to be) costs to
quantify potential cost savings, labor productivity improvements and business benefits:
Improved Lab System Consolidation
• Lab System Consolidation Savings
• Future System Expenditure Cost Avoidance

Improved Labor Productivity

• Improve Lab / Test System Provisioning Efficiency
• Improve Bug Reproduction Efficiency
• Customer Support / Help Desk Efficiency Improvements

Improved Business Agility

• Improve Application Time to Market (Indirect)

To calculate the ROI and to compare total costs, the analysis examines the following incremental Investment
requirements to implement Lab Manager:
• VMware Lab Manager Software Licensing Costs
• VMware Lab Manager Storage Investment
• VMware Lab Manager Services

1.3 VDI TCO / ROI Overview

For many environments, costs are not just high for the data center, but for managing desktop infrastructure as well.
PCs typically need to be replaced every 3 years, and in between require hands on moves, adds and changes, OS
and application patches, upgrades, security and user management, service calls, break-fix support and
administration.

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Using VMware ROI / TCO Calculator v2 for a financial services company, in the US, internal development group, with 100 CPU lab
systems and industry defaults for all other values.

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According to Gartner’s research, a typical desktop costs $488 per PC per year to manage and support resulting in a
total of $1,464 over the typical 3 year PC lifecycle. This represents a 1.5:1 ratio of operations to acquisition costs.

Current (As Is) Cost

PC Technical Services (annual per desktop)
User administration (Adds and Changes) $11.00
Hardware configuration/reconfiguration (MACs) $26.00
Hardware deployment $7.00
Software deployment $121.00
Application Management $32.00
Backup, archiving, recovery $7.00
Service Desk (Tier 0/1) $239.00
Security Management $30.00
IT Administration $15.00
Total per desktop per year $488.00
“TCO Comparison of PCs with Server-Based Computing”, Gartner, 15 June 2006

With virtualization, the opportunity exists to build a more stable hardware infrastructure to support the desktop
computing environment, one which can last for 6 years or more. At the same time, centralizing and virtualizing
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management can deliver significant savings – up to 62% per year, or $306 per PC per year.

For a typical 500 PC environment, an investment in VMware VDI for desktop virtualization can:
• Save $586.00 per PC per year, including $141,000 in annual labor productivity savings for PC operations
and administration staff.
• Drive NPV Savings of over $724,000
• Achieve payback on $1.2M in three year amortized investment in 4 months
• Provide a platform for additional upside savings in PC availability, Disaster recovery and resilience and
power savings, which in this version of the model and methodology, we do not quantify.

For VDI, the ROI/TCO analysis methodology compares current (as is) desktop infrastructure costs versus proposed
(to be) costs to quantify potential cost savings and labor productivity improvements (only direct costs were considered
for the desktop analysis):
• Desktop Capital Expenditure Avoidance
• Desktop Operating Expenses

To calculate the ROI and to compare total costs, the analysis examines the following incremental Investment
requirements to implement VDI:
• Capital Investment for Implementing VMware VDI

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Using VMware ROI / TCO Calculator v2 for a financial services company in the US, with 500 PCs.

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2 VMware Infrastructure ROI/TCO Methodology
2.1 Data Center Server Hardware
With VMware, data center server workloads can be consolidated, leading to server consolidations typically in the
range of 8:1 to 15:1. The resulting benefit is significant in that the consolidated servers can be reallocated to other
applications, and future server additions avoided.

To calculate the cost for servers for both the As Is and Projected (To Be) environments, the consolidation savings is
considered over the entire analysis period, examining the amortized server capital cost, and annual support and
maintenance contract costs each year for the current installed base, as well as proposed consolidated environment.

Data Center Server

Hardware Current (As Is)
For Each Year Total Number of Servers Before Consolidation *
(Annual Amortized Purchase Price Per Server +
Annual Support and Maintenance Contract)
With VI (Projected – To Be)
Total Number of Servers after
Consolidation *
(Annual Amortized Purchase Price
Per Server +
Annual Support and Maintenance
Contract)

For assets with useful lifecycles, the amortization technique is the most common valuation method to calculate
asset costs over time and consolidation benefits – used by Gartner as a vital part of its TCO methodology since
1989. To calculate the level of consolidation, the methodology uses workload assessments – essentially looking at
the number of CPUs in use today, and how many CPUs can be consolidated in the future. The key variable is the
amount of workloads which can be consolidated to a single CPU. Based on examining VMware deployments today,
on average 4 virtual machines are typically consolidated per CPU. By default, all 1, 2 and 4 CPU servers are
consolidated to 4 CPU servers (typical for virtualization deployments), while 8, 16 and 32 CPUs servers are
consolidated to 8, 16 and 32 CPU servers respectively.

Inputs

Input Description Default Value Source

Total Number of physical servers
Number of categorized by CPU (2, 4,
Servers 8,16, 32)
Useful Life Useful life of server (also
of Servers called the refresh rate)
Amortized Amortized annual server cost
Annual = Cost per physical server
Server Cost categorized by CPU + cost per
server for annual support and
maintenance contract by CPU
divided by the useful life
N/A Input
3 Years Industry average based on
VMware customer estimates
for production server
environments.
User inputs cost per server, Data based on average retail
with defaults as follows: price for Intel Xeon™ based
server configurations. The
1 CPU - $4,000 costs used are based on list
2 CPU - $6,500 prices June 2007 server costs
4 CPU - $15,300 as (USD) available from
8 CPU - $30,000 provider websites. Price
16 CPU - $140,000 includes chassis, CPUs and
32 CPU - $275,000 typical cache and memory
configurations. Does not
The server cost is amortized in include storage or networking
the calculation over 3 years, costs (tallied separately).

Workloads Average number of workloads 4 VMware estimate based on

per CPU for per physical CPU examining typical
VMware deployments.

Annual Expected compound annual 10% Installed base increases are

Growth in growth rate in number of set to 10.0% per year, a

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 Number of servers worldwide average estimated
Servers increase for typical non-
optimized enterprises based
on VMware estimates. User
can override defaults with
specific server type and count
changes.

TCO Calculation

Data Center Hardware Savings = (Total Servers * Amortized Cost per Server) As Is - (Total Servers * Amortized Cost
per Server) To Be

Assumptions
• Depreciation costs or savings are not included in this calculation, however all costs for hardware in the As
Is and To Be are amortized over their useful life.
• To account for growth in years 2 and 3 of the analysis, growth in the number of servers is used to scale the
annual costs and savings. The growth rate can be edited by the user to model non-linear growth
environments.

2.2 Data Center Server Storage

Storage virtualization with a SAN architecture can help to further implement an enterprise virtualization strategy and
help to reduce IT costs / improve IT productivity even further. One of the key cost factors in implementing a SAN
architecture is that every server needs to be connected to the SAN network, and the network connections require
an investment in purchasing, deploying and managing host bus adapters (HBAs), which connect the server to the
SAN network, and SAN switches to connect the servers to the “SAN Fabric”.

Server consolidation with VMware Infrastructure dramatically reduces the costs of implementing a SAN by the
reducing the number of SAN switches and HBAs needed, as the number of servers to connect to a SAN goes
dramatically down post virtualization. Of course in many deployments there is no SAN in place today, so storage
virtualization is often part of the server consolidation project, and many customers will actual invest in SAN
connectivity and SAN storage incrementally as part of the virtualization project, rather than achieving a net savings.
The analysis methodology examines storage TCO in total, accounting for the cost of storage as well as cost for
SAN networking infrastructure for the As Is and To Be environments, the difference being the realized TCO savings
(if any).

Inputs

Input Description Default Value Source

Number of Number of new Calculated from total number of Input
SAN SAN switches servers (assume switches are fully
Switches redundant and support 24
channels per switch by default)
Price per Price per SAN $6,000 Survey average of several
Switch switch SAN fibre channel switches
from US on-line national
resellers. Can be edited by
user.

Number of Number of new 2 HBAs per server that is Default established to support
HBA HBAs per year refreshed redundancy. Can be edited by
user.
Price per Price per HBA $1,250 Survey of several HBAs (Fibre
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HBA Channel) from CDW

8
http://www.cdw.com

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 Total Total Storage Before: User input, with allocation Estimated to be 10% SAN
Storage Capacity based on current SAN attach attach before (can be edited),
Capacity rates. 100% after virtualization.
After: Assumes migration of all
current server data to the SAN
Price per Price per gigabyte $3 for DAS Survey of storage from on-line
GB of (GB) of storage $15 for SAN national US reseller for mid
Storage range SAN, RAID DAS.
(DAS and Note: for user input / review, these
SAN) defaults are amortized over the Can be edited by user.
useful life of the server to be $1
and $5 respectively.
Useful Life Useful life of server 3 Years Industry average and VMware
of Servers to calculate experiential estimate for
amortized value of dynamic production server
hardware environments. Can be edited
by user.
Servers Percent of servers 10% before, 100% after (all VMs As Is is based on Industry data
attached to attached to SAN will be on the SAN) – VMware estimates for typical
SAN (%) enterprise environments. User
editable.

To Be set by default to 100%,

but is user editable.
Annual Expected 10% Installed base increases are
Growth in compound annual set to 10.0% per yearly default,
Server growth rate in matching the growth in the
Storage server storage. number of servers. This is a
Capacity conservative value as most
environments experience 20-
50% server storage growth per
year on average. User
editable.

TCO Calculation

Savings on HBAs = [(Number of HBAs * Price per HBA) / Useful Life of Servers] As Is
- [(Number of HBAs * Price per HBA) / Useful Life of Servers] To Be

Savings on SAN Switches = [(Number of SAN Switches * Price per SAN Switches) / Useful Life of Servers] As Is -
[(Number of SAN Switches * Price per SAN Switches) / Useful Life of Servers] To Be

Storage Savings = [Percentage of Storage DAS * Total Storage Capacity * Cost per GB DAS] As Is - [Percentage of
Storage DAS * Total Storage Capacity * Cost per GB DAS] To Be + [Percentage of Storage SAN * Total Storage
Capacity * Cost per GB SAN] As Is - [Percentage of Storage SAN * Total Storage Capacity * Cost per GB SAN] To Be

Because we assume 2 HBAs per server, the number of HBAs is calculated as follows:
Number of HBAs = 2 * Total Number of Servers

Similarly, the number of SAN Switches is calculated as follows. The calculation is multiplied by 2 to account for
redundant switches:
Number of SAN Switches = 2* ROUND UP (Total Number of Servers Connected to SANs/ 24)

Note: This formula behaves as a step function, and should always be rounded up to the nearest whole number. For
example, if there are only 6 servers connected to SANs in the environment, the total number of SAN connected
servers is divided by 24, equal to 0.2, but this needs to be rounded up to achieve a whole number value of 1 switch
by default. And then, these are made redundant, yielding 2 total switches required.

Assumptions

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 • Net storage costs may actually INCREASE with the proposed virtualization solution as storage is migrated
from DAS to SAN. To create a virtualized storage environment. The benefits of a virtualized storage
environment are not considered a part of this analysis, but the costs are – a conservative approach.
• Other potential storage savings, such as reduced storage backup, administration and management costs,
increased availability and reduced risks are possible upside benefits of the SAN environment, these items
are omitted to focus on the case for server virtualization.
• SAN Switches, HBAs, and SAN storage are refreshed at the same rate as server hardware.
• There are assumed to be 2 HBAs per server for redundancy (this can be edited by user)
• SAN switches are specified as fully redundant and having 24 channels (this can be edited by user).
• The calculations here assume all servers that are virtualized are attached to a SAN.
• SAN storage to support the VMware Infrastructure solution is an incremental investment, and the costs for
this are tallied in the Investment section rather than here in the TCO comparison / savings section.
• All storage networking and storage costs are amortized over the server useful life – 3 years.
• To account for growth in years 2 and 3 of the analysis, growth in the number of servers is used to scale the
annual costs and savings.

