I read this IBM case study in eWeek a few months ago. It said through virtualization, the US Tennis Association was able to run the US Open event website on just 9 servers (instead of 60 the year before) despite increased traffic and implementation of new features. Having spent years equating increasing server count with growth, I wasn't sure this was good news.
The article also mentions an Enterprise Management Associates research report: 75% of surveyed enterprises have already deployed virtualization, and less than 4% have no virtualization plans (!). 65% said server consolidation is a key goal. Yikes.
Gartner, likewise, said back in June that 40% of mid-sized businesses will reduce server count through virtualization by 2007. And last week, research director Jeff Hewitt said virtualization will significantly impact x86-class server sales:
The total number of virtual and physical x86 servers will grow at a cumulative annual rate of 12 percent from 2005 to 2010. But customers using virtualization can be expected to deploy about eight virtual servers on a physical server. So physical server growth rate will only be about 5% annually. The market is still growing. But this could be an early indication of a slowdown; it's something everybody in this market is watching.
If these figures worry you, Sun CEO Jonathan Schwartz' latest blog post might cheer you up.
There's an interesting phenomenon in the computer marketplace, which strikes some as counterintuitive: if you double the performance of a machine, customers don't buy half as many, they tend to double their order. Same goes for utilization, if you can double server utilization, people don't buy fewer computers - they buy more. The value of innovation is growing so fast that if the price declines, the overall return goes through the roof, encouraging a feedback loop. Moore's Law and free software drive relative pricing down, and customers accelerate their growth.
Schwartz offered a Sun sales exec two pieces of advice: sell beyond your current installed base, and trust that the market will grow. All of Sun's large accounts started as small customers, and lower entry barriers help "tomorrow's Fortune 500" gain momentum.
I was talking to someone about my recent post on virtualized complex hosting. What about ARPU, he asked? A system of virtual web/app/db servers won't generate nearly as much revenue as actual machines, but it still takes the same amount of resources to close sales and answer support tickets.
The answer, according to Sun and IBM, is that if customers can do more on a lower IT budget, they will find ways to use way more computing resources.
So, do you agree with Jonathan Schwartz' take? Or are you disheartened by Gartner's projections?
And in order to replace 60 servers with 9 running the same software, you need very good CPU utilization (or very poor utilization in the previous year), or 9 very top-of-the-range servers (or combination of both).
What can be sure is company will buy less low-end servers, replacing them with virtual servers running inside high-end boxes. In IBM's case, it's the p550 Express. At the end the server providers might actually sell more of their powerful boxes, be that IBM, Sun, HP or SGI. And they usually attract higher margin as well.
If enterprise will buy less low-end hardware, might hosting customers lease fewer $99 servers as well, choosing instead to move to VPSes with 20% the CPU power of their current Celerons?