WHITE P APER Business Value of Blade

Sponsored by: HP Jed Scaramella April 2012 Randy Perry

EXECUTIVE SUMMARY
Today, a company's datacenter is tightly integrated with its day-to-day business operations. Companies are increasingly looking to their IT as a means to gain a competitive advantage in the market rather than simply as a means of supporting business functions. IT applications and services have become a critical element in how companies interact with their customers, deliver new products and services, and improve their own workforce productivity. Yet even though IT organizations are charged with delivering an expanding base of workloads and seemingly higher degrees of service-level agreements (SLAs), they are also challenged with constrained budgets and overburdened staffs. In response, IT organizations must seek efficiencies in their operations and shift to a more agile infrastructure that is flexible enough to adapt to future changes in the business. Over the past decade, IDC has seen the industry move more toward distributed environments as lower-cost x86 systems have increased their share of workloads. While this migration has enabled customers to control capital expenditure with lowercost servers, the increased operational costs of managing the x86 base are taxing IT budgets, making it difficult to fund and staff new initiatives. This paper examines how eight midsize companies spanning the education, healthcare, media, retail, research, and telecommunications (service provider) industries were able to reduce their annual IT infrastructure cost per user by almost 25% by migrating to a blade platform. Reduced requirements for staff time and resources, hardware infrastructure, and facilities drove these savings. The integrated nature of the blade platform delivers efficiencies in system management, monitoring, and provisioning. The HP BladeSystem utilizes HP Insight Management software to automate key management processes, including a system's physical deployment, configuration, and problem management. As measured by IT infrastructure cost per user per year, companies implementing blades saved an average of $55 per user per year in reduced IT infrastructure staff time (as the company can apply that saved time to other business IT initiatives) and $56 per user per year in reduced hardware and software costs. HP BladeSystem ProLiant server blades enabled these companies to consolidate physical servers and components while still maintaining the same workload capacity and performance. Blade technologies, such as HP Virtual Connect, reduced networking and hardware costs by enabling up to four FlexNICs per physical NIC port; a single HP Virtual Connect interconnect module eliminates four switches.
www.idc.com Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015

The study also demonstrated that virtualizing HP ProLiant servers further improved IT infrastructure savings. By deploying a greater number of virtual machines (VMs) per physical server blade, IT organizations were able to further reduce IT infrastructure savings by 17.1%. IDC research indicates that available power, not floor space, determines the extent of a datacenter's capacity. HP Thermal Logic technology enables the HP BladeSystem to pool and share the power and cooling resources. The combined solution then utilizes management software to efficiently deliver those resources based on the performance level required. This study shows how customers reduced power costs and avoided facilities expansion, saving an average of $17 per user per year. In addition to illustrating the IT operations cost savings, the study also shows how migrating to a blade environment improved IT availability. Relative to traditional server environments, customers with virtualized blades incurred 75% fewer server incidents per year and reduced server downtime hours by an average of over 80%. IDC believes that the HP BladeSystem delivers improved return on infrastructure investment for customers, creating a flexible IT environment that provides for both easier IT management and easier adaptation to the changing needs of the business. IDC estimates that over a three-year period, the companies in the study saw their implementation of a bladed infrastructure deliver a return on investment (ROI) of over 250%, and cumulative savings from the implementation paid back the full investment within a period of just over 10 months.

WHAT'S CHANGING THE G AME ?

Operating Today's IT Environment with Limited Budget and Resources
In today's competitive marketplace, customers are evaluating how their IT organization can run more efficiently and drive additional value to the business. First among the challenges facing the managers of IT organizations is the fact that even with constrained budgets, they still must continue to deliver on increasingly stringent SLAs, build new applications, and maintain high levels of application availability. To respond to these challenges, IT managers must build their infrastructure on platforms that can deliver operational efficiencies and maintain the flexibility to adapt to future changes in business demands. Furthermore, the datacenter has become more tightly integrated with day-to-day business operations. IDC has observed that companies are placing greater emphasis on the operations of their IT environments not only to gain a competitive advantage in the market but also because IT services and applications have become a critical element in day-to-day business and workforce productivity. An unfortunate reality is that enterprises are asking IT organizations to do more with less, pressuring them to reduce their operational expenses. This can become a significant obstacle to increasing application availability, improving service levels, and providing higher levels of IT flexibility.