2.3 Data Center Server Networking

The number of physical network components is dramatically reduced with Virtual Infrastructure. With fewer physical
servers attached to the network, fewer switches, NICs and cables are required to provide server connectivity to the
corporate network.

Typically, the number of NICs per server is increase in a virtualized scenario (3 per server), although the total
number of NICs across all servers is substantially reduced. For the TCO calculation, the reduced NIC requirements
are accounted for in the price of the server hardware, since they often accompany server purchase. Therefore, this
section concentrates only on the reduction in network switches. The savings in cabling are small and therefore are
not recorded here.

Inputs

Input Description Default Value Source

Number of NICs per Number of NICs per As Is: 2 per server Survey of typical enterprise
Server server server customers, requiring
To Be: 3 per server redundant network
connections per server. For
To Be, based on need for
higher performance,
average per VMware
configuration. Can be
edited by user.

Number of Ports Per Number of ports per NIC As Is: 2 Dependent on types of
NIC NICs being used. Can be
To Be: 2 edited by user.

Number of Ports Per Number of ports per 24 Surveyed customers by

Network Switch network switch VMware. User editable.

Amortized Cost per Price per Network Switch / $4,000 / 3 = $1,333 Surveyed customers and
Network Switch Server Useful Life various switches at large
on-line US reseller. Can be
edited by user.

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 Annual Increase in Compound annual growth 10% Set by default to the growth
Server Networking in server networking costs in the number of servers by
Costs per year (%) default. User editable.

TCO Calculation

Annual Network Savings = ROUND UP [(Number of Servers * Number of NICs per Server * Number of Ports per
NIC) / Number of Ports per Network Switch)] As Is - ROUND UP [(Number of Servers * Number of NICs per Server *
Number of Ports per NIC) / Number of Ports per Network Switch)] To Be

Note: this formula behaves as a step function, and the number of switches required is rounded up (ROUND UP) to
the nearest whole number.

Assumptions
• Other savings resulting from reduced cabling, less power consumption and less network system
administration from having less network switches are omitted for simplicity.
• NICS are assumed to be 2 per server in the AS IS environment, and 3 per server in the To Be environment,
but can be changed.
• Ports per NIC are assumed to be 2 for the As Is environment, but can be changed / edited. For the To Be
environment, set to 2 ports per NIC, with more NICs recommended.
• Network switches are assumed to have 24 ports, but this can be changed.
• All costs are amortized over the server useful life – 3 years.
• To account for growth in years 2 and 3 of the analysis, growth in the number of servers is used to scale the
annual costs and savings.

2.4 Data Center Server Power and Cooling

Power consumption in the data center can be categorized into two main categories:
• Operating Power for the computing Infrastructure (IT loads): Server hardware, network switches, SAN
components, etc.
• Network Critical Physical Infrastructure or NCPI (non-IT loads): transformers, uninterruptible power
supplies (UPS), power wiring, fans, and lighting.
• Cooling Power for air conditioners, pumps, and humidifiers.

Virtualization drives the need for less physical servers and related networking, storage and data center
infrastructure, meaning less power consumption for operations and cooling. This typically drives substantial
reductions in annual power service costs, as well as important “green” savings in carbon consumption. A complete
model would account for each asset consuming power as listed above, but for simplicity, the methodology focuses
only on the power saved from reduction in server hardware with regard to direct operating and cooling power
leaving out potential power and cooling savings for networking, storage and other data center infrastructure. As
with other TCO saving calculations, the savings in power is calculated by estimating the differences in operating
power consumption and cooling power of server hardware before (as is) and after (to be) virtualization.

The operating power consumed by server hardware can be calculated by adding up the power ratings of each
server in the data center. Because this number represents the maximum power used, it should be de-rated to
achieve steady-state power consumption. The steady-state constant was determined empirically. According to the
American Power Conversion Corporation “…the nameplate rating of most IT devices is well in excess of the actual
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running load by a factor of at least 33%.” Forrester Research, Inc. corroborates this idea, indicating that idle x86
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servers consume between 30%-40% of maximum (rated) power.

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Sawyer, Richard, “Calculating Total Power Requirements for Data Centers”, American Power Conversion, 2004
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Fichera, Richard, “Power And Cooling Heat Up The Data Center”, Forrester Research, Inc. March 8, 2006

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 As well as operating power, servers produce heat and require substantial cooling to keep them running at
prescribed temperatures. Data center design plays an important role in determining the thermal efficiency and the
cost of cooling. Many data centers still employ a front-to-back layout, which positions servers in the same direction.
This means the heat emission from the back of one server feeds directly into the air intake of the front of another
server. A better approach is the hot-aisle/cold-aisle layout (depicted below) which mitigates the unacceptable
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temperature gradients associated with front-to-back layouts.
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Even with an optimized data center layout, as much as 25% airflow redundancy is still required. In the event of a
CRAC (Computer Room Air Conditioning) unit failure, airflow redundancy will continue to satisfy cooling
requirements. Furthermore, many data centers have hot spots, where heat density is greater than other areas.
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Focused redundancy satisfies localized data center cooling requirements.

Beyond requirements for airflow redundancy, data centers require additional airflow to account for inefficiencies
related to humidification. Humidification is required to reduce the potential for damage resulting from a static
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discharge. Most air conditioning systems, however, induce humidity loss that is caused by the air-cooling
function of the air conditioning system initiating condensation of water vapor. To maintain an acceptable humidity
level, supplemental humidification is required, which creates additional load on CRAC units. [5] The additional over-
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sizing can be as much as 30% of the standard load.

According to experiments completed in the HP Laboratories, 0.8W of power is consumed by the cooling equipment
for every 1W of heat dissipation in the data center (designated in this document as the Load Factor, L). This figure
is confirmed by Forrester Research, Inc., which estimates that 0.5W to 1.0W of power is required to dissipate 1W
of heat. [10]

Energy costs will vary by worldwide region and state / province. IT equipment energy costs need to reflect cooling
costs that can be as much as twice those of the actual IT equipment, depending on the PUE (power usage
effectiveness) of the data center.

Besides the annual operating and cooling power fees, many organizations are becoming more conscious as to the
environmental impact of data center power consumption, currently 1.4% of all power consumption in the US, but
16
expected to double by 2010. Electrical power generation is a major contributor to carbon emissions estimated to
be about 75% of CO2 emissions in the U.S., mostly because the major source of electrical power in the US is coal,
(and as such countries with more power generated using nuclear, wind or solar can have lower carbon emissions).
According to an enterprise storage forum article, the U.S. national average CO2 emission for electrical power is
17
1.341lbs per kWh. For comparison, a typical gallon of gasoline (octane level will vary) will on average generate
about 20 lbs of CO2,

A typical car over an annual operating period is estimated to produce about 12,000 lbs of CO2 emissions per year
(600 gallons of fuel per year, 12,000 miles / 20 mpg). Virtualization can help to not only reduce operating and
cooling but stop this costly rise in carbon emissions, estimated such that 100 servers retired is equivalent to taking
122 cars off the road per year.

Inputs

Input Description Default Value Source

11
Fichera, Richard, “Power And Cooling Heat Up The Data Center”, Forrester Research, Inc. March 8, 2006
12
McFarlane, Robert, “Let’s Add an Air Conditioner,” SearchDataCenter news article, published November 30, 2005.
http://searchdatacenter.techtarget.com/columnItem/0,294698,sid80_gci1148906,00.html
13
Dunlap, Kevin, and Rasmussen, Neil, “The Advantages of Row and Rack-Oriented Cooling Architectures for Data Centers”,
American Power Conversion, TCO
14
Dunlap, Kevin, and Rasmussen, Neil, “The Advantages of Row and Rack-Oriented Cooling Architectures for Data Centers”,
American Power Conversion, TCO
15
Rasmussen, Neil, “Calculating Total Cooling Requirements for Data Centers”, American Power Conversion, 2003
16
Brill, Kenneth, “The Invisible Crisis in the Data Center: The Economic Meltdown of Moore’s Law”, Uptime Institute, 2007
17
Shulz, Gary, “Storage Power and Cooling Issues Heat Up”, May 21, 2007
http://www.enterprisestorageforum.com/

12
 Server Sum of the nameplate
Nameplate power ratings of all
Operating computing infrastructure
Power in the data center in kW.
Electricity Price Price per hour of 1 kW
per Hour of electricity.
Nameplate to The steady state
Steady State constant used to
Power convert nameplate
Conversion power consumption to
steady state
Cooling load Estimated cooling load
factor factor (Watts of cooling
electricity needed to
dissipate 1W of heat
Airflow The airflow redundancy
Redundancy required to cool the data
center
Airflow De-rating The percentage of
airflow that is available
for cooling server heat
Data Center The product of hours
Operating Hours per day, days per week
and weeks per year that
the data center is
operational (server on
hours per year)
VMware CPU utilization will
Utilization Uplift increase with VMware,
and therefore power
consumption will also
increase. This increase
in power is accounted
for by increasing the
power consumption per
machine from before to
after virtualization.
Power and Compound annual
Cooling Cost growth (starting in year
Increases 2) for power and cooling
cost increases
TCO Calculation
For each server type, the following equations are used to determine annual operating power:
18
Brill, Kenneth, “The Invisible Crisis in the Data Center: The Economic Meltdown of Moore’s Law”, Uptime Institute, 2007
19
Sawyer, Richard, “Calculating Total Power Requirements for Data Centers”, American Power Conversion, 2004
20
McFarlane, Robert, “Let’s Add an Air Conditioner,” SearchDataCenter news article, published November 30, 2005.
http://searchdatacenter.techtarget.com/columnItem/0,294698,sid80_gci1148906,00.html
Before/After Available from
1 CPU: 475W manufacturer’s web site
2 CPU: 550W (server specs). Averages
4 CPU: 950W used for each of 3 major
8 CPU: 1600W providers. User can edit
16 CPU: 4400W values.
32 CPU: 9200W
$.07 (Average commercial value for Uptime Institute survey of
18
United States in 2007) their clients User can
edit value.
0.67 American Power
19
Conversion . On
average, nameplate
ratings are 33% higher
than steady state load
0.8 Empirically determined in
HP Laboratories. [3]
125% A 25% increment over
current airflow needed to
support proper cooling.
20
SearchDataCenter.com .
User editable.
80% SearchDataCenter.com
(see above). User
editable.
8736 hours on average (24x7x52) Annual operating hours
per year for typical 24x7x52
operation. User editable.
115% It is estimated that a
processor intensive load
may consume up to
150W more than an idle
load and 80W more than
an average load
according to VMware
estimates. User editable.
Server physical unit growth (Default Server unit growth
set to 10%) entered earlier by user
13
 Server Operating Power per Server per Year As Is = Server Nameplate Operating Power * Nameplate to
steady state power conversion * Data Center Operating Hours * Electricity Price per Hour

Server Operating Power per Server per Year To Be = Server Nameplate Operating Power * VMware Utilization
Uplift * Nameplate to steady state power conversion * Data Center Operating Hours * Electricity Price per
Hour

To calculate the total operating power consumption, the above equations are used and summed for each
server type taking the product for Quantity of Servers and the Server Operating Power per Server per Year.

To calculate the TCO savings, the difference between operating power costs are compared.

For server cooling power consumption, the following equations are used:

Annual Server Cooling Power per Server per Year = Operating Power per Server per Year * Cooling Load
Factor * Airflow Redundancy / Airflow De-rating

To calculate the total operating power consumption, the above equations are used and summed for each
server type taking the product for Quantity of Servers and the Server Operating Power per Server per Year.

