Posted by: tonywilburn | March 15, 2010

Should VMware lower their price?

It seems everyday that somebody is complaining that VMware ESX is too expensive.  Blog after blog and article after article says that VMware should drop it’s price to stay competitive.  I don’t get it.  I don’t hear anyone making the same argument about Windows 7.  I can get Ubuntu for free, why should I have to pay for Windows 7?  Why does VMware get the high price rap?  Why should the leader change their pricing model to stay competitive?  My dad taught me when I was very young that you get what you pay for.  If you buy a Ford, don’t expect a Ferrari.  Now I don’t have anything against Fords.  I’ve owned several, but none of them would out perform a Ferrari.

And that is what we are getting at here.  I’m not going to do price comparisons with XenServer and Hyper-V, that’s been done to death by all three camps.  I just want to put my views down where I can see them to help me better present my thoughts.  First, sticking with the performance theme.  VMware pays a lot of smart people to develop things that lets face it, their competitors don’t have.   Lockstep Fault Tolerance, Memory Over Commit, Transparent Page Sharing, Storage VMotion, Distributed vSwitch, Host Profiles, and coming soon, Memory Compression.  I’m not going to argue the merits of these and why I think they are invaluable, I’m just going to reiterate, you get what you pay for.

But lets look at how expensive VMware really is.  One thing I have seen is that most cost calculations leave off the fact that primary motivator for the  move to a virtualized platform is to retire old hardware.  Warranties on typical servers are three years, even though I’ve seen many companies stretch the life cycle to five years or more.  I’m going to use a three year refresh rate in my computations.

So, lets say you are a small to midsized business and this year you have 20 servers that are going end of life.  You could purchase 20 new servers to replace them, or you could purchase three new servers plus VMware licenses.  I’m going to use vSphere Enterprise for my example, since a SMB wouldn’t need Enterprise Plus.  The table below shows the “cost” of VMware.  The only thing that isn’t included in this is storage as there are too many variables in storage.  Some people already have the free space on the SAN, some only need to buy disks for an existing SAN and some need a new SAN.  There are too many different scenarios for me to include them all in this short blog entry.

So the “cost” of a VMware solution is a savings of $80,066.  Even if you don’t have the time and resources for the upgrade, you can hire a Solutions Architect (like me, for example) for less than the $80k and still come out ahead.  So, I’m a forward thinking person, I don’t just look at the right now, I like to look at, lets say, five years down the road.  Let’s assume you have a modest 20% growth in your server farm.  What happens over the next five years?

Now year three gets even better because we have plenty of room for the 20% growth with the existing infrastructure.

Year four.  Time for a server refresh and time to purchase SnS for vSphere.

Year 5.  Again Time to refresh the year 2 servers and purchase SNS.  Again we have room for the 20% growth in the existing infrastructure and do not need to buy new servers.

Granted this all assumes that the price of vSphere doesn’t increase and the prices of servers doesn’t increase.  I’m sure some of you noticed I left the 20% static from the first year instead of increasing it every year.  I just found the charts easier to read and understand if the numbers stayed the same.  The difference is only six servers over five years which I think is fairly negligible for this exercise.  I feel this is a more real world exercise than what most analyst show when they compare purchasing VMware with doing nothing.  Most analyst when explaining why VMware is too expensive will show you $60,000 vs $0 in the first example.  They forget that time marches on.

So, where does this leave us over a five year period?  Just in case you weren’t keeping score, we now have thirty-six servers, or thirty-six virtual servers running on five vSphere hosts.  A modest ratio of 7:1 which will allow for a one host failover solution giving you a 9:1 ratio during a host failure or maintenance.

Wait a minute, Tony are you saying that I will save almost $300,000 over five years just virtualizing 20 servers and virtualizing all my new servers?  Yes, that’s what I’m saying.  And not only do you save almost $300,000, you now have increased uptime through vSphere High Availability.  Your System Administrators can now do hardware maintenance and repairs during the day and spend nights and weekends with their families.  This may not seem like much to a manager since the System Administrators are on salary and get paid the same for a ninety hour week as for a forty hour week, but trust me, as an ex-System Administrator, this will increase the moral and decrease turnover.

But wait, there’s more!  Not only does it cut and dice, chop and slice, it’s also GREEN!  Lets look at the power consumption over the same 5 years.  I’m going to use nice round numbers and assume each server is running continuously at 300 Watts.  Of course this will vary, but it’s a good average mark.  The smart folks at Dell use a 2.8 Power Usage Effectiveness rating, so I won’t second guess them and I will use the same.  I will also use the same $.10 per kWh that the fine folks at Dell use in their calculations.

That’s a saving of $87,565 over five years of operating expenses.  Bringing the grand total to a savings of $376,721.  If you have a larger environment the savings just increases.  As I said, this doesn’t include storage cost, but you have to purchase storage no matter solution you choose.

So let’s recap.  The high cost of vSphere for twenty servers is a savings of $379,217 over a five year period.   In the first year alone you get a savings of $80,000 on a $60,000 purchase.  Sounds like vSphere pays for itself in less than twelve months.  A fact that has been proven by people like Forrester, who are better trained than I at making these kinds of calculations.  If VMware drops their price, will innovation stop?  Would VMware be able to stay so far ahead of their competition?  And if the cost of vSphere is a savings of almost $400k for 20 servers, how low do you want them to go?  How greedy are we?  Have we become spoiled with the so called free cost of open source software?  Don’t just look at the license cost, do an in-depth analysis, then decide if you can afford not to virtualize.

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