Dell’s CIO: Virtualisation Saved Us £100 Million

We know Dell enthusiastically sells virtualisation with its servers – so it’s no surprise to find the company is also a big big user of the technology. It reckons it’s saved $150 million (£98 million) in a single year, and cut its data centres massively.

The details are interesting – and include a green benefit as well as cash savings, we found during a talk with the company’s CIO, Robin Johnson.

Maintenance drains money from innovation

“For most companies, up to eighty percent of the IT budget is spent just keeping the lights on,” said Johnson. “If you take that money out of IT, then you stop innovation.” The more money you spend keeping old tech going, the less you have available for new projects, in other words.

The challenge is how to change the mix, and change the spending: “There’s a massive fixed cost in IT, but we have to push more spend to discretionary or project spending.”

It helps that chief executive Michael Dell is behind the move. He wants the company to run efficiently, and is leading a big effort to make it greener, said Johnson.

Dell sells 85 percent of its kit to business users (and only 15 percent to consumers), so most of its customers can benefit from virtualisation. By establishing good practices for virtualisation within the company, Dell established the best options to sell to customers, said Johnson: “It’s not exactly eating our own dog food – but we serve up the stuff we’d be prepared to eat at home.”

Dell operates in 90 countries and has multiple data centres. Within those data centres the company has been steadily eliminating older mainframes and replacing them with i86-based Dell servers, all virtualised for the most efficient usage.

And Dell’s IT operation does pay Dell’s sales wing for the servers, said Johnson, so the money savings it has made are real. It currently spends a pretty lean 1.74 percent of its revenue on its own IT – including all aspects of support and development

“Virtualisation is the methodology we use to change the cost-dynamics of our data centre. We’ve tested and found the right ratios of physical servers to virtual machines,” he said. “And the methodology we use in IT is the methodology we sell to our customers.”

Johnson is talking to the press for two reasons.

Firstly, Dell is keen to underline its credentials as a data centre provider, alongside more traditional vendors such as IBM and Hewlett-Packard. Both those companies make pitches around consolidation, for instance, HP’s promise to “cut information gridlock“.  Indeed he makes a case for Dell providing a more focused offering on virtualised servers.

HP has criticised IBM for still selling mainframes – and HP is equally open to this criticism, as its EDS support arm still buys mainframes for customers.

Dell is not conflicted, said Johnson: “We believe x86 is the most efficient platform. If you look at virtualisation, that changes the cost-paradigm, and it’s not happening on proprietary stacks.” The company has only been selling servers since 1996, and its own IT department is one of its most impressive users.

The second reason he wants to talk is because Dell crossed a threshold: Instead of spending eighty percent of its budget on maintenance, that figure is down to fifty percent, freeing budget for new efforts.