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TREND Business Case Executive Summary

Technology Revitalization and Efficiency at NewwDeal (TREND). The TREND project will increase service quality for customers while reducing overall power and cooling requirements. TREND will catalog the services provided and the IT platforms on which they reside; identify candidates for virtualization; optimize current platforms, replace older systems with new efficient systems; and provide end users with thin clients.

Table of Contents

TREND Business Case ................................................................................................................................... 1  

Executive Summary ................................................................................................................................... 1  

Table of Contents ....................................................................................................................................... 1  

Introduction ................................................................................................................................................ 2  Subject ...................................................................................................................................................... 2  Background .............................................................................................................................................. 2  

Scope & Boundaries ................................................................................................................................... 3  Scope ........................................................................................................................................................ 3  Location ................................................................................................................................................... 3  Equipment ................................................................................................................................................ 3  

Business Impacts ........................................................................................................................................ 4  Estimated Cost ......................................................................................................................................... 4  Estimated Hardware, Software, and Virtualization Costs ........................................................................ 5  Estimated Savings .................................................................................................................................... 6  Total Cost of Ownership .......................................................................................................................... 6  Options ..................................................................................................................................................... 7  Analysis of Results ................................................................................................................................... 8  

Assumptions & Methods ........................................................................................................................... 9  Assumptions ............................................................................................................................................. 9  Data Sources & Methods ......................................................................................................................... 9  Financial Metrics ...................................................................................................................................... 9  

Sensitivity & Risks ................................................................................................................................... 10  Risks ....................................................................................................................................................... 10  Constraints ............................................................................................................................................. 10  Sensitivities ............................................................................................................................................ 10  

Project Management ................................................................................................................................ 10  Stakeholder Communications and Collaboration .................................................................................. 10  Managing scope, cost, and schedule variables ....................................................................................... 11  Quality assurance methods. .................................................................................................................... 11  

Conclusion and Recommendations ......................................................................................................... 11  

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Introduction

Subject This case examines the likely costs and benefits to NewwDeal from consolidating Information Technology (IT) services provided through virtualizing servers and desktops. This will significantly reduce the number of physical machines needed to provide the services, reducing power consumption and increasing reliability through better backup management. Further savings will result from replacing legacy units with Green IT. End user thin clients will run virtualized desktops.

Existing and projected services will be cataloged and managed through IT Infrastructure Library (ITIL) to sustain and improve customer satisfaction. The ITIL tactical framework increases the efficiency of planning, delivering, and supporting IT services.

The advantage of such virtualization is that there are far fewer hardware servers to maintain. This results in less workload for administrators, simplified backup and restoration processes, smaller “footprint” in the server room, lower power consumption, and less heat for air conditioning to remove. The intended result is at least a 25% reduction in power requirements.

Further, cataloging services will provide NewwDeal with a clearer picture of actual service demand and a better ability to forecast peak loads both in terms of processor power and network throughput. Administrative workload is also reduced because consolidation simplifies the task of backing up critical files and other administrative chores.

The selection of services to virtualize plus the acquisition of Green IT systems will require diligence in researching options, gathering requirements, evaluating products, negotiating contracts, training the staff on the new configuration as well as end users on the thin clients.

Background This transition is regarded as necessary in order to improve efficiency in IT services and meet business growth targets for the next five years.

As a growing IT company, NewwDeal faces a choice. In our estimation, current server space is nearing capacity, with maybe one or two years left at the current growth rate before expansion will be needed. The heating, ventilation, and air conditioning (HVAC) equipment and ducting, as well as power feeds to the building effectively preclude an expansion in place. Therefore a major capital investment in another facility will be required.

The major cost of owning and running servers is no longer the purchase of the server itself. In its 2007 report to Congress, the EPA (EPA, 2007) states: “The purchase price of a new (1U) server has been exceeded by the capital cost of power and cooling infrastructure to support that server and will soon be exceeded by the lifetime energy costs alone for that server” (p. 30).

Therefore the most cost-effective course of action is for NewwDeal to maximize the efficiency of its current server complement through virtualization on “Green IT” power-efficient platforms.

