(10 votes, average: 3.80 out of 5)
Loading ...Recently, our competitor claimed an amazing Return on Investment (ROI) statistic – replace 9 older single core servers with 1 new multi-core one and repay that investment in less than a year. “The cost savings from energy alone will pay for new servers in about eight months[1].”
Having been around IT planning teams for the past 15 years, hearing any ROI statistic always sets my radar off. This is no exception. To me, this claim feels very unusual and there are only 2 explanations that I can think of; Either they are trying to oversimplify a very complex calculation by only looking at one factor (power); or they simply don’t understand the complexity of enterprise applications. Either way they risk doing a major disservice to customers.
The argument that a company can pay off the investment in a new multi-core server by retiring 9 older single core ones is akin to buying a new hybrid car and raving about how much money you are saving every time you fill the tank, ignoring that you had to purchase a car in the process. Return on investment should encompass all of the costs of a solution; otherwise it risks overstating the return.
Let’s take a look at retiring 9 single core servers by consolidating them down to one multi-core server. Simplistically you are going to incur the following costs:
· Consolidation prep – you have to actually do all of the planning and prototyping of the system, mapping data, etc., this is not a simple “copy and paste” exercise. Let’s not forget the data center planning piece of this exercise. You are going to have to remove all of the systems and install a new one.
· Migration of the data – this includes the actual movement of the data. Maybe you get lucky because all 9 servers magically had the exact same data structures and can all coexist happily with each other. Or not. I’m going to bet on “not”, I’ve seen enough of these projects.
· Security – You had 9 separate servers with 9 separate ACLs or security profiles set up to manage who could – and more importantly – could not access the data. Whenever you start consolidation of systems, it is important to make sure that the Marketing Department can’t see the Payroll Department’s files.
· Testing – once you have the new servers in the rack, you don’t actually just flip a switch. You are going to have to touch all the applications that touch that server. Including middleware, backup, security, and network infrastructure. One incorrect MAC address can result in a bunch of troubleshooting if you can’t quickly diagnose the problem.
· Unplanned consequences – Did you ever add a new user and find another suddenly can’t print? Most project managers I’ve worked with include some measure of “overage” to the project to help compensate for having to track down the “stragglers” of any project.
· Licensing changes – Well, 9 servers running 9 copies of the old program might be a sunk cost in ROI, but I am betting that as you consolidate these servers you may end up needing to upgrade to the newest version of the software in order to handle the complexity of the new environment.
· Disposal – you will need to get rid of the old systems, let’s not forget that you can’t just leave them in the dumpster (don’t forget to take the time to truly destroy the hard drives…)
And this is all just the tip of the iceberg, I’m sure that each one of you can provide your own list of hidden costs in trying to do a project. There is a human cost, and with the typical cost of ~$65/hour (the fully burdened cost estimate from the last project I worked on a few years ago) the human costs will likely dwarf the hardware purchase. If you don’t comprehend these costs, you can’t accurately assess ROI.
I’m not naïve in thinking that projects like this happen every day. But it is a bit naïve to think that power costs alone can determine ROI.
Looking at the typical server deployment, you can rest assured that the hardware is the lowest cost of the project by far. So if you want to do yourself a favor, don’t let your company fall for the “pays for itself in 8 months” hype that’s out there – do your own research and get the full story with all the costs revealed. Otherwise you’ll be the one explaining things to the CFO.
John Fruehe is the Director of Business Development for Server/Workstation products at AMD. His postings are his own opinions and may not represent AMD’s positions, strategies or opinions. Links to third party sites are provided for convenience and unless explicitly stated, AMD is not responsible for the contents of such linked sites and no endorsement is implied.
[1] http://download.intel.com/products/processor/xeon/dc55kprodbrief.pdf Intel footnote – Source: Intel. March 2009. Compares replacing nine four-year-old single-core Intel® Xeon® processor 3.8GHz with 2M cache-based servers with one new Intel Xeon processor X5570-based server. Results have been estimated based on internal Intel analysis and are provided for information purposes only.
#1 by Zixaphir - April 8th, 2009 at 01:33
But if you were going to update the environment anyways… many of these costs are already accounted for. Is there a more cost efficient method of upgrading via the path of virtualization that provides the same bang per buck?
#2 by John Fruehe - April 8th, 2009 at 09:42
Very good point. You are correct that if you are trying to do this type of consolidation, using virtualization is a much more realistic way to tackle the problem. Virtualization would allow you to continue to partition your data and applications, solving some of the integration data structure and security issues. But that adds cost for virtualization software, management and training. Again, many soft costs that go far beyond server hardware cost.
However, while you point out that updating the environment encompasses many of these costs already, I would counter that in determining the ROI for “updating the environment” would include a lot of manpower and software cost. The key is that the hardware is only a small portion of that overall cost.
ROI is a pretty complex calculation, not something you do “of the cuff”. I asked one of my coworkers who works in AMD’s IT department for the template they use in making ROI decisions. It is far more complicated than (total server cost) / (power savings) = ROI.
The bottom line for us is that in considering how quickly you can pay off that investment in IT technology, you have to consider a variety of factors, and hardware is just the tip of the iceberg. It’s what is underwater that is the bigger issue for IT departments.
#3 by GoToMarket - April 8th, 2009 at 14:33
Great post, John!
One key point made by the competitor is that cost of power is now a large portion of the overall cost-of-ownership for electronics equipment, especially in the data center, that can be quantified and monetized from cost of power consumed by the electronics and the cost of removing the dissipated heat under expected workloads.
Given conservative expectations that the cost of power will only be rising in the future, this “power-factored” total cost-of-ownership becomes increasingly important for marketing and selling electronics, even to consumers as we are beginning to see with Energy Star ratings on TVs and set top boxes.
It seems that the time has come for AMD’s power-saving advantages vs. the competition to be quantified and aggressively marketed. Customers now care.
#4 by John Fruehe - April 8th, 2009 at 20:14
Thanks for the comments.
Customers have been caring for several years now. I can say that on average, I have 7-8 conversations about power to every conversation about performance.
The cost of power continues to increase, and it will only go higher. For instance, if you do the quick math, a 250w average power draw server, at $.13/KwH, will cost you ~$850USD for power over 3 years.
While $850 is no small number, when you look at the 3 year cost of ownership on a server, you find most experts agree that acquisition costs (hardware + software) amount to only 25% of the total cost of ownership.
When you put those two figures together, it’s
clear: Power is a force to be reckoned with (especially because it is infinitely measurable vs. the other TCO “soft costs”), but it still is only one small piece of the overall pie. You really have to consider it all.