To calculate the TCO savings, the difference between operating power costs are compared.

Annual Power and Cooling Savings = Power and Cooling Costs As Is – Power and Cooling Costs To Be

For carbon footprint analysis, a summary result to illustrate savings, total power consumption for operating and
cooling power are summed, then multiplied by 1.341lbs per kWh to determine the carbon emissions (US default for
electrical power).

Assumptions
• To account for growth in years 2 and 3 of the analysis, expected annual growth in the power costs is used
to scale the annual costs and savings.
• This calculation is for operating power only and does not include the costs or savings (amortization and
maintenance costs) of the power delivery and cooling systems. For explicit calculation of this value, refer
21
to “Cost Model for Planning, Development, and Operation of a Data Center.” The value was excluded
here to achieve simplicity in the model; however, cost for constructing the data center includes
investments for power and cooling infrastructure.

2.5 Data Center Server Space

Savings in data center real estate are achieved by reducing the amount of physical servers consuming valuable
data center space. Reducing the amount of physical servers can lead to reclaiming of current data center space,
reducing the need to consume more space due to server proliferation to handle growth, and avoiding future data
center facilities build-out.

Due to the special infrastructure (racks, cooling, power systems, acoustics and disaster resilience) required in data
centers, data centers are often significantly more expensive to build than standard commercial properties.
According to industry research, a data center rated at 40W per square foot costs approximately $400 per square
22
foot. As data centers today consume at least 270W per square foot, current data centers are costing on average
of $2,700 per square foot. At the Computerworld 2009 projection of 500W per square foot, the same data center
would cost $5,000 per square foot to build.

21
Patel, Chandrakant D., Shah, Amip J., “Cost Model for Planning, Development, and Operation of a Data Center,” Internet
Systems and Storage Laboratory, HP Laboratories, Palo Alto, June 9, 2005

22
Anthes, Gary, “Data Centers Get a Makeover”, Computerworld news article, published November 1, 2005.
http://www.computerworld.com/databasetopics/data/datacenter/story/0,10801,97021,00.html?SKC=home97021

14
VMware can reduce a company’s physical server count, and as a result the resultant data center footprint today,
and prevent future construction of new data centers. The TCO calculation accounts for the total yearly data center
carrying costs, accounting for the monthly real-estate rental cost, plus amortizing the cost of data center facilities,
power and cooling build-out. The annual space cost is calculated as follows:

Annual Data Center Cost per Square Foot = (Cost to Build Data Center Facilities + Cost for Data Center
Power and Cooling Infrastructure) / Years to Amortize Build-out Costs + Annual Space Lease or Allocated
Annual Real Estate Cost per Square Foot

Inputs

Input Description Default Value Source

Rack Size Average rack size for 1 CPU = 1U Typical server configurations
Consumed current server hardware (in 2 CPU = 2U from manufacturer web
per Server number of U per server 4 CPU = 4U sites. User editable.
8 CPU=6U
16 CPU=12U
32 CPU=24U
Unit Space Average units which can be Set to 24 by default Typical usable data center
per Rack installed in a rack rack space, accounting for a
42U rack, but 43%
consumed with needed
power distribution, cable
management, keyboard /
display and spacing.
Source: VMware. User
editable.

Total Number Total number of racks Calculated based on the Calculation, user editable.
of Racks round up of the formula:
Number of Servers (by
type)* Rack Size Consumed
per Server / Unit Space per
Rack
Space per Square feet / square meters 7 Square Feet (approx) Typical rack size including
Rack per rack space for the rack. VMware
estimates. User editable
Space used Percent of space used by 30% VMware estimates to
by Racks racks, accounting for account for overhead for
needed overhead space for walkways and clearances.
walkways, power and User editable.
cooling equipment.

Annual Data Annual Cost per square foot
Center Space / square meters to annually
Cost lease data center space and
amortized cost to build data
center
Annual Data Center Cost Based on User inputs and
per Square Foot = (Cost to default values prior.
Build Data Center Facilities
+ Cost for Data Center
Power and Cooling
Infrastructure) / Years to
Amortize Build-out Costs +
Annual Space Lease or
Allocated Annual Real
Estate Cost per Square Foot

Default calculation is $310

per year in build-out and
lease / space costs.
Cost to Build Capital cost for facilities data $1,200 According Computerworld
Data Center center space build-out (see reference above), a
Facilities data center rated at 40W per

15
 square foot costs
approximately $400 per
square foot. At the 2009
projection of 500W per
square foot, the same data
center would cost $5,000
per square foot to build.
Using these data points,
estimates are that today,
data center space costs at
least $2,700 per square foot
to construct. Accounting for
the infrastructure only here,
nets an estimated $1,200
per square foot for build-out.
Cost for Data Capital cost for power and $1,500 Per server, additional cost is
Center Power cooling equipment per needed for power and
and Cooling server cooling equipment,
Infrastructure estimated to be 1,500 per
server, of a total of $2,700
per square foot.

Years to Average weighted 10 years Estimates on useful life for

Amortize depreciation to use for build- typical data center build-out.
Build-out out and equipment (in years User editable.
Costs
Annual Space Cost for the space (lease, $40.00 per square foot per Average space for data
Lease or rent, mortgage) in square year center lease space in US.
Allocated feet per year Can vary based on data
Annual Real center location and region.
Estate Cost User editable.
per Square
Foot
Annual Compound annual growth in Conservatively set equal to Default to server growth
Increase in facilities cost per year the growth in the number of rate, but user editable.
Facilities Cost accounting for growth in servers
per Year number of servers, and
increase in amortized build-
out / annual space costs.

TCO Calculation

Data Center Server Space Savings = Data Center Space Costs As Is - Data Center Space Costs To Be

Where:

Data Center Space Costs As Is = Total Number of Racks * Space per Rack * Space Used by Racks * Annual
Data Center Space Cost

Data Center Space Costs To Be = Total Number of Racks * Space per Rack * Space Used by Racks * Annual
Data Center Space Cost

Total Number of Racks = Round Up (Number of Servers (by type)* Rack Size Consumed per Server / Unit
Space per Rack)

Annual Data Center Cost per Square Foot = (Cost to Build Data Center Facilities + Cost for Data Center
Power and Cooling Infrastructure) / Years to Amortize Build-out Costs + Annual Space Lease or Allocated
Annual Real Estate Cost per Square Foot

Assumptions

16
 • The data center space for storage and networking is not included in this analysis.
• Data center facilities build-out and infrastructure is included as an amortized annual cost (using a 10 year
amortization) added to the data center space costs (lease / rent / mortgage / chargeback).
• If the data center build-out should not be included in the analysis, zero the figures for capital build-out
costs and only count annual space lease / mortgage fees.
• The model can use per square foot or per square meter calculations (by default for everywhere), whereby
defaults are automatically converted as appropriate.

2.6 Data Center Server Provisioning

Infrastructure provisioning is made significantly easier through using VMware Infrastructure, since it allows
administrators to provision workloads from their desk without having to acquire, setup, and deploy new hardware to
meet increasing workload demands. Provisioning savings are measured via the labor hours saved in not having to
do server provisioning manually. The savings are calculated by multiplying the hours saved by an administrator
hourly wage. Analyzing typical server provisioning in a non-virtualized environment takes 20 hours per server on
average including overhead tasks for server procurement and vendor and contract management, and server
administration time for server unpack, setup, installation, test and deployment. The savings are most commonly
realized as a productivity improvement via redeployment of administrators from mundane provisioning tasks to
more strategic value added activities, but the opportunity savings for this are calculated using labor hour and cost
savings.

Inputs

Input Description Default Value Source

Total Total workloads provisioned Derived from total servers User Input
Workloads per year refreshed per year
Provisioned (replacement after useful
per Year life) and expected growth in
the number of servers each
year (server growth)
Person Average total hours to 20 hours (without VMware) This figure is an estimate
hours per provision a workload. based on review of
Provision 13.58 consolidation benefit, customer case studies and
Event Overhead tasks for server yielding (20 hours / 13.48) internal VMware projections.
procurement and vendor 1.5 hours (with VMware)
and contract management, However, the provisioning
and server administration time reduction factor can
time for server unpack, also be used (see next
setup, installation, test and Input).
deployment. User editable.
Average Hourly burdened rate for $67.83 per hour, scaled for Average system engineer
Hourly server system provisioning industry and location burdened salary. IDC |
Burdened staff. Burdened rate is cost Alinean research 2007.
Labor Rate per hour for staff labor Scaled for industry selected
for IT including wages, overtime, and data center location.
System incentive pay, benefits and User editable.
Provisioning taxes. For contract labor,
Staff use contract labor rate.
Weighted average of all
persons performing task.
Annual Compound annual growth in Set by default to the sum of IDC | Alinean 2007 average
increase in server provisioning tasks the expected annual server of salary increases expected
server and costs. growth rate and the average for IT staff worldwide. User
provisioning annual expected salary entry for server growth.
costs increases.

TCO Calculation

17
 Annual Data Center Server Provisioning Savings = [Total Workloads Provisioned per Year * Person hours per
Provision Event * Average Hourly Burdened Labor Rate for IT System Provisioning Staff] As Is - [Total Workloads
Provisioned per Year * Person hours per Provision Event * Average Hourly Burdened Labor Rate for IT System
Provisioning Staff] To Be

Assumptions
• The customer may not actually realize the savings as a result of provisioning productivity improvements,
often achieved by reducing labor costs through attrition or layoffs. This is because resources are likely to
be redeployed to other tasks (usually more strategic). The reallocation still represents “savings”, however,
as more value-added activities are addressed as the result of virtualization.
• Savings are increasing over time because of increasing labor rates, and environment growth in the number
of servers to be managed and provisioned.

2.7 Data Center Server Administrative Costs

Beyond provisioning tasks, reducing the number of physical assets to manage helps to reduce the amount of server
administration needed for physical moves and changes, asset inventory, physical security, disaster recovery and
planning, compliance management/reporting, vendor and contracts management, chargeback, and financial/budget
management. Reducing the number of physical servers to manage, even with a slight decrease in the physical
servers per FTE, can yield significant server administration labor cost avoidance – helping to reallocate the
resources to more strategic uses.

Inputs

Input Description Default Value Source

Average Average number of servers Average of 40 physical IDC | Alinean estimates
Servers per IT per IT operations and servers to IT administration 2007 for as is environments.
Administration administration staff FTE and support engineer for
FTE typical non-virtualized server VMware estimates for to-be
environments. virtualized environments.

Estimated to be 75
workloads per administrator
for virtualized environments.
Average Hourly burdened rate for Average system engineer
Hourly server system provisioning burdened salary. IDC |
Burdened staff. Burdened rate is cost Alinean research 2007.
Labor Rate for per hour for staff labor Scaled for industry selected
IT System including wages, overtime, and data center location.
Administration incentive pay, benefits and
and Support taxes. For contract labor,
Staff use contract labor rate.
Weighted average of all $63.04 per hour, scaled for
persons performing task. industry and location.
Annual Compound annual growth Set by default to the sum of IDC | Alinean 2007 average
increase in in server administration the expected annual server of salary increases expected
server costs. growth rate and the average for IT staff worldwide. User
administration annual expected salary entry for server growth.
costs increases.

TCO Calculation

Typically, server administrators manage multiple servers – on average 40 physical servers. With VMware, the
amount of physical servers can be increased dramatically to 75 per administrator according to VMware estimates,
the savings can be calculated by:

Total Server FTEs required = Total Physical Servers / Physical Servers per FTE.