Beneficial byproducts of this transition include (1) meeting suggested EPA goals for power efficiency and (2) participation in the Green movement to reduce carbon emissions. The latter is a positive public relations factor and could sway potential customers in the current climate.

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This project is being developed and undertaken at the request of NewwDeal Vice President for Technology

Scope & Boundaries

Scope The TREND project proposes to replace 150 servers at NewwDeal by virtualizing the services onto 15 new Green IT servers. Based on initial survey at NewwDeal, this is the minimum number of servers that will be needed. Trend will also virtualize NewwDeal’s 500 desktops onto 3 high-end servers and replace the personal computer (PC) workstations with “thin clients.” Using ITIL and its tactical framework for identifying, planning, delivering and supporting IT services, TREND will improve the energy and computational efficiency of NewwDeal through the following Green IT initiative:

1. Reduce energy costs and consumption by up to 50% through virtualization. 2. Inventory services provided to identify redundancies (ITIL). 3. Identify areas to improve quality of services provided (ITIL). 4. Train NewwDeal IT staff on ITIL to use in their daily activities. 5. Using advanced resource and memory management features of VMWare, enable

consolidation of servers from 15 to 1 and get hardware utilization to 75% (Virtualization).

6. Reduce desktop acquisition, operating and management cost by replacing end of life desktop machines with thin clients and desktop virtualization.

7. Acquire new IT needed for this project based on newest most efficient power supplies and power management schemes that reduce both electricity consumption and cooling load. (Green IT)

8. Concentrate new and existing IT servers into fewer racks: reducing data center sprawl and HVAC resources.

Location The TREND project will take place within the NewwDeal enterprise server facility at Hibbing, and include end user equipment in New York, California, Dublin, and Tuvalu.

Equipment Table 1 shows the number of servers in the current state and the end state after virtualization.

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Table 1 Servers Virtualized

Table 2 shows the number of personal computers in the current state and the number of virtualized end state after virtualization. The servers shown in Table 4 are not included in the number of servers in Table 3.

Table 2 Desktops Virtualized

 

Business Impacts

Estimated Cost Table 3 shows the comprehensive project costs, including labor and equipment. Note that the major outlays come in year 1 when new equipment is purchased, and again in year 5 (final outlay) when replacements need to be purchased.

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Table 3 Cost and Schedule Estimates

Estimated Hardware, Software, and Virtualization Costs Costs of server and desktop virtualization are shown in table 5. Note that desktop virtualization requires purchase of servers to host the virtualized desktop, but the combination of ”thin client” and virtualized server is far more efficient than a single desktop PC per workstation.

Table 4 Estimated Hardware and Software Costs

 

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Estimated Savings Table 4 breaks out overall savings by year. Note the difference between outlays in table 3. Major savings come in year 2 when there is almost no hardware to buy. Table 4 thus emphasizes year 2 savings, and years 3-5 are totaled under “residual savings.”

Table 5 Overall Project Savings Estimates

 

Total Cost of Ownership To compare the cost of doing business as is, Figure 1 shows the total cost of ownership (TCO) for the current server complement with the red bars. This can be easily compared to the TCO for virtualized servers, shown in blue. As the categories show, there are many aspects to running a “server farm,” and the ease of maintenance of virtualized servers is quite evident.

Figure  1  TCO  Physical  Servers  vs  Virtualized  Servers  

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The comparison for “as is” desktop operation is similarly striking. While each desktop consumes less power than a server, the aggregate of 500 units is not trivial. Figure 2 shows the TCO for the current desktop complement with the red bars. Thin clients have no moving parts, no disk drives to crash, no data to lose, no Windows licenses, and probably most importantly, hardly ever need a system administrator to visit the workstation. This can be easily seen in figure 2 by the blue bars.

Figure  2  TCO  Desktop  PC  vs  Thin  Client  

Options The hardware and desktop virtualization portions of TREND implementation were intentionally kept separate so NewwDeal management can compare and assess the business case for each section. “Bang for the buck” is clearly with the servers because of server space crawl, cooling load and overall power consumption. However, without virtualizing desktops there is considerable administrative workload running the help desk and visiting workstations.