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Challenges with Distributed x86 Servers Environments

Over the past decade, IDC has seen x86 servers account for an increasing share of IT workloads. x86 servers started out as an extension of the PC market and provided business units, which were previously unable to secure space on the larger systems, the means to set up IT systems. Development on these platforms set in motion a positive feedback loop that drove expansion of IT capabilities via x86 that in turn drove still more development and innovation to the x86 platforms. This pattern has resulted in an increasing number of IT applications migrating to x86 platforms. Because the price point for smaller x86 systems is much lower than that of monolithic business systems, customers have been able to use x86 to expand server capacity while controlling their capital expenditure. However, this migration to a distributed environment created a more complex infrastructure that resulted in higher operational costs. As Figure 1 illustrates, today's IT organizations face rising operational expenses, power and cooling constraints that limit IT capacity expansion, and IT staffs overburdened by manual tasks. The management and administration costs associated with x86 servers have grown to eclipse costs in all other categories. The personnel costs required to manage and maintain the x86 server base consume the majority of IT budgets, leaving little time and few resources for value-add initiatives such as building new applications. Additionally, the power and cooling of servers is a top-of-mind issue for IT organizations, as the growth in server energy expense has outpaced spending on servers themselves; server energy expense grew at a compound annual growth rate (CAGR) of 9.5% compared with a server revenue CAGR of -2.6%.

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FIGURE 1
Worldwide Spending on Servers, Power and Cooling, and Management/Administration

300 250 200

($B)

150 100 50 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Power and cooling expense Management cost Server spending

90 80 70 60 50 40 30 20 10 0

Physical server installed base (M)

Logical server installed base (M)
Source: IDC, 2012

Future Requirements for a More Efficient IT Environment

These trends toward sprawl and higher costs for datacenter management have significantly impacted the IT environment. Going forward, IT managers need to implement solutions that can considerably reduce costs by: Increasing IT hardware utilization. Research indicates that only a fraction of most servers' total capacity is typically utilized in a distributed environment. The overprovisioning results in wasted rack space as well as increased power, cooling, bandwidth, and operational costs. Simplifying management and increasing flexibility. As currently deployed, most server configurations are static, hardwired, and difficult to change. Too much manual coordination is required to maintain applications and server configurations, involving too many people to perform too many manual steps. Improving server energy efficiency. IDC finds that the primary driver behind efforts to improve energy efficiency is to ensure the availability of IT to the business by averting risks posed by power and cooling challenges. To avoid costly new buildout, IT must deploy more systems with the current available power.

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(M)

These requirements become imperatives because distributed server environments can often consume large amounts of space, power, and IT staff time. The costs associated with provisioning, monitoring, and managing servers have escalated, challenging IT organizations to seek systems and tools to help them lower the overall cost of IT operations.

BLADE SYSTEMS DRIVE EFFICIENCY AND SIMPLICITY TO THE IT ENVIRONMENT

Methodology
In the fall of 2010, IDC interviewed eight midsize companies, referred by HP, that had migrated 19% to 100% of their server environment to blades. These United States based organizations represent experiences from the education, healthcare, media, retail, research, and telecommunications (service provider) industries.

The Results: Blades Deliver 25% Cost Savings

Efficiencies Across the IT Environment
The customer interviews and IDC ROI modeling make clear that blades deliver cost savings in several areas (see Table 1); yet there are three main categories of efficiency improvements: IT staff time and resources. The integrated nature of the blade platform allows for centralized management of all servers and components within the chassis. The centralized management results in more efficient methods of provisioning, monitoring, and managing. These efficiencies in turn reduce the amount of IT staff time required for IT infrastructure administration, allowing companies to apply that newly available staff time to other activities more directly related to the business, such as business application expansion or enhancement. As stated previously, companies implementing HP BladeSystem in their environment saved an average of $55 per user per year in reduced IT infrastructure staff time. IT hardware infrastructure. Migrating to a blade environment enables customers to consolidate physical servers while maintaining the same workload capacity and performance, which reduces capital expenditure on hardware. IT organizations are able to improve IT resource utilization rates by reducing the numbers of servers, a factor that is further enhanced through virtualization. Companies implementing blades saved an average of $56 per user per year in reduced hardware and software costs. IT facilities. Blades reduce power and cooling consumption due to the integrated platform and efficiencies gained through shared power and cooling components. On average, companies in this study reduced power costs and avoided facilities expansion, saving an average of $17 per user per year.

