Why would you replace a server that runs fine, meets SLAs, and is not fully depreciated?

This is a common obstacle to replacing a physical server with a VM when it is not yet "ready" to be refreshed. Historically, people have had a hard time producing a business case for these servers. Here, I present a framework that can help justify a "refresh now" plan, and it is based upon a few key requirements:

• Energy costs are real. We can ignore the capital costs of power and cooling infrastructure (e.g. UPS, PDU, generator, chillers, etc. - which do not go away as a result of virtualization, unless new infrastructure is required due to growth). What we can't ignore is the monthly electrical utility bill. A typical server in the US costs over $1000 in electricity per year to remain powered on and kept cool. That number jumps to $1400 in Western Europe and is $1500 in certain areas of the US such as New England
• Shared Storage costs are decreasing. The use of NFS and iSCSI, as well as the typical annual decrease in cost per GB means that the entry cost for enterprise server virtualization is becoming lower
• Multi-core processors have an impact in two areas: it increases the VM-per-server ratio (a server with 8 cores can easily handle over 20 typical VMs) and it reduces the VMware license cost per VM (VMware counts by CPU socket)

When you take into account some of the above factors, it's often quite easy to produce a strong business case for virtualizing servers that are not yet due for a refresh.

The following spreadsheet shows a per-VM analysis that determines the breakeven point, in months, for virtualizing a server that still has useful life remaining. Some things to keep in mind:

• Analysis includes both cash flow (for the Finance people) and GAAP views (for the accounting people). Cash flow includes a leasing option, which helps ease the cash flow hit with these kinds of projects
• Cost savings of data center floor space and capital infrastructure (PDUs, UPSs, etc) are ignored
• VMware software is calculated at list price (not discounted)
• A certain percentage of existing servers may be re-used as VMware ESX hosts, but server depreciation expense continues until end of term for those that remain

Feel free to make comments or suggestions on this spreadsheet – it is a work in progress. You may find that some of the numbers are conservative, others may seem aggressive, so your mileage may vary. The full version is here.