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Contributed Article By Michel Feaster, VP Products at Apptio

Virtualization Accountability in 2010

It doesn't take an expert to predict that budgets will be relatively flat in 2010.  And, as such, the old mantra of "do more with less" will be in full force. But lately there has been a corollary added to it: "And prove to us the value of our dollar spent." IT is no exception, especially as the CIO's role shifts more to a service provider model with initiatives like virtualization and cloud services in the mix.  Tracking the cost of delivering goods and services to the business is critical.  However, virtualization significantly changes the playing field, and the old way of tracking IT spend with general purpose spreadsheets or corporate planning systems is no longer sufficient.  With IT becoming a "virtual resource pool," the ability to manage the "value" of IT to the business and charge business units for IT resource consumption has become orders of magnitude more complex.  As a result, we are witnessing the maturation of CIOs who are putting systems in place to analyze, allocate and reduce costs, and communicate their value to the CEO.  In 2010, we will see greater fiscal accountability of IT. This will take into account the myriad of computing models and dynamic nature of today's IT infrastructure, accompanied by the following changes. 

1.  Virtualization - Do the Math

The popularity of distributed shared-services models, accelerated by technologies like virtualization, is creating a wrinkle for companies trying to accurately track chargeback, usage and ROI.  Unlike static business expenses, virtualization is complex and constantly shifting, making traditional business intelligence (BI) models ineffective at providing this level of insight. Emerging technologies, such as cloud computing, only muddy the waters, making it more difficult to map direct relationships to resources. A more nimble model will be needed. In 2010, virtualization will drive adoption of more sophisticated IT financial management systems that can track the cost and usage of services amidst virtual resources.

2.  Marriage of Cost and Utilization Will Drive IT Performance

From a business perspective, the beauty of virtualization is that it reduces the total percentage of dollars spent on fixed assets by increasing the utilization of these assets. As a result, IT can free up budget to spend more on "Change the Business" projects or reduce costs altogether.

To optimize the financial return on virtualization, IT must consider both the optimal configuration from a utilization standpoint, and the net cost benefit of virtualized infrastructure and virtualization software.  Combining cost and utilization, side by side, gives IT the power to get the most out of their virtualization projects and report on the true ROI of virtualization over the long run.  In 2010, companies will look for ways to holistically calculate application TCO and server utilization rates across both physical and virtual servers to identify consolidation opportunities.

3. Talking Cost-Benefit, not Technology

In 2010, one of the biggest hurdles in virtualization will be evaluating, assessing and accelerating expansion of virtualization initiatives.  Until IT can demonstrate both the lack of business risk and the tangible benefits to the lines of business, virtualization rollouts will be in danger of stalling. IT and financial leaders must understand how to leverage cost and utilization data to change their dialogue with the line of business. Clear cost savings back to the business combined with a lack of risk to critical business service delivery is the recipe for getting business buy-in to virtualization initiatives. In 2010, IT executives with communicate cost-benefits to get line of business buy in and use the same methodology to measure the ROI of existing virtualization initiatives.

Conclusion

Virtualization is a critical part of the IT mix that is here to stay, and CIOs must understand how to realign their fiscal cost/benefit analysis with this new model in mind.  Prioritizing virtualization targets and managing the ongoing ROI of virtualization initiatives is no easy task.  However, with a clear understanding of the cost and utilization of virtual servers, companies can allocate virtualization investments to various IT services and business units, optimize server configurations, track utilization rates over time, and maximize the ROI of further server virtualization investments. By using cost and utilization data to frame the high benefit, low risk conversations, IT can accelerate line of business buy-in to virtualization. By mapping utilization rates to the cost of servers and intelligently expanding consolidation through virtualization, companies can avoid unnecessary investments in new infrastructure and create a baseline understanding among business leaders as to the value virtualization can provide.

About the Author

Michel Feaster is VP Products at Apptio http://www.apptio.com/, a leading provider of on-demand IT Financial management software. Michel has deep experience across sales, product management and marketing having served in numerous leadership roles at Mercury Interactive and HP Software.