Quoting from Network World

In our recent research benchmark on data centers, Nemertes Research discovered many different approaches to server virtualization. Some companies are combining virtualization with blade servers in a double-barreled approach to modernizing the data center. Others are aiming to bring a halt to the rampant growth of servers by moving many barely utilized services to virtual machines.

One thing was clearly obvious from our research: The best starting point for server virtualization is the consolidation of “low-hanging fruit.”

We collected various metrics around server virtualization and one of the most interesting was the ratio of virtual to physical servers. IT directors reported various ratios, from 20:1 (20 virtual machines on every physical server) to 1:1 (virtualization as a hardware abstraction layer - a rare case). Once we looked at the virtualization ratio in historical terms we were able to verify the common sense approach of low-hanging fruit.

When companies first apply virtualization, the average ratio is around 15:1. After one year it drops to 8:1 and after three years stabilizes at an average of 3:1. In order to fit 15 to 20 virtual machines on a single server, the average CPU utilization of these virtual machines must be 5% to 8%. These represent servers with permanently low demand on CPU resources or with intermittent demand: testing and development servers, small Web servers with many static pages, rarely used applications, and so forth.

The upfront savings can be huge. Consolidating 15 servers onto one can lead to approximately $40,000 in savings from postponed server purchases. Across an entire data center, such consolidation can lead to cost avoidance exceeding $1 million per data center. So if you were wondering how to justify the expense of training administrators on virtualization, buying virtual machine licenses and such - there’s your ROI! 

But IT executives should not see this as the end of the road. We look at the low-hanging fruit as the means to justify the initial spend, but not the means to derive the greatest benefit. We predict that the major benefits come from the combination of automation and virtualization: tools allowing you to move a virtual machine to another server or even another data center in real time, operational efficiencies from the standardization on a VM as a application deployment platform, etc. Just like VoIP was initially adopted to gain from toll bypass but really delivers the biggest benefits from convergence of networks and productivity gains, server virtualization as consolidation is just the thin end of the wedge.

Read the entire article, here.