Ok – I will jump from philosophical and business blog to a bit more technology/$$ blog. Technology and $$ – what? Let me explain. part of my trip to Sydney, I met with a Citrix customer – a large local insurance provider. They use Presentation Server for selective client/server applications for their remote users in their branch offices. I say a very typical enterprise Citrix customer/user. As part of my meeting, I had two interesting discussions with the customer – one about their overall desktop and application delivery strategy and the other one about 64-bit and financial implications. I will write another blog post for the discussion I had regarding application delivery strategy.
This post is about 64-bit technologies. In the room, we had IT managers, Desktop strategists and Citrix architects. There were contemplating 64-bit technologies. They have heard a lot about the benefits of 64-bit technologies when it comes to Terminal Services or CPS; however, they were stuck in a simple loop –
you adopt 64-bit technologies, cost of server hardware increases in order to support more users per server pretty linearly – so why do I move up to 64-bit for my Citrix server?
Lets do some math.
Just to take an example, if one spends say $5K per server to support 50 users per server with 32-bit, it means that they will spend a total of about $100 per concurrent user.
A server than can support 3-4 times more users per server, especially for applications that are memory bound (which was the case for most of the applications in the case of this customer), you will probably need to get a much bigger server with much more memory making your total capital expense per server to be about $20K for supporting 200 concurrent users. In other words about $100 per concurrent users.
ME THE MONEY! (It was tempting to put that in – wont happen again in this blog)
Of course the finance person in the room say – where are my savings? And, it is a legit question because if you are looking for savings to occur in capital costs they may be marginal, if any.
So, I asked them a simple question – how do they calculate their operating costs? They told me that they use a simple formula as a factor of capital costs. There lies the problem for adoption of 64-bit technologies.
What the problem?
Did you know that you spend about $7 in operating expenses for ever $1 of capital expenses in 32-bit technologies. And, you spend about a quarter/year on power for every $1 for capital expenses. These figures come from IDC who conduct a worldwide analysis of actual customer expenses for server infrastructure.
So, when IT budgets are being created they are created with the same formulas. In the meantime, the technology is changing very rapidly. Virtual Machines and 64-bit technologies are helping consolidate the server infrastructure in the data center for the primary reason for cutting down on operating costs. Virtual Machines have a similar argument – if you simply used VMs to cut down on capital costs, you will only get a benefit of around 15-20%, according to a study done by an Australian ASP and Data Center Services provider. The real savings come from significant shrinkage of operating expenses.
However, this is hard for financial departments to understand because there are no benchmarks or industry analyst studies for them to understand this. While this particular customer understood the value and they are going to re-evaluate the situation; however, it is an added complexity in 64-bit technology adoption that cannot be ignored.
What is the solution?
Like every other technology, 64-bit will go through its own adoption curve – where IT organizations that are more strategic and can manage risks of adopting new technologies more effectively will be able to adopt it earlier. As a result, folks like IDC will publish their operating expense factors to be much less than 7 times, which will kick-off a much broader adoption by majority.
So, what should you do? recommendation for consodlidation technologies like 64-bit and VMs is to adopt it where it makes sense, so you do not get a shock and pressure from your finance teams a year or two from now when they cut down your operaitng expense budgets due to revised IDC figures. Those operating expense budgets are due for revision – be prepared to handle them by adopting the technologies in time.
Are others doing it?
Within Citrix customer base, we have a very high interest in the adoption of 64-bit technologies (over 80% intend to adopt in the next 12 months) and we have 10% of our large customer base already using 64-bit technologies succesfully.
Bottom line - look beyond the capital expnses for 64-bit. Even though you are not worried about operating expenses today; however, It is the future and we need to embrace it. The sooner you do the better !