18
 Calculating the costs for these FTEs for both the As Is and To Be scenarios can be done using the formula:

Total Server Administration Labor Costs = Total server FTEs required * Average annual Burdened Salary for
IT Systems Administration and Support Staff

Calculating the TCO savings can be done using the formula:

Annual Data Center Server Administrators Labor Savings = Total Server Administration Labor Costs As Is -
Total Server Administration Labor Costs To Be

Assumptions
• The customer may not actually realize the savings as a result of administration and support productivity
improvements. This is because resources are likely to be redeployed to other tasks (usually more
strategic if not spending time on server administration and support activities - as opposed to reducing labor
costs through attrition or layoffs. The reallocation still represents “savings”, however, as more value-added
activities are addressed as the result of virtualization.
• The realization is automatically adjusted to 50%, counting only 0.50 per $1 USD of projected savings
because this is a somewhat softer benefit than other cost savings and task productivity improvements.
• Savings are increasing over time because of increasing labor rates, and environment growth.

2.8 Reduced Business Risks

When it comes to disaster recovery and business resilience, VMware Infrastructure offers significant savings
including:
• Recovery from a massive failure: Unsuccessful or lengthy recoveries are commonplace, and VMware
Infrastructure can speed recovery and enable long-term survival;
• General Downtime – VMware can dramatically reduce planned downtime associated with scheduled
software upgrades, application maintenance, hardware reconfiguration, etc. In addition, it reduces
unplanned downtime such as unscheduled outages due to hardware failure, application (software) failure,
etc;
• Reduced cost for DR planning: Covered in server administration savings.

In addition to these savings, several additional savings may be available, but are not quantified, including:
• Disaster recovery sites can be virtualized as well, helping to reduce the capital expense needed for DR sites
• Disaster Recovery Maintenance and Provisioning – Maintenance and provisioning that occurs in the DR site
as a result of server refreshes can be made quicker and easier.

2.8.1 Data Center Server Disaster Recovery

In the event of a massive failure (disaster), VMware Infrastructure can dramatically reduce recovery times. First,
servers can be consolidated helping to reduce the number of physical servers which need to be restored in case of
disaster, and in turn, helping to reduce total recovery time. As well, traditional disaster recovery solutions require
that recovery hardware is a duplicate of production hardware. Server configuration and complex multi-step
processes in these bare-metal recoveries are time-consuming and difficult. Hardware independence and single-
step file recovery offered by VMware Infrastructure reduce the time to recover and resume. The actual gains
achieved using VMware Infrastructure depend on the current disaster recovery infrastructure. For example,
VMware Infrastructure provides substantial benefits for customers who use array-based replication, and even
greater benefits to customers who execute backups from tape. (Although there are other disaster recovery
solutions, only these two are mentioned here for demonstration purposes).

Input

Input Description Default Value Source

Likelihood The probability that a 1% Conservative estimates of a
of disaster disaster requiring server major disaster once every
per year recovery will occur in any 100 years by VMware
given year. estimates. User editable.

19
 Recovery Time for full recovery after
Time disaster for all servers and
data (in hours)
Downtime The cost per downtime hour
cost per during recovery including
hour the labor cost for IT, and
indirect impact of lost user
productivity / business.
Recovery Recovery reduction factor
Reduction (% of reduced recovery time
Factor with virtualization)
Annual The compound annual
increase in increase in downtime costs
downtime (starting in year 2)
costs
Assumes a conservative 1
hour per server.
See table below
25%
Estimated based on
increased server growth
VMware estimates. User
editable.
IDC | Alinean estimates of
downtime for typical
applications (see table
below). The base downtime
per application is then
scaled by number of servers
(size of environment) and by
industry / region. User
editable.
VMware customer
experience. User editable.
User editable.

The business cost (lost productivity / lost revenue) of downtime is as follows in typical environments

Cost per downtime hour by

Application Type application
Other / Combination $60,000
Collaboration and Messaging $60,000
ERP $120,000
General Infrastructure / Productivity
Tools $42,000
Line of Business Applications $120,000
Retail / POS $400,000
Scientific / Technical $85,000
Supply Chain Management /
Manufacturing $120,000
Trading $600,000

TCO Calculation

Data Center Server Disaster Recovery Savings = [Likelihood of disaster per year * Recovery Time * Downtime Cost
per Hour] As Is - = [Likelihood of disaster per year * Recovery Time * Recovery Reduction Factor * Downtime Cost
per Hour] To Be

Assumptions
• This calculation is an indirect cost and benefits assessment, and is adjusted to realize only 10% of any
potential savings estimates.
• Average recovery time from a disaster may be based on disaster recovery tests. If disaster recovery
testing is not performed, savings can still be projected using this methodology.
• The cost of downtime includes all recovery costs in the event of a disaster including lost revenue, lost
productivity and recovery labor costs.
• The recovery reduction factor is currently a conservative estimate based on discussions with VMware
engineers and sales people. Empirical data should be added when made available.

2.8.2 Data Center Server Unplanned Downtime

VMware Infrastructure can help reduced both planned and unplanned downtime. Planned hardware maintenance
can result in a temporary disruption of business, since servers have to be powered down. VMware’s VMotion
technology drastically reduces this downtime, though, by allowing IT administrators to move running virtual

20
 machines between servers, without end user impact. Unplanned downtime is also reduced using VMware
Infrastructure. VMotion allows administrators to proactively move virtual machines away from overloaded hosts or
from servers that have experienced hardware failure. This minimizes interruption to normal business activity, and
can ultimately lead to preservation of revenue. Because planned downtime usually has minimal impact on a
company (performed during non-business hours), only unplanned downtime impact is considered.

Inputs

Input Description Default Value Source

Cost per Cost of downtime per hour See table in Disaster IDC | Alinean, 2007.
Unplanned Recovery Section
Downtime This downtime is NOT
Hour scaled by industry or size –
based on application type
alone. User editable.
Unplanned Unplanned downtime per Established for 99.5% IDC | Alinean, 2007 for
Downtime year uptime on average, resulting average Intel server
per Year in 43.7 hours per year in operations, non clustered /
overall downtime hours virtualized environments.
User editable.
Unplanned Unplanned downtime 75% VMware projection
Downtime reduction expected with (conservative). User
Reduction virtualization editable.
Factor

TCO Calculation

Data Center Server Unplanned Downtime Savings = [Unplanned Downtime Hours per Year * Unplanned Downtime
Cost per Hour] As Is - = [Unplanned Downtime Hours per Year * Unplanned Downtime Reduction Factor * Unplanned
Downtime Cost per Hour] To Be

Assumptions
• This calculation is an indirect cost and benefits assessment, and is adjusted to realize only 10% of any
potential savings estimates.
• The default estimates can be replaced with actual values.
• The cost of downtime includes all recovery costs in the event of a disaster including lost revenue, lost
productivity and recovery labor costs.
• The unplanned downtime reduction factor is currently a conservative estimate based on discussions with
VMware engineers and sales representatives. Empirical data should be added when available.

2.9 VMware Infrastructure Investment

To achieve expected TCO savings, there will be an investment in VMware Infrastructure. The incremental capital
and operating expense change cost to implement the To Be solution is tallied in this Investment section, which is
added to the TCO for the To Be scenario to develop a full cost picture of the After VMware scenario.

2.9.1 VMware Infrastructure Licensing

Deploying a virtual infrastructure requires a onetime cost of purchasing VMware Infrastructure software licenses, as
well as the annual support and subscription costs. Typical implementations include VMware Infrastructure
Enterprise Edition, which includes ESX Server, VMFS, VirtualCenter Agent, Virtual SMP, VMotion, VMware HA,
VMware DRS and Consolidated Backup. The model derives the cost of software by dividing the total number of
processors after virtualization by two - One Enterprise Edition server license for every 2 CPUs after consolidation.
Depending on the type of support and subscription program, the recurring fees vary. “Gold” and “Platinum”
programs are 21% and 25% of the purchase price annually, respectively. Customers run VI in production and
purchase 24x7 platinum support for their deployments. The default in the TCO calculator assumes all software that
is purchased is VMware Infrastructure Enterprise Edition. However, users can manually input a different VI edition.
Similarly, pricing is provided to be default US List pricing, but can be changed to match actual incentive pricing.
Pricing details can be found at http://www.vmware.com/pdf/vi_pricing.pdf.

21
Inputs

Input Description Default Value Source

VI Enterprise Unit price of VMware $5,750 (list price US$) VMware Commercial List
Edition License Infrastructure Enterprise Prices
Cost
VI Enterprise Units of VMware Number of CPUs post Calculated default
Edition License Infrastructure Enterprise virtualization divided by 2
Units Licenses to purchase
VI Standard Unit price of VMware $2,995 (list price US$) VMware Commercial List
Edition License Infrastructure Standard Prices
Cost
VI Standard Units of VMware 0 Defaults to Enterprise
Edition License Infrastructure Standard Edition licensing, but can
Units Licenses to Purchase be changed.
VI Starter Edition Unit price of VMware $995 (list price US$) VMware Commercial List
License Cost Infrastructure Starter Prices
VI Starter Edition Units of VMware 0 Defaults to Enterprise
License Units Infrastructure Starter Edition licensing, but can
Licenses to Purchase be changed.
VirtualCenter Unit price of VirtualCenter $4,995 (list price US$) VMware Commercial List
Management Management Center Prices
Server License
Cost
VirtualCenter Units of VC Management 0 Defaults to Enterprise
Management Center Licenses to Edition licensing, but can
Center License Purchase be changed.
Units
Subscription Factor Subscription factor – 21% (Gold) VMware Commercial List
percentage of unit price that 25% (Platinum) Prices
yields annual fee

TCO Calculation

Initial Purchase is calculated as follows:

Initial Purchase = VI Enterprise License Cost* VI Enterprise License Units+ VI Standard License Cost* VI
Standard License Units + VI Starter License Cost* VI Starter License Units + VC Management Center
License Cost* VC Management License Units

Annual Recurring Costs for Support and Maintenance Contract is calculated as follows:
Subscription Cost = Initial Purchase * Subscription Factor

Assumptions
• US list prices are used for all software and support and subscription services
• Defaults to VI Enterprise Edition licensing
• Defaults to Platinum support and subscription pricing
• License units set to one Enterprise server license for every 2 CPUs after consolidation.

2.9.2 VMware Infrastructure Design, Plan and Deployment Services

VMware and partners offer several services that should be included in the TCO calculation. These services
include: Planning and Design (Virtualization Assessment) and Deployment Services. Travel and materials expenses
associated with services are also included.

Planning and Design

The costs for planning and design vary depending on the size of the project. The table below provides the
approximate cost for specific implementations as provided by Professional Services. To account for variability in

22
services pricing, a logarithmic regression is performed using the above data points. From this regression, the cost
of services can be determined from the number of servers being virtualized.

Number of Servers Cost

Less than 200 servers $20,000
200 $100,000
500 $175,000
1000 $250,000

Deployment
Similar to planning and design costs, deployment costs also vary by the size of the project. The table below
provides approximate project costs. A linear regression was performed to describe the variable cost of services
based on number of servers.

Number of Servers Cost

500 $175,000
1000 $250,000

Travel and Materials

Travel and materials costs will also vary depending on the size of the project, usually 2.5% of total planning and
design and deployment costs.

2.9.3 VMware Infrastructure Training

There are two training classes available to systems administrators. The total cost of these classes is achieved by
taking the cost of the class and multiplying it by the number of administrators taking the class. Currently, the
number of classes required is estimated based on the number of administrators estimated to need training, one for
every 20 virtualized servers. This can be edited.

The cost of training is provided in the following table:

Class Cost
VI: Install and Configure $2,995
VI: Design, Scale, and Automate $3,470

The “VMware Certified Professional (VCP) on VMware Infrastructure”, an additional $175 fee is automatically added
to the cost for the second class. (Note, the Install and Configure class is typically a prerequisite to the Design,
Scale, and Automate class. Therefore, the total two-class price, with VCP included, is $6,465.)

