December 30, 2008, 3:43 PM — Damn the torpedoes! Full speed ahead! Admiral David Farragut's famous American Civil War exclamation could be the rallying cry of the IT executives behind server and virtualization efforts. Rather than cutting and running as they face deepening economic woes, these IT professionals are pushing harder to complete their projects.
It's easy to understand why: Many server and virtualization projects deliver the kinds of cost savings that businesses crave right now. "These projects affect costs... and they affect revenue," says Dennis Smith, first vice president of advanced engineering at The Bank of New York Mellon Corp.
The slowing economy has ratcheted up management's sense of urgency to get those projects done. "Businesses are saying, 'How much faster can you do this, and how much more cost savings can you wring out if we give you more power to do this sooner?'" says James Staten, an analyst at Forrester Research Inc.
Perhaps that's why Forecast Survey respondents said their No. 1 and No. 2 increases in spending in 2009 will be in servers and virtualization technologies, respectively. Those projects are the second- and third-highest priorities, right behind security.
Rockwell Bonecutter, data center technology and operations practice lead at Accenture Ltd., works with IT executives at many Fortune 100 companies. "I haven't seen a significant pullback on refresh spending," he says, although new projects are getting more scrutiny -- particularly capital-intensive ones.
Rather than simply reacting to the recession, some IT executives are leveraging it to push virtualization projects deeper into the business -- and to drive harder bargains with vendors. (Read about managing the complexities of storage virtualization.)
With the increased emphasis on cost savings and the bottom line, IT organizations that have begun virtualization projects and produced results have unprecedented clout to deliver those savings in areas of the business that have resisted the trend thus far. "This is a great time to take advantage of the situation in the economy to let technology do what it is meant to do," says Bonecutter.
Success in consolidation and virtualization is also lowering resistance to change. "We're seeing a lot of interest from other parts of the organization to leverage IT in ways they haven't in the past," says Matthew Clark, director of IT at San Diego-based Qualcomm Inc. "They're asking us."
Smith says the economic crisis has technology vendors banging on the doors of his bank -- and cutting deals. "In our space, there are a number of companies that had large orders, and over a weekend, they disappeared. It's a very, very good time [to buy]," he says. While many banks are struggling, Bank of New York Mellon has remained in a relatively good position to take advantage of those deals, he says.
IT bargains aren't limited to the financial services sector, says Eric Lindgren, CIO at PerkinElmer Inc., a life sciences and industrial technology company in Wellesley, Mass. "The number of vendors pushing discounts has really gotten extreme," he says, and the number of vendor visits to his offices increased sharply as the year wound down.
Scottrade Inc. is one of the few financial services firms that has benefitted from the credit crisis. As the masses have alternately rushed into and out of the market, the St. Louis-based online brokerage has operated one of the turnstiles through which all of that traffic has passed. "We are seeing record days in our business," says CIO Ian Patterson.
During the tumult, Scottrade took in a huge volume of fees on those trades -- and survived unprecedented stresses on its server infrastructure.
At one point, programmed trading on a single financial firm's stock drove quote-system volatility to the point where prices were changing 600 times per second. Transaction volumes in the data center spiked to 5.5Gbit/sec., says Patterson.
"People were complaining about the markets and the speed. It was insane. I don't think we would have survived if we didn't have some of the hardware that's out there now."
Because it had virtualized its front-end servers and used server blades, Scottrade was able to quickly add capacity to keep up with demand. It's going full speed ahead in 2009 with a planned backup data center and has already begun ordering servers.
Patterson plans to scale up the servers running the company's midtier quoting-system infrastructure -- and its front-end servers. The new servers are fully loaded with the maximum processor core and memory configurations and the fastest processors.
That trend goes beyond online brokerages, says IDC analyst Michelle Bailey. "Virtualization tends to drive a scale-up strategy on the hardware side," she says, as businesses try to reduce the total number of physical machines and gain efficiencies by maximizing the number of virtual machines that can be consolidated onto a single physical server.
To reduce power and cooling loads in the data center, Scottrade will continue to buy PowerEdge servers from Dell Inc. that feature energy-saving technologies such as variable-speed fans, high-efficiency power supplies and low-voltage processors. While that might reduce the data center's carbon footprint, being green "is the flip side of what we're doing anyway," Patterson says. Reducing the cooling and power consumption "goes right to my bottom line."
While Scottrade uses embedded VMware virtualization software on its blade servers for rapid deployment on the front end, hypervisors use too much overhead in the midtier transaction-processing environment. With blades, Patterson says, "the backplane isn't fast enough to keep up." Instead, Scottrade uses "the hottest, biggest" 1U and 2U rack-mounted x86-class servers it can find.
Other operations are also moving toward buying fully loaded server platforms to host virtual machines in 2009. Dan Blanchard, vice president of enterprise operations at Marriott International Inc. in Bethesda, Md., says his company remains committed to rolling out a remote-recovery data center this year. Virtual servers will be key to Marriott's fail-over strategy. "We're definitely going with high-end systems. That way we can fit more virtual platforms on a single box," Blanchard says.
Proceed With Caution
But many organizations fear that capital-intensive projects might be affected if the economy worsens. At PerkinElmer, Lindgren has a major effort under way to consolidate 17 SAP ERP programs onto Itanium systems starting in early 2009. The equipment has already been purchased. "Thankfully, that one is ahead of the curve," Lindgren says.
In some cases, IT organizations are struggling to fund server consolidation efforts. "It's a 'capital-light' environment right now," but some IT organizations are using server refresh budgets to bootstrap virtualization efforts, says Bonecutter.
IT can harness refresh dollars to gain savings quickly by rationalizing the server environment, reducing not just the number of physical servers but the total number of server instances as well. IT organizations that do that, Bonecutter says, can make virtualization efforts a "self-funding exercise."
Many organizations haven't done that in the first phase of their virtualization rollouts, he notes, adding that rationalizing server environments will be a big priority for his clients this year.
Lindgren is also planning ahead for the possibility of cutbacks in both ongoing projects and operating budgets, although so far, none are expected. "We're buying portions of things over a three-month period so that if the economy changes, we can react quicker," he says.
If the economy worsens, many companies are likely to push IT projects out for a few quarters, says Bailey.
IT organizations are also looking for ways to reduce upfront capital outlays. "[The economy] has customers thinking of more leasing and hosting options," Bailey says.
At Scottrade, Patterson says the new data center will be hosted at a collocation facility. Lindgren also plans to rely on consultants and third-party service providers, just in case a rapid pullback is called for. As he says, "It's not a great time to be taking on a lot of risk."