Are Virtual Machines Free?
Are Virtual Machines free since I can run multiple independent instances of an Operating System in isolation on a single physical server? I can only pay for a physical server once; if I already paid for it, why can’t I consider each Virtual Machine a no-cost server installation?
The uncontrolled installation of perceived free virtual server installations is called virtual machine sprawl—by many accounts is a new epidemic in the datacenter with the advent and rapid adoption of Virtualization. If Virtual Machines are free, how do I pay for additional capacity requirements when I use all existing capacity? This article describes the costs associated with Virtual Machines and two strategies for calculating cost per Virtual Machine. This information can be used to recover hardware and software costs associated with virtualization and can also be used in reports and analyses of projected project costs.
In the mainframe days, Technology departments developed a method to recover technology costs by charging customers for services provided. This method of cost recovery is called the “chargeback”. Chargeback models are not perfect. In fact, Chargeback is often a point of contention within organizations depending on which side of the aisle you are on. For example, IT managers are typically fond of the chargeback model. It’s a way to prevent customers from demanding excessive services without first considering the cost impact. Business managers, however, see chargeback from the other side. Often the cost passed back to the customer includes a margin of profit which is looked at in a negative way because the business manager feels he is being asked to pay for “more” than the actual usage cost. Executive management typically falls in the middle. They like chargeback because independent accounting and performance metrics can be tracked back to individual business units and used as a scorecard. However, Executives struggle with chargeback because it’s “one organization”; the money used for IT capital expenditures is often allocated using an Enterprise strategy (i.e. “Business Unit A” needs a new database server and the money will come from a general IT expenditures account).
Assuming you still want to pursue a chargeback model you will need to figure out how to accurately account for resource usage in the virtual environment that covers actual costs, is perceived by business customers as fair, and also allows enough (profit) to purchase additional capacity and replacement hardware and software in future years. There are two models of Chargeback that work fairly well to recover costs associated with providing Virtual Infrastructure services. I will call these “Simple” and “Complex”.
In the Simple model, the cost per Virtual Machine is calculated as the Virtual Infrastructure is built-out. By totaling the costs associated with physical server hardware purchases, virtualization software licensing, Operating System licensing, storage costs, and any other costs associated with standing up a new virtual machine (i.e. maintenance and personnel costs) and dividing by the number of Virtual Machines that are expected to be supported on the Virtual Infrastructure over its lifetime, you can determine an estimated per Virtual Machine cost. This model is simple and easy to calculate but is largely unfair to customers because it doesn’t account for differences between actual resource usage. For example, Business Unit A uses a single-CPU Virtual Machine with 1GB of RAM and Business Unit B uses a four-CPU Virtual Machine with 8GB or RAM—though, both Business Units are paying the same.
In the Complex model, the cost per Virtual Machine is calculated using actual resource usage information of a Virtual Machine. This model is especially complex in a virtual environment because of the many different ways a Virtual Machine can be configured and deployed. Further, because Virtual Machines are often shuffling around physical servers as capacity requirement change, it’s impossible to use a simple ledger-style Chargeback method. To implement a fair and balanced Chargeback model using the Complex model, the use of Chargeback tools (VMware Chargeback and VKernel Chargeback) purpose-built for virtualization becomes a requirement. The Complex model requires the cost per Virtual Machine to be calculated using the Simple model described above as a first step. Actual CPU, Memory and Storage information is then collected as an additional cost and added to the basic per Virtual Machine cost. By using the complex model a fair and accurate per Virtual Machine cost can be associated to an individual Virtual Machine.
Virtual Machines are not “free”. Each Virtual Machine has hardware costs, software costs, infrastructure costs, personnel costs and other hidden costs (HVAC, Electricity, Datacenter footprint) that are all factors to consider when creating a Virtual Machine.