TCO Calculation

Training Cost is calculated as follows:

Training Cost = Number of Personnel to be Trained * Cost for Training Class

23
3 Lab Manager TCO / ROI Methodology
For Lab Manager, the analysis can be made for an Internal Application Development Group, developing applications
for corporate / organization use, or for an Independent Software Vendor (ISV), developing applications as a revenue
business. The Lab Manager analysis compares current (as is) development / test lab costs versus proposed (to be)
costs to quantify potential cost savings, labor productivity improvements and business benefits.

Additional opportunity information which is collected up-front as part of the methodology includes the following key
“Before VMware (As Is)” metrics:

• Servers (counted as CPU cores) being used to support software development, quality assurance and
development labs and testing. In the methodology for Lab Manager, total CPU cores are used versus
individual census on server types. A default of 100 CPUs is provided and will be used in this analysis.
• An average CPU utilization across all servers (excluding those already running VMware Infrastructure) in the
lab. The Default was used and assumes that, on average, across all systems (including those that are not
even being used, thus are at 0% utilization) the CPU utilization is 12% and is based on estimates from
VMware Lab Manager team regarding typical lab environments.
• The total number of developers and testers leveraging the lab, by default was set to 25 full time equivalents
(FTEs) and was maintained for this case study.
• The current development infrastructure that already has virtualization or is virtualization ready, set by default
to zero as worst case analysis, including:
o The number of servers already running VMware Infrastructure and available for use with Lab
Manager, indicating the number of existing systems that are already Lab Manager ready (they are
already running VMware Infrastructure and can be used "as is").
o The number of servers available for use with Lab Manager, indicating the number of existing
servers that aren't yet running VMware Infrastructure, but are capable of running VMware
Infrastructure (sufficient power and compatibility) and can be used in the solution (not needing
replacement).
o The number of VMware Infrastructure licenses available which can be used in this solution, not
counting the licenses already in use in the lab.
• The current (As Is) software release profile, including:
o The number of major software product releases per year, estimated to be 4 per year for an ISV or
10 per year for an Internal Application Development Group by VMware Lab Manager team
experiences of typical environments.
o The number of bugs typically generated per release, estimated to be 600 by default based on
VMware Lab Manager team estimates for major software release program experience.
o The number of different builds tested per software release. Estimated at 20 per release for an ISV
or 3 per release for an Internal Application Development Group.
o The value expected to be generated from a software release during the first 12 months after
deployment / launch. Estimated at 10,000,000 USD in revenue per release for an ISV or 2,000,000
USD in revenue or potential cost savings / productivity improvements per release for an Internal
Application Development Group.
• The current (As Is) Lab / Test provisioning, including:
o The number of provisioning requests in total for lab / test systems, including provisioning requests
to build and deploy a new configuration (single or multi-machine), copy a configuration for reuse by
team member, transfer a configuration to a team member, and revert a system to an existing
"known good state". By default, this value is calculated as the product of two variables: the number
of builds per release and the number of developers/testers on a team. In this example, 75 requests
per year.
o The provisioning requests include the weighted average person hours spent to build and deploy a
new configuration (single or multi-machine), copy a configuration for reuse by a team member,
transfer a configuration to a team member, and revert a system to an existing "known good state".
Default estimated at 3 person hours based on VMware lab manager team estimates for typical
system provisioning in lab environments.

24
3.1 Improved Lab System Consolidation
With VMware Infrastructure organizations are empowered to create a centralized pool of virtualized servers, storage
and networking equipment shared across software development and test teams. This virtualization driven system
utilization improvement and consolidation helps drive lab system cost avoidance both for today’s installed system, as
well as future system expenditure purchase avoidance.

3.1.1 Lab System Consolidation Savings

With VMware Infrastructure, the organization can reduce the number of systems needed to support testing and
development lab requirements - resulting in less resources needed for lab purposes – providing equipment
reallocation / cascade opportunities. The cost analysis is performed by examining the three major cost areas for
existing As Is systems (before VMware), and the predicted consolidated To Be (after VMware):
• Annual server amortized purchase, network costs and maintenance – the sum of the total cost to purchase a
server initially (amortized over the lab system’s useful life to create an annual cost), and the annual cost for
maintenance and support contracts.
• Annual power / cooling / space – the annual cost for operating and cooling power and lab space for the
systems
• Annual administrative and support costs – the annual cost for systems administrators and lab manager to
support and maintain the servers and lab systems, not including system provisioning tasks, especially
administrative overhead tasks such as on-going break-fix and asset management.

VMware and Alinean estimate that the consolidation can improve net utilization by more than 50%, resulting in a
typical 60 to 95% reduction in the number of systems required to support lab / development and testing efforts
(depending on current utilization rates). This will result in reduction / avoidance of the afore-mentioned annual
costs associated with the existing lab systems.

Additionally, implementing VMware Lab Manager provides a level of consolidation benefit beyond that achieved
with VMware Infrastructure. While VMware Infrastructure permits significant consolidation of physical servers, there
is still usually a virtual machine deployed on the server pool for each physical machine replaced (often even more
since it is so easy to create new VMs and few ever seem to get turned off).

With Lab Manager, it is very easy to turn VMs on and off as needed, reducing the total number that are "live" and
occupying space on the servers at any given time. Servers are usually configured based on the current active
development project. Only when a team is actively developing and testing an application is the equipment needed.
Given the "peaks and valleys" of development cycles, and given the ease with which even the most complex
software configurations can be "spun up and spun down," while saving the state of the systems in the library
between uses, Lab Manager permits server consolidation above and beyond that delivered by VMware
Infrastructure alone - on average by about 25%. The more teams you have sharing a lab, or the more applications
you are supporting, the higher the incremental benefit of VMware Lab Manager will be.

Inputs

Input Description Default Value Source

Current Indicates the total number of Input Input
Number of CPUs currently (As Is) being
Lab Systems used to support software
(CPUs) development and including
software development, quality
assurance and development
labs and testing, expressed in
number of CPUs (e.g. 50 two-
way servers would be 100)
Current The average CPU utilization 12% VMware estimates based on
Utilization across all servers (excluding customer surveys pre-
Rate those already running VI) in the virtualization. User editable.
lab and including those that are
not even being used, thus are
at 0% utilization.
Average The average purchase price for $4,000 Default pricing based on
Purchase new / replacement lab / test typical high end lab / test

25
Price for New systems (per CPU) system per CPU list pricing –
Systems Server manufacturer web
sites. User editable.

Amortized Includes the original purchase
Annual Cost price amortized over the
for Systems system’s useful life of 3 years,
and including 15% annual
support and maintenance
contract
Annual Power The annual cost for operating
/ Cooling and and cooling power, and lab
Space Costs space for the test / lab systems.
$1,933 based on $4,000 per VMware estimates on useful
CPU purchase price life and annual support and
maintenance contract rate.
User editable.
$300 per year Based on 390 watts of actual
power consumption for both
power and cooling (de-rated
based on low system
utilization rate), powered on
24x7 x365, with a power rate
of $0.08 per kWatt. Additional
$25 per year per CPU for lab
center space. Manufacturer
specifications on server
manufacturer web-sites. User
editable.

Admin and The average administrative and Default assumes one hour VMware estimates based on
Support support hours per lab / test per month on average for typical lab manager systems
Person Hours system per month administrative and support and required support and
per System per lab / test system. administration. User editable.
per Month
IT Admin and The average hourly burdened $63.04 per hour IDC| Alinean estimates. For
Support labor rate for IT administration lab IT administration and
Burdened and support staff including support. Scaled for location
Salary Rate direct compensation, benefits and industry. User editable.
and taxes.
Annual The compound annual growth 4% IDC | Alinean estimates for
Growth in rate expected in the costs for average annual increase in IT
Server Costs administrative, support, power, staff costs. User editable.
cooling, space, contracts and
overhead costs for lab / test
systems
Virtualization The overhead to consider that 10% VMware testing and customer
overhead for VMware consumes to operate. experience. User editable.
VMware
Utilization Server utilization rate that 60% VMware estimates that
Rate After customer estimates / consolidation can improve net
VMware comfortable with after utilization by more than 50%,
virtualizing with VMware resulting in a typical 60 to 95%
reduction in the number of
systems required to support
lab / testing efforts (depending
on current utilization rates).
User editable.
Amortized Average annual amortized $7,395
Annual Cost server costs and annual
for VMware maintenance contracts on Average cost for system
systems VMware compatible systems (4 based on manufacturer web
way / 146 GB HD) sites list pricing. User editable.
Power / Annual cost of power / cooling / $1,200 Estimated to be 4x the cost of
Cooling and space for new VMware current systems by default.
Space Costs compatible servers User editable.
for VMware

26
 Systems
Lab Manager The incremental consolidation 25% VMware customer experience.
Additional benefits achievable with Lab User editable.
Consolidation Manager beyond VI. Provides
Benefit the ability to "turn off" a
specified percentage of your
VMs at any given time due to
software cycle "peaks and
valleys".
Already Indicates the number of 0 Input
Running VI existing systems (total CPUs)
that are already Lab Manager
ready (they are already running
VI and can be used "as is").
Available Indicates the number of 0 Input
Systems existing servers (total CPUs)
Which Can that aren't yet running VI, but
Run VI are capable of running VI
(sufficient power and
compatibility) and can be used
in the solution.

TCO Calculation

For the VMware Infrastructure virtualization benefits, the following calculations are used:
TCO Savings = Annual Lab System Costs As Is - Annual Lab System Costs To Be

Where:
Annual Lab System Costs As Is = Current Number of Lab Systems (CPUs) * Amortized Annual Cost
for Systems * Annual Power / Cooling and Space Costs * Admin and Support Person Hours per
System per Month * 12 * IT Admin and Support Burdened Salary Rate

Consolidation Ratio with VMware = [ROUND DOWN (Utilization Rate after VMware - Virtualization
overhead for VMware - Current Utilization Rate) / Current Utilization Rate) + 1] with a minimum of
value of 1.

Number of CPUs Needed Post Virtualization = Current Number of Lab Systems / Consolidation
Ratio

Number of Lab Systems Post Virtualization = ROUND UP (Number of CPUs / Number of CPUs per
VMware System) – Available Systems (CPUs) Which Can Run VI / 4 CPUs

Annual Lab System Costs To Be = Number of Lab Systems Post Virtualization * (Amortized Annual
Cost for VMware Systems + Annual Power / Cooling and Space Costs for VMware Systems +
Admin and Support Person Hours per System per Month * 12 * IT Admin and Support Burdened
Salary Rate)

For the incremental VMware Lab Manager benefits, the following calculations are used:
Number of CPUs Required With Lab Manager = Number of CPUs Needed Post Virtualization +
Already Running VI * (1- Lab Manager Additional Consolidation Benefit)

Number of Systems Required with Lab Manager = ROUND UP (Number of CPUs Required With
Lab Manager / 4 CPUs per System)

Costs with Lab Manager = Number of Systems Required with Lab Manager * (Amortized Annual
Cost for VMware Systems + Annual Power / Cooling and Space Costs for VMware Systems +
Admin and Support Person Hours per System per Month * 12 * IT Admin and Support Burdened
Salary Rate)

27
 Additional Cost Savings for VMware Lab Manager = Annual Lab System Costs To Be – Costs with
Lab Manager

Assumptions
• Lab system useful life is assumed to be 3 years for pricing used above. This figure can be changed to
reflect different useful life experiences. For Lab systems useful life is often from 3 to 6 years so the
amortization values may be edited to reflect this potentially longer life (lowers the amortized annual values
used in the calculations based on user entry / override of defaults).
• If there are available systems which can run VMware Infrastructure and can be used (not replaced -
assumes 4 way boxes) then these systems are excluded from the Number of NEW Lab Systems Post
Virtualization, however, the annual amortized cost calculation is based on the number of total systems (4
CPU) post consolidation versus the number of NEW systems to purchase.
• The calculation is performed in two parts – one calculating the net savings using virtualization of current
lab systems with VMware Infrastructure, the next calculating the incremental additional consolidation
available with Lab Manager management improvements.
• The cost avoidance tallied here automatically calculates the cost of retiring existing systems and avoiding
purchases of future replacement systems. Growth cost avoidance (net new growth) is covered in the
subsequent section.

