Alex Bakman

Organizations are rapidly consolidating multiple physical servers to virtual environments. There is no debating the cost savings and operational benefits of virtualization. The issues that are now arising as virtualization continues to proliferate are rooted in management and how organizations can gain cost visibility and recover the costs of their virtualization projects. As a result, corporate finance and IT functionalities are moving ever closer together.

In many organizations, the IT department has always been and will continue to be a cost center and an ongoing expense on the balance sheet. Most IT departments simply cannot justify making massive investments in new virtualized data centers without recovering costs from its business units - a reason why chargeback is one of the hottest virtualization topics today.

What organizations quickly realize is that virtualization projects are not inexpensive endeavors. In fact, they can be quite costly, including new server hardware, software, network storage systems, people, processes, and training. However, because of increased IT efficiencies, the ease of adding new virtual machines, and the fact that departments no longer need to purchase their own physical servers, there is a perception that virtualization does not cost them anything and adding new virtual machines is free. Adding a new virtual machine is not free, but how does the IT group convey that to the business units it serves?

Based on process savings, physical space reduction, hardware consolidation, and energy efficiencies, a server virtualization project can produce a manageable return on investment (ROI) if the value of the project can be correctly measured. To gain cost visibility and implement a proper chargeback process in a virtual server environment, IT must be able to accurately determine which business groups are using which shared resources (such as CPU, memory, storage and network) and be able to associate a dollar value to that usage. Driving to a measurable ROI is the success factor for IT.