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TABLE 1
Sample Demographics
Category Employees IT users (internal) IT users (external) Servers % traditional physical % blades physical % blades virtualized IT staff Applications Installed storage (terabytes) Storage growth (average per year) Industries Note: Values represent the mean for all respondents (8).
Source: IDC, 2011

Average 747 682 166,792 179 24 43 32 43 15 429 168% Education, healthcare, media, retail, research, telecommunications (service provider)

As the data in Table 2 illustrates, IT organizations that migrated to HP BladeSystem reduced their annual IT infrastructure cost per user by 24.9%. The greatest areas of savings included facilities (56.8%), server hardware (49.5%), network hardware (49.5%), and power and cooling (37.5%). Figure 2 presents the relative reduction in various datacenter costs facilities, hardware, software, power and cooling, etc. that survey participants experienced after implementing bladed infrastructures.

TABLE 2
IT Infrastructure Expense: Annual Cost per User
% of Additional Savings from Virtualizing Blades 26 23 10 0 0 26 0 17%

Traditional Environment ($) Server hardware Software* Facilities Network hardware Power and cooling Management tools* Storage Total 49 25 26 20 6 8 159 293

Blade Environment ($) 25 21 11 10 4 6 143 220

Savings ($) 24 4 15 10 2 2 16 73

% Savings 50 15 57 50 38 24 10 25

*Note: The software category includes license and maintenance fees for infrastructure software (exclusive of management tools), application development, collaboration, business applications, etc. The management tools category includes infrastructure software to manage (deploy, configure, monitor, etc.) systems, virtual environments, network, and storage.
Source: IDC, 2011

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FIGURE 2
IT Savings from Blade Infrastructure

Facilities

Network hardware
Server hardware

Power and cooling

Management tools
"I could only put in about 8 servers per rack because of power constraints. So I was consuming about 20 racks total. I was essentially going to have to double my physical footprint at my other datacenter. This was going to be very, very costly, increasing operational costs by another $260,000 per year. Two years ago, I switched to HP ProLiant BL490c blades. That was the technology that was going to allow me to build the plant with the horsepower necessary to ensure better performance." Manager of Infrastructure, Healthcare Provider

Sof tware Storage 0 10 20 30 40 (% savings) 50 60

Source: IDC, 2011

Virtualization Further Enhances IT Efficiencies

IDC has always believed that blades represent an excellent consolidation platform, but they also excel in virtualized environments. IT organizations running virtualization on blades were able to further reduce IT infrastructure, which resulted in additional cost savings of 17.1% (refer back to Table 2). As an increasing number of VMs are deployed per physical server blade, IT is able to further reduce hardware expenditure, as well as licensing fees and the cost of tools, by purchasing the appropriate amount of system software for the reduced hardware footprint.
Enhanced Connectivity

The blade platform is an integrated architecture that matches well with the goals of virtualization, yet the running of a higher number of virtual machines on physical servers can introduce challenges in the form of I/O bottlenecks. To eliminate these obstacles, HP Virtual Connect enables up to four FlexNICs per physical NIC port. Because only one HP Virtual Connect interconnect module is needed for four FlexNICs, compared with the four switches that would have been previously required, blade infrastructure costs and support burden are reduced. Customers can ensure more efficient use of networking resources through the HP Virtual Connect capability of throttling bandwidth at increments of up to 100MB, matching the application to the appropriate amount of bandwidth. With HP Virtual Connect, we avoid having a lot of switches, a lot of cables, and a lot of additional gear. But it more or less pays for itself within the first year of implementation. I'm avoiding a whole lot of cabling and a whole lot of external switches to then switch back into the chassis themselves. For a fully loaded chassis, I think we're avoiding 23 switches that would cost about $500 each. Vice President, Sales and Operations, Opus Interactive

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Blade Management Tools Drive IT Staff Productivity

Figure 3 examines how customers that migrated to a blade environment were able to increase the efficiency of their IT staff. The wire-once, ready-to-deploy nature of blades reduced the physical deployment by 75.1% and system setup and configuration by 46.1%. The ongoing operations of IT also become more efficient as problem management was reduced by 52.3% and maintenance was reduced by 49.4%.