3.1.2 Future System Expenditure Cost Avoidance

With VMware Lab Manager development / test labs centralized virtualization of resources and improved
management can help not only consolidate existing systems, but help avoidance of spending for future
systems needed to support growth. For purposes of this methodology, only the amortized purchase cost
avoidance is tallied, versus the additional operating expense avoidance from reduced labor costs to manage,
support, power, cool and house the future systems (an additional potential of $1,200 per year on average in
potential upside savings).

Inputs

Input Description Default Value Source

Current Indicates the total number of Input Input
Number of CPUs currently (As Is) being
Lab Systems used to support software
(CPUs) development and including
software development, quality
assurance and development
labs and testing, expressed
in number of CPUs (e.g. 50
two-way servers would be
100)
Number of Calculated Calculated Calculated in prior section.
Systems
Required with
Lab Manager
Lab annual Compound annual growth in 5% Default assumes organic
growth rate % the number of lab systems. growth of 5% based on typical
(budgeted growth rates for average
servers / year) company. User editable.

Amortized Includes the original purchase
Annual Cost price amortized over the
for Systems system’s useful life of 3 years,
and including 15% annual
support and maintenance
contract
Amortized Average annual amortized
Annual Cost server costs and annual
for VMware maintenance contracts on
systems VMware compatible systems
$4,000 per CPU purchase VMware estimates on useful
price life and annual support and
maintenance contract rate.
User editable.
$7,395 Average cost (list price) based
on manufacturer web sites for
requisite systems. User
editable.

28
 (4 way / 146 GB HD)

Assumptions
• This benefit considers only net new growth avoidance. Replacement cost avoidance is covered in prior
section.
• Lab system useful life is assumed to be 3 years for amortized costs.
• The operating cost for these systems including administration, support, power, cooling and space is not
included in the cost / savings to be more conservative.

TCO Calculation

TCO Savings = Lab System Growth Costs As Is - Lab System Growth Costs To Be

Where:
Lab System Growth Costs As Is = ROUND (Current Number of Lab Systems (CPUs) * Lab annual
growth rate % (budgeted servers / year)) * Amortized Annual Cost for Systems

Lab System Growth Costs To Be = ROUND (Number of Systems Required with Lab Manager * Lab
annual growth rate % (budgeted servers / year)) * Amortized Annual Cost for VMware systems

3.1.3 Improved Labor Productivity

VMware Lab Manager provides overall for less systems to manage, and build / deployment productivity enhancing
features to help reduce the workload and improve productivity for test / lab system provisioning, bug reproduction and
customer service / support.

3.1.4 Improve Lab / Test System Provisioning Efficiency

VMware Lab Manager provides a shared storage library from which users can check out fully provisioned systems
"on demand." With this feature, provisioning task time can be reduced by 90% or more through the automatic, rapid
set up and tear down of complex, multi-machine software configurations for use in development and test activities.
These features and automation can help to reduce the tasks and person hours needed to reconfigure systems to
support testing requests, helping to improve productivity and reallocate precious resources to more strategic tasks.
By empowering the team with self service capability, every developer or test engineer now has the equivalent of their
own fully equipped lab / test data center with dedicated provisioning staff.

Inputs

Input Description Default Value Source

Number of The number of major software Estimated at 4 per year for an Input
Major releases per year. ISV or 10 per year for an
Software Internal Application
Releases Per Development Group Input
Year
Number of The number of developers & 25 Input
Developers / testers supported by the lab /
Testers test team.

Builds Tested Indicates the number of Estimated at 20 per release Input

per Release different builds tested per
software release.
Number of The provisioning requests
Lab / test include provisioning requests
System to build and deploy a new
Provisioning configuration (single or multi-
for an ISV or 3 per release for
an Internal Application
Development Group.
As a proxy, this value should Input
be calculated as the product
of two variables: the number
of builds per release and the

29
 Requests per machine), copy a number of developers/testers
Release configuration for reuse by a on a team
team member, transfer a
configuration to a team
member, and revert a system
to an existing "known good
state".
Average IT The provisioning requests Default estimated at 3 person As Is estimated based on
person hours include the weighted average hours for As Is. VMware customer experience.
to complete person hours spent to build
provision and deploy a new 90% savings expected from With VMware Lab Manager
request configuration (single or multi- To Be improvements. the team can reduce
machine), copy a provisioning task time by 90%
configuration for reuse by or more by automatically and
team member, transfer a rapidly being enabled to
configuration to a team virtually set up and tear down
member, and revert a system complex, multi-machine
to an existing "known good software configurations for
state”. use in development and test
activities. User editable.
Average Annual labor costs for lab / $67.83 IDC | Alinean research 2007,
hourly test system provisioning What scaled for industry and
burdened is the average hourly location from this default
labor rate for burdened labor rate for IT value. User editable.
IT system system provisioning staff
provisioning
staff
Average Compound annual growth rate 5% Equal to expected growth in
annual growth for number of requests for number of systems. User
in the number provisioning per year. editable.
of lab / test
system
provisioning
requests

Assumptions
• Labor rates are burdened to include taxes and benefits.
• Growth is calculated as the sum of the increase in tasks, and the indicated increase in annual salaries.

TCO Calculation
TCO Savings = Lab / Test System Provisioning Productivity As Is - Lab / Test System Provisioning
Productivity To Be

Where:
Lab / Test System Provisioning Productivity As Is = Number of Major Software Releases per Year *
Number of Lab / test System Provisioning Requests per Release * Average IT person hours to
complete provision request As Is * Average hourly burdened labor rate for IT system provisioning
staff

Lab / Test System Provisioning Productivity To Be = Number of Major Software Releases per Year *
Number of Lab / test System Provisioning Requests per Release * Average IT person hours to
complete provision request To Be * Average hourly burdened labor rate for IT system provisioning
staff

3.1.5 Improve Bug Reproduction Efficiency

VMware Lab Manager enables users to effectively and efficiently suspend and capture “live” multi-machine
configurations to a shared library, allowing them to reliably capture, reproduce and share bugs across the team.
This reduces the hours spent reproducing bugs for troubleshooting, decreases the constant cycling between
developers and testers, and improves overall team collaboration. According to VMware’s estimates, the Lab

30
Manager features can help to reduce the efforts in setting up environments and reproducing bug / error conditions
by 80% or more.

Inputs

Input Description Default Value Source

Number of Major The number of major Estimated at 4 per year for an Input
Software software releases per year. ISV or 10 per year for an
Releases Per Internal Application
Year Development Group Input
Number of Bugs The number of bugs typically Estimated at 600 by default. Input
per Release generated per release.

Number of Bugs The number of bugs typically Estimated to be 10% of total VMware estimates. User
to Reproduce generated per release that bugs generated editable.
per Release need to be reproduced in
order to determine error
condition and solve.
Person hours Person hours spent to Estimated to be on average VMware estimates. User
per reproduce bug / error 4.0 person hours in current editable.
Reproduction condition non-virtualized environment.
Event
VMware can provide the
team with the tools to
effectively and efficiently
suspend and capture “live”
multi-machine configurations
to a shared library helping to
reduce the ability to
reproduce reported bugs and
issues, and reducing the
constant cycling between
developers and test.
According to VMware
estimates, this can help to
reduce the efforts in setting
up environments and
reproducing bug / error
conditions by 80% or more.
Fully burdened Fully burdened rate for $72.62 IDC | Alinean research 2007,
labor rate per development labor per hour scaled for industry and
hour for bug for bug reproduction location.
reproduction

Assumptions
• Labor rates are burdened to include taxes and benefits.
• Growth is calculated as the sum of the increase in tasks, and the indicated increase in annual salaries.

TCO Calculation

TCO Savings = Bug Reproduction Productivity As Is - Bug Reproduction Productivity To Be

Where:
Bug Reproduction Productivity As Is = Number of Major Software Releases per Year * Number of
Bugs to Reproduce per Release * Person hours per Reproduction Event As Is * fully burdened labor
rate per hour for bug reproduction

Bug Reproduction Productivity To Be = Number of Major Software Releases per Year * Number of
Bugs to Reproduce per Release * Average IT person hours to complete provision request To Be *
fully burdened labor rate per hour for bug reproduction

31
 3.1.6 Customer Support / Help Desk Efficiency Improvements
VMware Lab Manager enables automated provisioning and rapid reproduction of software defects, accelerating cycle
times and increasing the amount of testing that can be performed in a given release. More thorough testing
translates to higher quality software, which results in reduced customer service/help desk requests. VMware
estimates that more test time can help reduce the number of service requests by 50%.

Inputs

Input Description Default Value Source

Number of The number of major software Estimated at 4 per year for an Input
Major releases per year. ISV or 10 per year for an
Software Internal Application
Releases Per Development Group Input
Year
Support The total number of support Default for As Is assumes 50 VMware estimates. User
trouble tickets trouble tickets are generated support trouble tickets are editable.
generated per per software release due to generated per software
software bugs release due to bugs.
release due to
bugs VMware estimates that by
streamlining provisioning
time/effort and reallocating
resources to more QA,
increase in testing time can
help improve the number of
errors found by 50%.
Customer The average fully burdened $63.04 IDC | Alinean research 2007,
support rate of development per hour scaled for industry and
engineer for customer support engineer location. User editable.
burdened
labor rate per
hour
Person hours The average number of person Default assumes 8.0 person VMware estimates. User
to resolve hours needed to resolve support hours of support on average is editable.
support trouble tickets related to bugs in required to resolve support
trouble ticket the software release, per bug. trouble tickets related to bugs in
the software release.

Assumptions
• Labor rates are burdened to include taxes and benefits.
• Growth is calculated as the sum of the increase in tasks, and the indicated increase in annual salaries.

TCO Calculation

TCO Savings = Support Productivity As Is - Support Productivity To Be

Where:
Support Productivity As Is = Number of Major Software Releases per Year * Support trouble tickets
generated per software release due to bugs As Is * Person hours to resolve support trouble ticket *
Customer support engineer burdened labor rate per hour

Support Productivity To Be = Number of Major Software Releases per Year * Support trouble tickets
generated per software release due to bugs To Be * Person hours to resolve support trouble ticket *
Customer support engineer burdened labor rate per hour

3.2 Improved Business Agility

32
Improved business agility can be gained by reducing cycle times on major software development/ test / deployments.
This faster time to market can lead to a realization of the potential benefits of these applications sooner.

3.2.1 Improve Application Time to Market

With the amount of time it takes to provision a test environment reduced with Lab Manager, the testing / lab time
during the application development lifecycle can be compressed, helping to get applications developed / tested and
deployed in less cycle time (faster time to deployment).

The potential value of the applications can be realized sooner as a result of this streamlined application development
lifecycle. VMware estimates that reducing delays from provisioning, reproducing bug states, and error realization /
recovery can result in cycle time savings per release of 20 to 30% in typical environments.

The realization of accelerated value is not a direct impact of the solution and so this is an indirect (soft) cost and
benefit. Any benefit calculated is reduced to 10% of the original value before being used in the summary calculations,
to account for the risk in realizing the benefit and its bottom-line contributions.

