With volumes of information spiralling out of control and much the same happening to data centre costs, not to mention the environmental impact of the rising number of data centres, companies face some major issues in the coming years. These range from cost control pressures through power consumption issues (in their own right and linked to green strategies), floor space efficiency, server optimisation and overall business productivity at the corporate, departmental and individual user levels.
Virtualisation implementation in EMEA is growing, but what is driving these virtualisation strategies, how focused and well developed are they and what measures are in place to assess their success? How confident are companies that their virtualization strategies will deliver their objectives and within what timescales? And of course, how are the leading organisations in different countries approaching the concept of virtualization? In order to shed more light on this HP commissioned Coleman Parkes Research to conduct a major piece of market research. 501 interviews with CIOs and IT directors of major organisations were carried out within 17 countries throughout July and August 2008. Those interviewed were in the following countries: Austria, Belgium, France, Finland, Germany, Italy, Portugal, Denmark, Netherlands, Spain, Switzerland, United Kingdom, Poland, Russia, South Africa, Norway and Sweden. The results make fascinating reading.
The survey found that there is widespread and growing implementation of virtualisation in EMEA. 56 percent of all companies surveyed have already implemented virtualization in their businesses and 21 percent are looking to implement it in the near future. In addition, the adoption of virtualisation looks set to grow rapidly over the next three years and by 2011 respondents expect to have virtualized 49 percent of their technology environments. With this rapid take up there is no doubt that organisations are seeing some benefits of virtualisation including cost reduction, increased efficiency, business agility and competitive advantage.
However, 55 percent of respondents regard virtualisation as a technology and not a business tool indicating that many are not yet realising virtualisation's benefits outside of reducing costs and driving data centre efficiencies. One of the reasons that CIOs are focused on short term benefits is that their level of confidence in virtualisation to deliver real benefits is not that high. This can be partly due to that fact that virtualisation is still in its early stages but also that organisations are facing several challenges ahead, most notably in respect of infrastructure and capacity planning as well as gaining the support and approval of corporate management.
Only when companies stop taking a short term, tactical approach and recognise the long term benefits of virtualization and its potential to be a key competitive weapon will they be able to take advantage of the more efficient, cost effective infrastructure it allows. Ultimately, virtualisation should support business performance and allow businesses to spend more on innovation and less on maintenance.
High adoption rates in EMEA driven by the need to manage data centre pressures and a growing data volume
Analysis of the sample group shows that there is a high level of current and predicted future adoption of virtualisation across Europe. 56 percent of companies interviewed have already implemented virtualized technologies, with an additional 21 percent planning to employ them over the next three years. This level of interest in a relatively new technology indicates the recognition amongst businesses of the need to make changes to their data centres without requiring large capital expenditure.
Breaking the results down by country highlights some interesting differences; companies in Portugal (76 percent), Poland (72 percent) and Norway (71 percent) are most likely to have implemented virtualization to some extent whilst firms in South Africa (33 percent), Switzerland (44 percent) and Finland (46 percent) are least likely. This can be attributed to the general technology infrastructure within individual countries as some will be more adaptable and open to change than others.
However, it could also be due to the principle industries within each country. Countries with a greater proportion of manufacturing and/or utilities, telcommunications and media based firms will also have higher levels of adoption over the next three years. These sectors are fast-moving and technology reliant and as such are more likely to be early adopters of new solutions. However, countries such as the UK that have a greater proportion of financial services businesses will have an average to low rate of adoption, as demonstrated by the UK's three year total of 65 percent. This could be down to the financial services industry's need for security and low levels of risk, resulting in a less flexible, more rigid technology nfrastructure.
Retail/wholesale companies are lagging behind other industries, with only half of companies having implemented virtualization to date and just 19 percent planning a move to use the technology. This low level could be attributed to the perceived lack of need for innovative enterprise technologies within this sector, potentially due to the industry viewing virtualisation as a technology and not a business tool.
Key drivers are reduction of operational costs and increased availability
Within the data centre there is clear evidence of the need to maximise ongoing investments and reduce capital expenditure. It seems that many organisations believe that virtualization will provided a "quick fix" solution to meet these needs. However, more worryingly, this may also indicate that companies are moving to use the technology without clear foresight of its long-term implications.
On average respondents identified five main benefits that were driving their move towards virtualisation, the top two being reduction of operational costs and increased availability. This clearly indicates the recognition by business leaders of the importance of virtualization and at the same time provides an initial insight into the tactical implementation approach being used by many. This tactical approach does not allow organisations to take full advantage of virtualisationas a key business tool and limits the impact of the technology on a company. This is exemplified by the fact that only 32 percent consider virtualisationto offers a competitive advantage, yet 48 percent still understand that it can help to increase business agility. Finally, almost half of respondents stated reduced power consumption as a key decision driver, which demonstrates that many organisations now take energy and green issues into account during their business technology decision making.
Taking a closer look at the data at a country level shows some major differences with regard to the main reason for adopting virtualization. Just three countries – the UK, Germany and Austria – had less than 50 percent of organisations cite cost savings as a virtualization driver. The current economic climate may well account for every other country valuing reduced costs as a key benefit of virtualisation.
The data breakdown by country on the increase of business technology delivery as a driver shows even greater polarisation. Finland, Russia and Spain all had approximately 70 percent of respondents claim this as a main benefit, whereas in Portugal, Switzerland and the UK only around 25 percent of organisations believed this to be an important factor. Again, the principle industries within each country can influence these figures as some industries, such as utilities and telecommunications, will place more importance on the improvements in business technology delivery than others, as shown in the table below. Countries with a greater proportion of utilities and telecommunications industries will show higher results in this area.