FIGURE 3
IT Staff Reduction per Task

Server deployment (physical)

Problem management
Maintenance

System setup and conf iguration

Change management

Network management Incident management 0 10 20 30 40 50 60 (% improvement) 70 80

Source: IDC, 2011

"The average full chassis that we've got pulls about 815 amps of power running full load. If I were to take those same 16 servers and put them in rack and stack, I'd need almost double the amount of power. I'd need close to 30-plus amps to power all of it. So I've got about half of the power consumption." Vice President, Sales and Operations, Service Provider

Blade platforms, such as the HP BladeSystem c-Class, which utilizes HP Insight Management software, help IT organizations reduce their overall server management complexity and respond more efficiently to change. HP Insight Management is a suite of management tools designed to enable simple and reliable provisioning, monitoring, and control of the HP BladeSystem infrastructure. Because key management processes are automated, less staff time is required. This ensures that IT resources are focused on more value-added initiatives. Elements of HP Insight Software include: HP Systems Insight Manager (SIM) provides a single, integrated view of all infrastructure resources and delivers core management services for discovery, monitoring, and control. HP Insight Control software provides comprehensive server health monitoring, imaging, power management, remote management, and vulnerability management.

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 HP Matrix Operating Environment provides advanced management capabilities, enabling physical and virtual resources to be managed in exactly the same way and automated resource provisioning through a self-service portal.
Power and Cooling

HP BladeSystem incorporates HP Thermal Logic technology to help HP customers achieve greater power and cooling efficiencies in their IT environments. HP Thermal Logic includes technologies from system to enclosure, enables server infrastructures to pool and share power and cooling resources, and then utilizes management to efficiently deliver those resources based on the performance level required. The HP BladeSystem chassis utilizes Platinum Power supplies with 94% efficiency for increased energy efficiency. Additionally, the HP Dynamic Power Saver mode enables more efficient use of power in the server blade enclosure. During periods of low server utilization, the HP Dynamic Power Saver places power supplies in standby mode, incrementally activating them to deliver the required power as demand increases. HP Power Regulator, built for ProLiant, dynamically changes each server's power consumption to match the needed processing horsepower, thus reducing power consumption automatically during periods of low utilization. A datacenter is built with a specific maximum power capacity, and power and cooling not floor or rack space is often the limiting factor in determining the compute power in any given facility. Unfortunately, power in the datacenter is rarely efficiently allocated, and the full power budget envelope is seldom used. HP Dynamic Power Capping enables IT to allocate power to individual servers based on actual usage versus faceplate estimates, thereby reclaiming unused energy in the datacenter.

Blades Reduce IT Risk and Increase Availability

Today, the availability of IT applications and services is critical to the business; unplanned downtime of IT can lead to the interruption of business operations and even loss of revenue. This ROI analysis demonstrates how blade environments can reduce IT risk by lowering the number of server incidents as well as the time needed to bring the system back online. As Figure 4 illustrates, customers involved in this study reported that bladed infrastructures, versus traditional environments, reduced server incidents per year by over 36%. Virtualizing OS images on bladed infrastructures reduced the number of incidents even more. Running virtualized OS images on blades reduced by over 76% the average number of annual server incidents experienced in a traditional environment. It likewise reduced server downtime hours by over 84%. Overall migration to HP BladeSystem generated benefits of over $13,000 per 100 users annually.

"We are in a high-availability configuration and, by far, more stable with the blades. With a traditional server, we used to schedule about 5 hours per year for complete blackouts. And now the blades have none. We do suffer unplanned downtime 34 times per year for traditional servers, but no unplanned [downtime] for the blades." Director of IT, Excelled Sheepskin & Leather Coat Corp.

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FIGURE 4
Risk Reduction of Key Performance Indicators

90 80 70 60 50 40 30 20 10 0 Server incidents per year Hours needed to f ix the problem (MTTR) Server downtime Downtime hours hours per year per user per year

Traditional Blades

Blades with virtualization

Source: IDC, 2011

Blade Environments Deliver Improved ROI

IDC interviewed eight companies, referred by HP, that had implemented HP BladeSystem to record their results. IDC used the following three-step method for conducting the ROI analysis: Gathered quantitative benefit information during the interviews using a before-and-after assessment. In this study, the benefits included IT staff productivity increase, user productivity increase, and IT cost reduction. Created a complete investment (three-year total cost analysis) profile based on the interviews. Investments go beyond just the solution's hardware and software. IT departments spent staff time installing and configuring the new solution, removing old equipment and/or software, and then maintaining the new solution over three years. Ancillary costs directly related to the solution, such as user input to planning, outsourced installation, configuration or maintenance costs, and IT staff or user training, are also included in the analysis. Calculated the ROI and payback period. IDC conducted a depreciated cash flow analysis of the benefits and investments over a three-year period. Because the full benefits of the solution are not available during the deployment period, IDC prorates the benefits on a monthly basis and subtracts the appropriate amount for the deployment time from the first-year savings.