Inputs

Input Description Default Value Source

Number of The number of major software Estimated at 4 per year for an VMware estimates. User
Major releases per year. ISV or 10 per year for an editable.
Software Internal Application
Releases Per Development Group Input
Year
Days per Days per release spent on Estimated to be 4% of the VMware estimates. User
release provisioning tasks, and total release cycle 7.2 days by editable.
attributed to associated delays. default for As Is.
provisioning
delays 75% savings expected with
VMware.
Days per The number of days per Estimated to be 10% of the VMware estimates. User
release release attributed to total release cycle -18.0 days editable.
attributed to reproducing bug states by default for As Is
reproducing
bug states 75% savings expected with
VMware.
Days per The number of days per Estimated to be 3% of the VMware estimates. User
release release attributed to untested total release cycle. - 5.4 days editable.
attributed to code deliveries by default for as is.
support
escalations 50% savings expected with
that consume VMware.
engineering
resources for
resolution
Average The estimated average 180 days VMware estimates. User
application development release cycle editable.
development from start of development to
release cycle completion / release, including
in days any delays.
(including
delays)
Average The average application value Indicates the amount of VMware estimates. User
application (revenue (ISV and IADG) or revenue or cost savings editable.
value per day cost savings (IADG only)) per expected to be generated /
software release, on a per day realized from a software
basis. release during the first 12
months after deployment /

33
 launch. Estimated at
10,000,000 USD per release
for an ISV or 2,000,000 USD
per release for an Internal
Application Development
Group.

Divided by number of
business days per year (input,
default to 248) to get average
application value per day.
Average Used for compound annual Set to 0% by default. User editable.
annual growth growth increases on
in application opportunity costs and benefits
release delays related to application time to
or value market improvements

Assumptions
• Selection of ISV versus Internal Application Development Group will affect results as values of application
value vary drastically – with ISV being revenue driven applications, and Internal Application Development
Group having potential for applications to be either / both customer facing applications and back office
across the portfolio of releases.
• This is an indirect cost / benefit category and is scaled to 10% of predicted value to account for the risk
involved in actually realizing the predicted opportunity cost reduction benefits.

TCO Calculation

TCO Savings = Application Time to Market Opportunity Cost As Is - Application Time to Market Opportunity
Cost To Be

Where:
Delays per release cycle (days) As Is = Days per release attributed to provisioning delays As Is +
Days per release attributed to reproducing bug states As Is + Days per release attributed to support
escalations that consume engineering resources for resolution As Is

Application Time to Market Opportunity Cost As Is = Number of Major Software Releases per Year *
Delays per release cycle (days) As Is * Average application value per day

Delays per release cycle (days) To Be = Days per release attributed to provisioning delays To Be +
Days per release attributed to reproducing bug states To Be + Days per release attributed to support
escalations that consume engineering resources for resolution To Be

Application Time to Market Opportunity Cost To Be = Number of Major Software Releases per Year *
Delays per release cycle (days) To Be * Average application value per day

Note that overall results are discounted to 10% original value because this is an indirect benefit.

3.3 VMware Lab Manager Investments

3.3.1 VMware Lab Manager Software Licensing Costs
For VMware Lab Manager, the Lab Manager Foundation Enterprise Bundle is recommended. The default
implementation of the TCO model currently assumes that all software that is purchased is Lab Manager Foundation
Enterprise Bundle. However, the model allows for manual input of a different software purchase scheme.
Depending on the type of support and subscription program, the recurring fees vary. “Gold” and “Platinum”
programs are 21% and 25% of the purchase price annually, respectively, with Gold as the recommended default
program. Pricing details can be found for Lab Manager at: http://www.vmware.com/products/labmanager/buy.html.
Similarly, pricing is provided to be default US List pricing, but can be changed to match actual incentive pricing.

34
Inputs

Input Description Default Value Source

VMware Lab Manager Unit Price of VMware $45,000 VMware Commercial List
Foundation Enterprise Lab Manager Prices. User editable.
Bundles Foundation Enterprise
Cost Bundles (includes 1
Lab Manager Server,
5 Lab Manager
Agents, 5 VI
Enterprise and 10
VMware Workstation
licenses)
VMware Lab Manager Units to purchase of By default, one bundle is Calculated default. User
Foundation Enterprise VMware Lab Manager included if new servers are editable.
Bundles Foundation Enterprise being purchased that will
(includes 1 Lab Bundles require all of the VMware Lab
Manager Server, 5 Lab Manager components.
Manager Agents, 5 VI
Enterprise and 10
VMware Workstation
licenses) Units
VMware Lab Manager VMware Lab Manager $30,000 VMware Commercial List
Expansion Bundle Cost Expansion Bundle Prices. User editable.
(includes 5 Lab
Manager Agents, 5 VI
Enterprise and 10
VMware Workstation
licenses)
VMware Lab Manager VMware Lab Manager Default number of VMware Calculated Default. User
Expansion Bundle Units Expansion Bundle Lab Manager Expansion editable.
Units Bundles are calculated as
the number of physical
machines required with the
VMware solution, minus the
number of servers already
containing ESX licenses
and any ESX licenses the
organization plans to reuse,
divided by 5 rounded up to
the nearest whole number
minus one if VMware Lab
Manager Foundation
Enterprise Bundle is also
purchased)
VMware Lab Manager VMware Lab Manager $15,000 VMware Commercial List
Server License Cost Server License (a la Prices. User editable.
carte) cost per unit
VMware Lab Manager VMware Lab Manager By default, one Lab Manager User editable.
Server License Units Server License (a la Server is required if a
carte) units to foundation bundle is not
purchase purchased.

VMware Lab Manager VMware Lab Manager $1,000 VMware Commercial List
Agent License Cost Agent License (a la Prices. User editable.
carte per 2 CPUs)
cost per unit

VMware Lab Manager VMware Lab Manager If foundation or expansion

Agent License Units Agent License (a la bundles are not purchased, one

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 carte per 2 CPUs) Lab Manager Agent is required
units to purchase for every 2 CPUs.

VI Enterprise License Unit price of VMware $5750 (list price US$) VMware Commercial List
Cost Infrastructure Prices. User editable.
Enterprise
(a la carte - per 2
CPUs)
VI Enterprise License Units of VMware If foundation or expansion Calculated default. User
Units Infrastructure bundles are not purchased, editable.
Enterprise Licenses to one ESX license is required
purchase for every 2 CPUs. Default
considers ESX licenses that
are going to be reused.
Windows 2003 Cost Unit price of Windows $2,000 (list price US$) Microsoft list pricing US.
2003) User editable.
Windows 2003 Units Units of Windows Default assumes 1 Windows Calculated default. User
2003 to be purchased Server 2003 Standard editable.
for the VMware Lab Edition license with 30 CALs
Manager server (client access license) for up
to 30 concurrent Lab
Manager users.
Subscription Factor Subscription factor – 21% (Gold) VMware Commercial List
percentage of unit 25% (Platinum) Prices. User editable.
price that yields
annual fee

Assumptions
• Units are recommended, but can be edited.
• Pricing is US default list pricing, but can be changed to reflect regional pricing / incentive pricing.

TCO Calculation

VMware Lab Manager Initial Licensing Cost = ∑ (Units * Unit Cost)

VMware Lab Manager Annual Recurring Subscription Cost = VMware Lab Manager Initial Licensing Cost *
Annual Subscription Rate

3.3.2 VMware Lab Manager Storage Investment

For VMware Lab Manager, the VMware team recommends a default 1.5TB of storage be established using SAN
storage. At $15 per GB on average by default, this results in a fixed fee of $23,040 per configuration.

Inputs

Default
Input Description Value Source
Cost of 1.5TB Purchase cost for 1.5TB of $23,040 VMware recommendation on capacity needed
of storage storage, as recommended by ($15 per for Lab Manager. Typical low end SAN price
default for configurations of GB) estimates from VMware. Includes the costs for
VMware Lab Manager solution the chassis, storage network, software, and
fault tolerant configurations.

Assumptions
• The cost for SAN storage covers only the purchase price, not on-going operations and maintenance /
support / management costs.
• The recommendation is currently fixed for the storage requirement, however the pricing can be changed to
reflect actual pricing for the requisite solution storage (if different pricing, or if different capacity needed).

36
 3.3.3 VMware Lab Manager Services
For VMware Lab Manager, the VMware team recommends using a fixed Jumpstart service bundle, established at
$6,000 fixed US list price.

Inputs

Input Description Default Value Source

Jumpstart Purchase cost for Jumpstart $6,000 VMware Commercial Price
Services services List
Other Any other services used to $0 Input
Services implement the VMware
configuration

Assumptions
• Pricing is US default list pricing, but can be changed to reflect regional pricing / incentive pricing.
• Services are assumed to take the place of any internal labor to setup and deploy the solution.

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4 VDI TCO / ROI Methodology
For VDI, the analysis compares current (as is) desktop infrastructure costs versus proposed (to be) costs to quantify
potential cost savings and labor productivity improvements (only direct costs were considered for the desktop
analysis).

4.1 Desktop Capital Expenditure Avoidance

With VDI, current desktop expenditures to refresh existing desktop systems can be avoided, replaced with the VDI
virtualized desktop infrastructure. Based on how many desktops are to be virtualized, the model methodology
compares the costs with current (As Is) traditional desktop purchases, versus the costs with VDI as an alternative.
The cost avoidance of the current (As Is) plan is the benefit. The investment in VDI is calculated in the Investment
section, ultimately being tallied against this desktop capital cost avoidance for a net savings (in the total TCO
analysis).

Inputs

Input Description Default Value Source

Number of User The number of user
Desktops to desktops that can be
Virtualize virtualized with VMware.
Existing Desktop The cost of an existing
Acquisition Cost desktop including hardware
and operating system costs.
Useful Life of The useful life of a desktop
Desktop PC in years
Expected increase Compound annual growth
(if any) in desktops rate in number of desktops
per year per year
Input
Default estimated at $1,399
USD for a high end desktop
system. Actual cost can be
lower based on actual
configuration.
3 years by default
5% by default
Input
The cost of an existing
desktop including hardware
and operating system costs.
Default estimated at 1,399
USD, specified as the
following typical high-end
system configuration: HP
Compaq dc7700 Convertible
Minitower PC (RT899UT)
with Windows XP SP2, Intel
Core Duo E6400, 2.13 GHz,
2MB L2 Cache, 2GB
SDRAM, 250GB hard drive.
VMware estimates
VMware estimates

Assumptions
• Amortization of As Is PC capital expenditures over 3 year lifecycle.
• Calculates only cost avoidance in Current (As Is) spending versus a net benefit, as the change cost
(Investment) in VDI calculated in Investment section, compared in total TCO section

TCO Calculation

Current (As Is) PC Capital Cost Avoidance = Number of User Desktops to Virtualize *
Existing Desktop Acquisition Cost / Useful Life of Desktop

4.2 Desktop Operating Expenditure Cost Avoidance

With VDI, costly labor for PC technical services (desktop infrastructure management) can be avoided, helping to
improve productivity and reallocate resources to more strategic IT management tasks.

The tasks that can be addressed include the following PC technical services

38
 • User administration (Adds and Changes)
• Hardware configuration/reconfiguration (MACs)
• Hardware deployment
• Software deployment
• Application Management
• Backup, archiving, recovery
• Service Desk (Tier 0/1)
• Security Management
• IT Administration

In typical environments according to the Gartner Publication "TCO Comparison of PCs with Server-Based
Computing" 15 June 2006, these tasks cost an estimated $488 per PC per year [14].