The following scenarios describe three levels of change that could result from this business decision.

Scenario #1: Full TREND implementation – server consolidation and replacement with Green IT, plus desktop virtualization. This is the TREND project as presented to the VP for Technology and as described in the Subject.

Scenario #2: Server virtualization only, no desktops. This would consolidate services and replace servers with Green IT.

Scenario #3: Business as usual. NewwDeal continues present operations. Note: expected growth cannot be accommodated in current facilities beyond year 3, necessitating a new server facility. This major capital expense is not included in the Table 3 figures.

Figures 3 and 4 together represent the cumulative investment and savings from the total TREND implementation. Figure 3 displays the cumulative investment and savings resulting from

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virtualizing NewwDeal servers and services, and by itself (server virtualization only) depicts Scenario 2.

Figure  3  Cumulative  Investment,  Savings,  and  ROI  -­‐  Servers  

Figure 4 displays the cumulative investment and savings resulting from the virtual desktop portion of TREND implementation. Scenario 1 includes these figures, Scenario 2 does not.

Figure  4  Cumulative  Investment,  Savings,  and  ROI  -­‐  Desktops

Analysis of Results The payback period on servers is 1.5 years. For desktops it is 1.1 years. In other words, after the second year NewwDeal is paying out less money in electricity and added system administrator workload and the project has paid for itself. This can be seen by looking at the

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TCO in Figures 1 and 2, comparing with the savings shown in Figures 3 and 4 that will not be realized with business as is.

Assumptions & Methods

Assumptions 1. Short downtime will be permitted to permit cutover from physical to virtual servers. 2. Task leads will remain with project for the duration. 3. NewwDeal SME’s are available for consultation, not assigned to conflicting tasks 4. Minimal incompatibilities between server applications/platforms and virtual hosts. 5. Funding will be available throughout project lifespan. 6. End users will accept virtualized desktops as equivalent to the physical systems. 7. Start time/date will not slip: Current start date of 1/3/2011 will not slip. Slippage may

affect costs to procure new equipment and make present system usage untenable as more services are added through marketing. Scope is based on projected demand through the agreed upon period of performance.

Data Sources & Methods Data for power consumption and estimates of savings come from:

1. Manufacturer specification for the types of servers in use at NewwDeal and the new Green IT units that will replace older servers.

2. EPA figures on cooling loads for server facilities 3. US Energy Administration for retail price of power to industrial customers 4. NewwDeal power invoices

Data for information throughput and transaction loads come from:

1. Interviews with NewwDeal system administrators 2. Service Level Agreements between NewwDeal and its clients 3. Server and service software specifications 4. Capacity of current network equipment and network equipment specifications

Financial Metrics Describe to the readers on what types of measures you have based your case. These may include:

• Net present value is calculated on the capital worth of present IT systems to be included in the TREND project.

• Payback period is calculated from total expenditures on virtualization software, plus new hardware, minus the savings in direct (IT) and indirect (HVAC) power consumption

• Return on investment is the cumulative savings in power consumption.

• Total cost of ownership: 3 years: $HW, SW, Storage, Netwk, Training: $608,704; 5yrs: $879, 676

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Sensitivity & Risks

Risks Below are the evaluated risks from the TREND risk register and risk management plan:

R1 Information corruption/loss.

R2 Task leads: departure of one of the primary leads will create a skill vacuum

R3 Virtualization incompatibilities could prevent some applications or services from being virtualized

R4 Loss of funding: NewwDeal could experience difficulties or become dissatisfied with TREND work

R5 No downtime: NewwDeal may not allow downtimes to migrate from physical to virtual servers

R6 Trial deployment failure: Beta tests may go badly

R7 End users may not accept the thin client virtualized desktops and refuse to use them

R8 Licensing – does not allow virtualization. Some applications need physical license keys; others do not properly sync with license files when virtualized

R9 Budget or schedule overruns

Constraints 1. TREND tasks must be performed in a live environment, project cannot affect

ongoing operations. 2. NewwDeal IPO. TREND absolutely must be complete before planned August 1,

2011 IPO event.

Sensitivities 1. TREND benefits are sensitive to price fluctuation in power costs. While this is not

expected to decrease, a reduction in cost could offset expected savings. 2. TREND costs are sensitive to equipment and virtualization software pricing. While

increases are expected and planned for, sudden spikes will reduce TREND savings.  