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IDC uses a discounted cash flow methodology to calculate the ROI and payback period. ROI is the ratio of the net present value (NPV) and discounted investment. Payback period is the point at which cumulative benefits equal the initial investment. IDC uses a standard 12% discount factor, which allows for risk and the missed opportunity cost that could have been realized using that capital. The three-year ROI analysis shows that on average, the companies in this study spent $8,074 per 100 users deploying and maintaining HP BladeSystem and received $28,326 per 100 users in benefits for an NPV of $20,252. The companies saw payback in 10.2 months and achieved an ROI of 251% (see Table 3 and Figure 5).

TABLE 3
Three-Year ROI Analysis per 100 Users
Benefit Investment Net present value (NPV) ROI = NPV/investment Payback Discount factor
Source: IDC, 2011

$28,326 $8,074 $20,252 251% 10.2 months 12%

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FIGURE 5
Three-Year Pro Forma Bladed Infrastructure Investment and Returns

Definitions and Notes: All values are per year (12 months). All values are per 100 connected users. We define connected users as the number of users actively linked to and interacting on the infrastructure network. Pro forma assumes that the initial cost of the solution occurs as lump sum outflow in year zero. The Hardware Purchase category sums the acquisition expenditure on hardware (servers, storage, network, etc.). The Implementation category sums the time for staff to learn and implement new technology. The Software License/Maint. category sums the net reduction (increase) in fees for software licensing and provider's maintenance and support. The End-User Productivity category sums the reduction in user's lost productivity due to system/application outage and unavailability. The Network Equipment category sums the reduction in requirement for adding switches and cabling network equipment given consolidation of server infrastructure. The Storage category sums the reduction in requirement for adding storage capacity to handle demand given higher utilization of storage capacity. The Facilities Cost category sums the reduction in cost for power and cooling, datacenter space, etc. The Hardware Upgrade category sums the reduction in requirement for adding server capacity to handle workload. The Administer Datacenter category sums the reduction in IT staff time to manage and implement all aspects of datacenter operations.
Source: IDC, 2011

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CHALLENGES/OPPORTUNI TIES
While the study demonstrates the improved ROI, IDC acknowledges that blade vendors still face some challenges. Identifying expenses may not always be as straightforward in IT organizations as in other business units. Up-front costs, such as the cost of hardware or software licenses, are tangible and relatively easy to see. However, some abstract costs, such as hardware cabling costs, facilities charges, and personnel hours needed to configure and manage the environment, are often not accounted for with precision. A more sophisticated ROI analysis is required to demonstrate the full benefits of and cost savings from blade environments. A 2010 IDC study, IDC Blade Market Survey: The Dynamic Platform for the Future Datacenter, shows how the potential obstacles to blade deployments have decreased in recent years. The current generations of blade technologies have vastly improved over the initial offerings of the early 2000s. Additionally, customers have a better understanding of the technology, and the improved services from vendors have made it easier to deploy blades into IT environments. However, the top-ranking obstacles remain the perceived price premium over other server form factors and organizational issues such as internal or management resistance to the platform. This finding shows that HP and other blade vendors face a number of nontechnical challenges as they seek to deliver blade-based solutions. IDC market data indicates that blades represent 13.8% of the total worldwide server investment. To drive further blade adoption, vendors will need to convey the message of how blades deliver a better total cost of ownership than traditional environments.

CONCLUSION
This IDC ROI analysis indicates that customers can achieve considerable cost savings and improve the agility of their infrastructure by migrating to an HP BladeSystem environment. The companies in this study were able to pay back their initial investment in less than a year, a significant factor given the financial constraints most IT organizations are facing. IDC believes that the datacenter of the future will require IT organizations to increase the utilization of their hardware, simplify their management, and improve the energy efficiency of servers. By leveraging HP BladeSystem and technologies such as HP Insight Control, HP Virtual Connect, and HP Thermal Logic, customers will be able to reduce their operating expenses and improve the flexibility of their IT environment. As a result, a greater portion of IT budget and staff time can be allocated to new initiatives that drive value back to the business.

Copyright Notice
External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2012 IDC. Reproduction without written permission is completely forbidden.

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