Good recession for virtualization dispels cloud ascendancy

Although cloud computing is flavor of the month and lends itself to the straitened economic circumstances for those organizations brave enough to radically rethink their IT architecture, virtualization could be a better bet in the immediate future. Consultancy, McKinsey goes even further and posits the notion that cloud computing savings potentially don't exist and, worse, could end up costing more. Instead, it reckons that focusing on server virtualization is the way forward.

According to its figures, which are based on usage of Amazon's Web Services, outsourcing a typical corporate data centre to the cloud would increase the total cost of data centre functions to US$366 per unit of computing output compared to US$150 per month for a conventional data centre. This is where virtualization comes in. McKinsey thinks server utilization can routinely be boosted by 18% using virtualization and improvements of as much as 35% are possible thereby bringing down the cost of data centre functions even further. Although McKinsey appears to have ignored some of the fringe benefits of cloud computing, such as reduced requirement for on-desk/in-office computing power, it's hard to argue with the figures. McKinsey adds that the cost stratification of cloud computing services is similar to that seen in the mobile phone sector. Namely, you end up paying more to the service provider than the value of the device over time.

I don't think this means that the cloud concept has broken, just that there are readily identifiable savings to be made through increased virtualization and improving utilization rates of existing capacity. To write off cloud computing, you have to subtract from any argument issues such as the increased cost of capital to organizations investing in hardware and software versus the fixed, operational expenditure of the cloud model. To my mind, these figures can still stack up but it is very much a case of horses for courses.

Nevertheless, it is clear that virtualization is having something of a good recession. Analyst firm Gartner reckons the EMEA market for virtualization is likely to be 'very robust' this year and software revenue in the region could rise by 55% this year. Globally, the analyst firm thinks revenue from virtualization software will grow by 43% to hit US$2.7bn - up from US$1.9bn last year.

However, not everyone is unreservedly singing virtualization's praises. Burton Group analyst Jack Santos reckons that some organizations are ignoring the risks of virtualization in a headlong dash to reap its rewards. Santos highlights that few current virtualization tools integrate with general data centre management software such as Tivoli and he expects that to be the case for some time. "Middle East peace, at this stage, will be easier than getting vendors to play," he told Techworld.

Stewart Baines
Stewart Baines

I've been writing about technology for nearly 20 years, including editing industry magazines Connect and Communications International. In 2002 I co-founded Futurity Media with Anthony Plewes. My focus in Futurity Media is in emerging technologies, social media and future gazing. As a graduate of philosophy & science, I have studied futurology & foresight to the post-grad level.