Achieving and measuring virtualisation return on investment (ROI)
Across the sample as a whole the key methods of measuring ROI for virtualisation are said to be better quality of service and reduced costs of technology provision. Increased sales or profitability is the least used or valuable ROI measure which again indicates that companies are failing to see virtualisation as a core business tool that can help to drive business growth and so help to increase their sales and profitability.
Again there are some significant differences by country with regard to the use of ROI measures for virtualisation. 78 percent of companies undertaking or planning some degree of virtualisation in France cite better quality of service as a measure of ROI, closely followed by companies in Austria and Belgium, but only 28 percent in South Africa and 32 percent in the UK believe this to be an important measure.
The importance of faster delivery of applications to users as a measure of ROI for virtualization varies greatly from country to country, ranging from a very high 75 percent of companies in Norway down to just 5 percent of firms in Italy. The same is true of user satisfaction which is identified as a measure of ROI for virtualization by a very high 63 percent of companies in Germany, but again only 5 percent in Italy and 16 percent in South Africa. Overall, companies in Italy appear much less likely than those in other countries to subject their virtualisation activities to ROI measurement.
Generally, it can be argued that too few core measures are used for measuring the ROI for virtualisation, which would indicate that usage is in its infancy and companies are seeking ways to justify their reasons for using it.
Virtualisation – business tool or technology?
It is of some concern that companies across Europe do not seem particularly convinced of the ability of virtualisation strategies to deliver real business benefits, such as reduced costs, increased efficiency and accelerated business growth. A belief that virtualization will deliver reduced costs was the most popular, achieving a relatively mid range score of 3.6 out of a possible 5, equivalent only to quite confident.
There is little confidence amongst technology leaders that virtualisation will deliver a competitive advantage, demonstrating that it is not currently perceived to be a core business tool. There is little overall variation by country in these results, proving that this perception is widespread across the EMEA market.
It is clear that few companies view virtualisation as a business tool – 55 percent of respondents see it as a technology only. For virtualization to have the biggest impact it has to be treated as a core business tool. At present companies are failing to fully realise the benefits virtualisation can bring to their business and are not maximising its impact. It would therefore appear as though the technology is being implemented to solve short term data centre problems, rather than being used as a long term business strategy.
Here, some significant differences by country can be seen with regard to the proportions viewing virtualisation as a business tool rather than just a technology. For instance, 71 percent of companies in Spain and 64 percent in Portugal see it as a business tool compared with just 28 percent of organisations in Austria, Sweden, Belgium and Poland. Perception of virtualisation as a business or technology tool does not however seem to have any impact on the rate of take up within countries, as all the above countries, apart from Belgium, have a higher than average level of planned and implemented virtualisation adoption. This would indicate that organisations are willing to implement virtualization without realising the true potential of it. One possible outcome is that once companies realise the power of virtualisation, adoption rates will rise even further than the current average of 76 percent.
Key challenges and concerns regarding virtualization
The top concern or challenge with respect to virtualisation, mentioned by 55 percent of all companies, is infrastructure planning, followed closely (52 per cent) by capacity planning.
Overall a significant proportion, but still less than half (46 percent), see putting the right policy and governance in place as a concern, which shows that management and governance of the virtualisation process is regarded as important but not critical.
There are significant differences between countries with regard to all of these concerns and challenges. Companies in Switzerland (80 percent) and Germany (76 percent) are most likely to see infrastructure planning as a challenge whilst those in South Africa, the Netherlands and Denmark (all 32 percent) are the least likely. Russian companies (72 percent) are most concerned about capacity planning whilst those in the UK (29 percent) are least concerned.
The increasing business technology management workload is a widespread concern, but particularly in South Africa (68 percent) and Italy (68 percent). Companies in Germany (61 percent) and Poland (56 percent) are most likely to be concerned about upfront costs, while those in the UK (18 percent), Portugal (20 percent) and Denmark (20 percent) are least worried in this regard.
The range of issues raised makes it difficult to draw specific conclusions for each country. However, in general a company is likely to see between four and five of the issues mentioned as being a challenge or concern, indicating that whilst the importance and value of virtualization is widely recognised, few think the benefits will be easily achieved.
The research indicates that there is strong adoption of virtualisation across Europe with two thirds of companies having implemented or planning to implement it. Despite this, the results suggest that virtualisation is still very much in its infancy and most EMEA CIOs are still uncertain of, or lack confidence, in virtualisation's full potential.
The results also indicate that there is a common acceptance that having a long-term management and governance strategy in place to ensure the success of virtualisation is important. However, this is yet to materialise in most companies.
It is good news that around three-quarters of CIOs see virtualisation as a strategy and not as a tactic. However, a finding that indicates virtualization is still yet to mature is that 55 percent of CIOs still view it solely as a technology rather than a business tool. This means that many are not linking it to broader business benefits outside the data centre. This may limit the ability of virtualisation to create renewable, flexible resources focused on business priorities.
Whilst there is no doubt that virtualisation has a very important and increasing role to play over the next few years in improving levels of technology and data centre efficiency, the fact that more than half of EMEA organisations do not see it as a business tool may limit, or at least slow down, its overall impact and contribution. HP encourages CIOs to rethink virtualisation in terms of business outcomes.
Once businesses start looking at virtualisation from a business outcomes perspective – beyond lowering costs and increasing efficiency – they will be able to unlock the full potential of virtualization in improving business continuity and increasing security of end-user data.