Key Takeaways
- Consolidating physical servers through virtualization can save $2,500 or more per machine per year.
- But virtualization is not a one-size-fits-all approach. It’s not great for highly sensitive industries or situations that require high service levels.
- Still, virtualization can delay capital expenditures (i.e., investing in new hardware) by making use of the existing servers that hosts already use.
Virtualizing servers can save U.S. web hosts from $2,500 to as much as $4,500 per 1U server annually, according to Energy Star and the Uptime Institute.
Since traditional data center servers typically operate at 10%-15% utilization, the majority of the compute capacity is idle, which means hosts are paying for unused space.
For providers that own their infrastructure — whether that’s colocation, private cloud, or on-prem — virtualization could be a low-risk path to optimize capacity.
Where the Savings Come From
Virtualization boosts usage to 80% and cuts hardware, licensing, and cooling costs by up to 75%, according to a VMware case study by ENERGY STAR. That translates to $2,500:
- $500 in energy
- $500 in OS licensing
- $1,500 in hardware maintenance
When factoring in indirect costs, the total savings can reach up to $4,500 per server per year.
| 3 Year Total Cost of Ownership | |||
|---|---|---|---|
| Direct Costs | Without VMware | With VMware | Savings |
| VMware Services | $0 | $17,000 | -$17,000 |
| VMware Software & Support | $0 | $38,938 | -$38,938 |
| Third Party Software & Support | $0 | $0 | $0 |
| Server Hardware | $229,500 | $27,000 | $202,500 |
| Network Costs | $49,500 | $18,000 | $31,500 |
| SAN Costs | $0 | $30,000 | -$30,000 |
| Total Direct Costs | $279,000 | $130,938 | $148,063 |
| Indirect Costs | Without VMware | With VMware | Savings |
| Data Center | $136,823 | $16,965 | $119,858 |
| Server Provisioning | $11,745 | $1,980 | $9,765 |
| Server Administration | $50,760 | $55,080 | -$4,320 |
| Procurement | $8,750 | $750 | $8,000 |
| Total Indirect Costs | $208,078 | $74,775 | $133,303 |
| Total Cost of Ownership | $487,078 | $205,712 | $281,366 |
These aren’t just guestimations: Another case study from Southwestern Illinois College (Table 1) found that replacing 35 physical servers with four virtualized hosts saved $280,000 over three years.
Cisco also estimates that traditional server deployment costs about $7,000, while a virtualized server costs around $2,000.
Where Virtualization Still Falls Short
Virtualization is not a one-size-fits-all solution. Even Energy Star warns that servers handling regulatory-sensitive data or ultra-high service levels are not ideal candidates.
Academic research also shows that real-time, high-frequency workloads can perform poorly under virtualization (though container-based virtualization often performs better).
Still, Energy Star emphasizes that for the majority of operations, ROI is fast, often within the first two years.
And if your clients mostly run static websites, brochureware, WordPress, or seasonal eCommerce, you’re in good hands.
Virtualization As a Middle Ground
The biggest benefit of tools like VMware and other hypervisors is that they allow providers to customize and optimize their infrastructure without migrating fully to the cloud.
This is a huge draw right now since the market is currently at a point where many providers and their clients are dealing with a heavy bout of cloud anxiety, mainly about rising cloud costs and vendor lock-in.
But certain workloads prove that virtualization deserves some consideration.
It also helps on the environmental side, which hosting industry folk know is a rising concern for clients and regulators alike.
So as ESG metrics become more commonplace in sensitive industries, virtualization could give providers a leg up in certain markets.
In fact, organizations with consistently high ESG scores had 4.7x larger operating margins and saw 84% lower carbon emissions after migrating to IaaS.
The consumer expectation is changing, too, with 28% of U.S. internet users saying they’d support businesses with strong environmental practices.
Ultimately, virtualization helps providers use what they already have and save some cash in the long run. Just make sure you’ve got the right stack for it.