Through virtualization of the desktop PC, various physical configuration, MAC, support, maintenance, security
management and administrative tasks (such as asset management) can be avoided or eliminated, providing a much
easier and centralized environment to standardize, manage, control and support. This can lead to savings in time for
PC technical services staff, and reallocation of staff to higher strategic uses.

Estimates by Gartner group of typical virtual desktop implementations (see above) place the savings at around 60%,
a reduction of $360 per PC per year in annual operating costs.

The calculation of labor savings is performed as in other portions of this methodology, taking the equivalent of the
labor or service savings in person hours * the labor rate per hour as the estimated savings – in actual formula taking
the equivalent labor / service cost per PC per year * the expected task reduction or productivity improvement with
virtualized desktops.

Inputs

Input Description Default Value Source

Number of The number of user desktops Input Input
User that can be virtualized with
Desktops to VMware.
Virtualize
Current The cost per PC for specific Total per desktop per year Gartner Publication "TCO
Technical PC technical service tasks. costs of $488.00 including: Comparison of PCs with
Services • User administration (adds Server-Based Computing" 15
Costs and changes) = $11.00 June 2006
• Hardware
configuration/reconfigurati As with other input values,
on (MACs) = $26.00 users can edit and change
• Hardware deployment = default values to match actual
$7.00 costs and experiences.
• Software deployment =
$121.00 User editable.
• Application
management= $32.00
• Backup, archiving, and
recovery = $7.00
• Service desk (Tier 0/1) =
$239.00
• Security management =
$30.00
• IT administration =
$15.00
Expected The expected productivity Reduce the cost of user VMware estimates based on
Savings from improvements / task administration (adds and experience from deployments.
Desktop avoidance via desktop changes) = 80%
Virtualization virtualization solution. Reduce the cost of hardware Note that in a few instances
configuration/reconfiguration = costs increase because case

39
 -27.0% studies showed that managing
Reduce the cost of hardware the virtualized environment is
deployment = 28.0% more expensive than current
Reduce the cost of software discrete desktops.
deployment = 60.0%
Reduce the cost of application User editable.
management = 30.0%
Reduce the cost of backup,
archiving, and recovery =
100.0%
Reduce the cost of service
desk (Tier 0/1) = 60.0%
Reduce the cost of security
management = 50.0%
Reduce the cost of IT
administration = 50.0%
Expected Compound annual growth rate 9% by default VMware estimates. User
increase (if in number of desktops per editable.
any) in year and the salary increase
desktop expected for IT personnel
management
costs per year

Assumptions
• Costs based on Gartner research, but can be edited.

TCO Calculation

TCO Savings = PC Operating Cost As Is - PC Operating Cost To Be

Where:
PC Operating Cost As Is = Number of User Desktops to Virtualize * Current Technical Services Costs

PC Operating Cost To Be = Number of User Desktops to Virtualize * Current Technical Services Costs * (1 -
Expected Savings from Desktop Virtualization)

4.3 Capital Investment for Implementing VMware VDI

To generate these expected benefits requires an incremental Investment to implement VDI. To calculate these costs
the VDI team created a configuration tool to help size and cost the configuration. This tool is included within the TCO
/ ROI Calculator, and is described below. From the configuration recommendations, all units and unit pricing can be
edited to customize the predicted solution cost.

Inputs

To help configure the VDI solution, the following input is collected, with typical configuration defaults provided based
on VMware configuration recommendations and experience metrics:

• Estimated number of users or desktops per core= 8

• RAM to assign to each virtual desktop = 512 MB by default, 1MB choice also available
• Disk space to assign to each virtual desktop (in GB) = 10 GB
• Number of dual core processors (CPUs/Sockets) to have in each server = 2 by default, but 4 available as a
choice
• Use connection broker, selection of Yes or No) = Yes by default as it is an integral part of the VDI solution
• Deploying connection broker on physical hardware selection of Yes or No = Yes by default, indicating that
connection broker will be deployed on physical hardware (i.e. middle tier which binds user to back end
desktop)

40
 • Version of VMware Infrastructure are you planning to use = Enterprise by default with additional choices for
Standard
• Selection for 1 Yr Gold/Limited VMware SnS = Yes
• Desire to include thin clients, Keyboard, mouse, monitors cost in this model = No by default
• Desire to include SAN storage costs in this model = No
• Number of desktops administered by each Virtual Center server = 1,000 by default
• Total RAM (GB) required per ESX server = 16 by default
• The useful life of a VDI solution (in years) = 6 by default as the VDI solution lasts much longer than PC
desktop solutions.

TCO Calculation

All pricing set based on unit price and number of units required. Unit pricing is described in Assumptions section.
For units, the following calculations are applied to estimate and size the required solution:

ESX server hardware units (when 2 dual cores for ESX sever selected by default) = number of desktops to
virtualize / (Estimated number of users or desktops per core * 4)

ESX server hardware units (when 4 dual cores for ESX server selected by default) = number of desktops to
virtualize / (Estimated number of users or desktops per core * 8)

VC servers= 1 for every 1,000 desktops by default

VI 2 socket licenses (when 2 dual cores for ESX server selected by default) = number of ESX server hardware
units

VI 2 socket licenses (when 4 dual cores for ESX server selected by default) = number of ESX server hardware
units * 2

VMware VC management server licenses = number of VC servers

Windows operating systems for VC management server = number of VC management server licenses

Windows XP Pro fully packaged product/volume licenses = number of desktops to be virtualized

If option selected to include, then thin clients and keyboard, mouse, monitor sets are set to the number of
desktops to be virtualized

If including SAN costs is set, the FC SAN switch ports is set equal to the number of ESX servers

If including SAN costs is set, FC SAN storage TB needed is set to the number of desktops to be virtualized * GB
required per desktop / 1000 TB per GB.(this is an estimate so can use 1024 in the equation to be more accurate
when calculating the actual units).

If included in the analysis (should be and is by default), Connection broker (for desktop users) = number of
desktops to be virtualized, and Connection broker server hardware = 1 connection broker server for every 2000
desktops to be virtualized

Subscription licensing annual recurring costs are based on the Total licensing cost for VI 2 socket licenses and
Total cost for VMware VC management server licenses, Platinum support is set at 25%. Gold/limited level
support is 21%. Default set to Gold support. Calculated as:

Annual recurring cost = (Total licensing cost for VI 2 socket licenses + Total cost for VMware VC management
server licenses) * Subscription Cost

Assumptions
Pricing is based on US list pricing as specified at: http://www.vmware.com/products/vdi/purchasing.html

This unit pricing for the VDI solution is as follows:

• VI 2 socket licenses = $5,750.00 Enterprise Edition / $3,750 Standard Edition

41
 • VMware VC management server licenses = $4,995.00

Additional default pricing provided from industry average prices and provided by VMware based on customer
deployments include:

• ESX server hardware (based on VMware pricing estimates of typical servers from Dell / HP)
o 2 x dual core CPUs

32 GB RAM server = $15,250

16 GB RAM server or other = $11,103
o 4 x dual core CPUs

64 GB RAM server = $27,000

32 GB RAM server or other = $18,000

• VC servers = $1,300.00, assuming the cost of a standard desktop system

• Windows operating systems for VC management server = $150.00 (uses Windows XP)
• Windows XP Pro fully packaged product/volume licenses = $270.00
• FC SAN switch ports cost estimate (per port, assumes 2 ports per ESX server) = $4,400.00
($2,200 per port)
• FC SAN storage cost estimate (per TB) = $6,000.00
• Connection broker costs (per desktop user) = $50.00
• Connection broker server hardware= $1,300.00

If required as part of the solution (based on user input as to whether to include or not)
Thin clients = $250.00
Keyboard, mouse, monitor sets = $200.00

42
5 Conclusion
For most IT organizations, infrastructure costs are still consuming too much of the IT budget. In fact, the average
company spends 61% of their budget on day to day operations, and 25% on progressive migrations and upgrades,
23
leaving little of the budget, less than 14%, for innovation. One of the ways to reduce “keeping the lights on” costs is
through enterprise virtualization – providing a flexible pool of server, QA lab, storage, and desktop resources which
can be allocated based on business demands. Infrastructure optimization using enterprise virtualization can help to
consolidate assets, improve utilization and make the business more resilient and agile.

Examining case studies of Enterprise Virtualization deployments, Alinean and VMware have found that virtualization
projects generate double the ROI of other comparable infrastructure optimization projects – delivering 400 to 800%
risk adjusted ROIs versus. 200-400% for other core IT infrastructure projects. They deliver payback on investment in
less than 8 months, while most core IT infrastructure projects take 10 to 16 months to reach breakeven. The net total
cost of ownership (TCO) is reduced by over 30%, while most optimization projects deliver between 5% to 15%.
24
These projects have a proven high probability of delivering on time, within budget, and on promised returns.

For a typical customer with 350 servers in the datacenter, 100 1-cpu servers in the development and testing lab, 500
desktops, the outcome of the virtualization project includes:
• $10,570,609 in total direct TCO savings over 3 years.
• Additional $1,229,485 in indirect (soft) savings over 3 years.
• Overall, an ROI of 967.3% on an $881,383 investment.
• An NPV savings of $9,674,063 and a projected payback period of 3 months.
• An 8.3 to 1 consolidation ratio for data center servers, reducing server counts from 350 to 42, helping to
generate $7,971,756 in direct TCO savings and $657,318 in indirect savings over the next three years.
• Consolidate lab / test systems by 80.0%, reducing the number of dedicated lab / test systems from 100
CPUs to 20 CPUs (5 4-CPU systems), avoiding future system expenditure costs by 100.0%, improving
lab/test system provisioning efficiency by 90.0%, and improving bug reproduction efficiency by 95.0%
helping to generate over $1,718,523 in direct TCO savings and $572,167 in indirect (soft) TCO savings
over the next 3 years.
• Virtualize user desktops, saving 57.3% in desktop capital and operating expenses, $880,330 in net TCO
savings over the 3 year analysis.

Cumulative 3 Year With VMware

TCO Comparison Current (As Is) (Projected) Difference ($ and % savings)
VMware
Infrastructure
TCO - Direct $10,607,967 $2,636,211 $7,971,756; 75.1%
TCO - Indirect $875,994 $218,676 $657,318; 75.0%
Total TCO (3 year) $11,483,961 $2,854,887 $8,629,074; 75.1%
VMware Lab
Manager
TCO - Direct $2,461,298 $742,775 $1,718,523; 69.8%
TCO - Indirect $810,570 $238,403 $572,167; 70.6%
Total TCO (3 year) $3,271,868 $981,178 $2,290,690; 70.0%
VMware VDI
Total TCO (3 year) $1,536,467 $656,137 $880,330; 57.3%
Total TCO
TCO - Direct $14,605,732 $4,035,123 $10,570,609; 72.4%
TCO - Indirect $1,686,564 $457,079 $1,229,485; 72.9%
Total TCO (3 year) $16,292,296 $4,492,202 $11,800,094; 72.4%

23
Alinean ValueBase database of 20,000 company IT spending, June 2007.
24
Using the VMware ROI / TCO Calculator v2 observed results from prior respondents, comparing to other analyses using other
Alinean ROI / TCO tools and models.

43
VMware, Inc. 3401 Hillview Ave Palo Alto CA 94304 USA Tel 877-486-9273 Fax 650-427-5001 www.vmware.com
© 1998-2007 VMware, Inc. All rights reserved. Protected by one or more U.S. Patents Nos. 6,397,242, 6,496,847, 6,704,925,
6,711,672, 6,725,289, 6,735,601, 6,785,886, 6,789,156, 6,795,966, 6,880,022, 6,944,699, 6,961,806, 6,961,941, 7,069,413,
7,082,598, 7,089,377, 7,111,086, 7,111,145, 7,117,481, 7,149, 843 and 7,155,558; patents pending.

44