Project Management

Stakeholder Communications and Collaboration Major stakeholders include:

• CTO/VP for Technology – Our project manager reports directly to the CTO. The Resource Loaded Network (RLN) will be open as needed and weekly status reports will be delivered.

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• CEO – Receives status reports at major milestones.

• CFO – Receives weekly cost projections

Methods of communication and collaboration will be, in addition to the reports indicated above, weekly meetings, and other interval as needed

Managing scope, cost, and schedule variables TREND will manage cost and schedule variables using Earned Value Management (EVM). Scope variables will be managed through a configuration management process: once the scope is accepted by NewwDeal management, TREND and management will assess any changes for cost and schedule impact via a configuration change board (CCB). TREND will keep track of the three measures of earned value (Niwot, 2009):

• The Plan: Budgeted Cost of Work Scheduled (BCWS) • The Performance: Budgeted Cost of Work Performed (BCWP) • The costs of Performance: Actual Cost of Work Performed (ACWP)

Comparing these measures will allow us to keep track of deviation from planned cost and schedule values (Niwot, 2009):

• Cost Variance = BCWP – ACWP (negative CV is “bad”) • Schedule Variance = BCWP – BCWS (negative SV is “bad”)

TREND will use Earned Value Management to keep the IT Efficiency Upgrade project for NewwDeal on budget and on time.

Quality assurance methods. TREND will utilize the Lean methodology for quality and continuous improvement. Lean concentrates on eliminating anything in a process that does not contribute to customer value. Value stream mapping will be used to analyze the processes, and the “5S” method will keep tasks on track by removing distractors:

1. Sort –software tools and equipment on hand are only the ones needed 2. Set in order – place the most frequently used tools where they can be easily found 3. Shine - clean up the workplace after daily work, maintain an orderly appearance 4. Standardize – handle each job the same way 5. Sustain – follow 1 through 4: keep the workplace clean and ordered. This reduces

distraction, keeping emphasis on customer value.

The process is reviewed and any items that distract from customer value are eliminated to maintain focus on customer value.

Conclusion and Recommendations

TREND will save NewwDeal 3 MILLION DOLLARS over a five-year period, which it does by consolidating services onto fewer computers. Fewer computers (1) consume less electricity, (2) generate less heat to be removed through cooling; (3) are more easily managed by IT staff; (4) are

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easier to back up and restore; and (5) take up less server room “real estate.” Newer, more efficient computers also achieve the same benefits, adding to the overall savings.

TREND can be reduced in scope if needed, as described in the business impact scenarios. This will save some expenditure in the short term but the yield will also be less.

For maximum benefit to NewwDeal, we recommend full TREND implementation.

Benefits of Virtualization

• Reduces physical infrastructure footprint, consolidating excess server and desktop hardware

• Reduce Capital and Operational Expenses because additional services likely accommodated with existing hardware

o Increase utilization rates of existing hardware from 5-15% to up to 80% o Defer datacenter construction costs by $1000/ sq ft * o Attain 50-70% higher VM density per host than is possible with individual

servers o Achieve 20-30% lower cost-per-application because no need for separate

hardware • Reduce Operational Expenses with Better Management and Automation

o Shift staff energy from routine tasks to strategic projects and adding value to the business. Manage what matters most - entire IT services and their service levels - by taking the complexity out of infrastructure management, service delivery and application management.

• Minimize Potential Lost Revenue from Business Downtime o Any unplanned downtime adversely affects your bottom line and your corporate

perception, business relationships, and future viability. o Eliminate business loss due to datacenter outage o Save time by automating testing and quick/ reliable restore