Virtualization has become the defining technology of the efficient IT shop. According to industry leader VMWare, some 84 percent of the Fortune 1000 have implemented it, yet analysts say this barely approaches the market potential. IDC estimates that less than one million of the nearly 25 million x86 servers in use today are running virtualization software, and less than five million of the almost halfbillion desktops worldwide use it.

New options, such as entry-level offerings from VMware, and baked-in capabilities from operating system suppliers like Red Hat, Novell and Microsoft, make virtualization affordable for a company of any size. Hence its appeal to solution providers -- whether they cater to the enterprise or to the SMB market.

Beyond Consolidation
Virtualization is perhaps best appreciated for server consolidation, but there are other pluses as well. For example, virtualization makes bringing new servers online so easy and inexpensive that once cost-prohibitive projects are now feasible. Even a solution provider's smallest clients can afford test and development networks and business continuity projects.

To really reap the financial benefits of virtualization, however, every project needs a storage area network (SAN).

"We were doing SANs on an as-needed basis if a customer came to us with a specific situation that justified a SAN," says Alan McDonald, CEO of AllConnected, a virtualization solution provider. "But we didn't strategically align ourselves with SAN vendors until we got into virtualization. That's when we developed a solid SAN strategy and put the engineering resources into it. You can get customers into a starter SAN for about $8,000 or so, then move up to largerscale SANs. It's been fantastic for us."

Better still, solution providers such as AllConnected have used virtualization to create entirely new lines of business. (For details, see the "Virtualization Drives New Managed Services" section below.)

Despite the technology's good graces, success with virtualization isn't a given. Smart solution providers know when to apply the technology -- and when not to. The following guidelines will help you make the right choices.

1. Think Small as Well as Big
Virtualization made its mark with enterprise-class server consolidation projects, where 100 physical servers or more could be reduced to 10. The savings of unplugging 90 servers easily paid for new hardware and virtualization software license fees. But even small companies can reap cost benefits when consolidating a couple of dozen physical servers, solution providers say.

"Virtualization reduces the number of servers needed, and that has several by-products, such as reduced costs and streamlined IT," says Thom McAleer, director of business development for ISG Technology, a solution provider working with virtualization for about two years. McAleer's typical consolidation project involves between 20 and 50 servers. "Businesses with only 100 employees are finding a lot of benefit in consolidating servers," he says. "If they have only one or two IT people, fewer servers free them up for more strategic work, rather than rolling out new patches and keeping servers current."

Virtualization can also make servers more reliable and secure -- another boon to the smaller customer. "If an application goes down, it won't take the entire server down," says Justin Steinman, Novell's director of product marketing for Linux and Open Platform Solutions.

2. Recommend New Hardware
While it is possible to reprovision existing hardware to make virtualization work, newer servers with more I/O muscle are preferred for hosting many virtual machines. If the only goal is to unplug servers to save money, clients may be unwilling to spring for enough hardware upgrades or adequate storage. That could mean putting most of the company's key applications on a single point of failure.

"When you virtualize, you start putting more eggs into one basket, and if a company has the budget for only one high-end hardware server, then every critical software server ends up running on that device," warns McDonald. "In that case, the implications of a hardware failure are a lot more severe. If they don't get the vision of virtualization, I think we would be doing them disservice."

The ideal time to pitch virtualization, then, is when existing hardware is three to five years old and the customer is beginning a refresh cycle. But even when their servers are mostly younger, customers can often be sold on an upgrade. The return on investment can be so high that it will pay for a couple of high-end servers in a matter of months.

"You can reprovision some of the boxes, but usually you end up refreshing the hardware," says Jim Hardee, vice president of professional services for Agilysys, a virtualization solution provider.

"That's another justification technique. Sometimes you can show that the savings are 35 percent from reprovisioning, but 75 percent with new hardware. Then the upgrade makes sense."

Ingram Micro's virtualization desk can help calculate the savings from projects with and without new hardware (See "Need Help? Call the Virtualization Desk" below.).

3. Tricky Configuration -- It's a Good Thing
Companies running critical applications based on old software versions are ideal for virtualization. "We see virtualization often used for legacy application rehosting -- where older software servers will no longer be supported by the manufacturer," says Jon Busshart, technology solutions engineer at Ingram Micro. "The companies can’t buy a new software infrastructure to run that legacy application, but it is easily brought into a virtualized environment to keep it running."

Virtualization can also help companies affordably build more secure environments. To meet Microsoft's recommended best practices for Exchange Server, for example, companies need to dedicate three or four servers to the job, at least two of which have low utilization. These best practices call for "a front-end server and an edge gateway server on the outside," McDonald says. "The front-end and edge gateway server may be very low on CPU usage. With VMware, we can build those as virtual servers with a lot less cash outlay."

4. Capacity Planning Will Make or Break You
Not every server is a good candidate for virtualization. More importantly, not every virtual machine can play nicely with every other one. "You might have some workloads that are very heavy on memory usage and others that are heavy on CPU. Those work well on one machine because they balance each other off," says Joel Berman, Red Hat's product management director for virtualization. "Or you might have situations where the workloads have different peaks -- as when your orderintake server is busy during one part of the day and manufacturing is busy later. You need to ensure that every system has enough capacity to manage the most demanding workloads."

Conversely, say a physical server is dedicated to a single application and is already near capacity. That server is a poor candidate for shared hardware, although there may be other benefits, such as portability and availability, from converting it to a virtual machine.

These simple examples show the importance of capacity planning. "You really need to do upfront work, particularly around the assessment, discovery and analysis, to ensure the customer will have the payoff," says Hardee of Agilysys.

5. Consider the Playing Field
While VMware remains the market leader, it's no longer alone. Regardless, its market position makes it attractive for a number of reasons, solution providers say. Most customers dabbling in virtualization have used VMware technology and are already comfortable with it. Plus, its tools are mature and well-liked in the industry, and it's investing in its channel, says John Gilmartin, VMware's senior product marketing manager.

The big advantage offered by Red Hat and Novell SUSE Linux Enterprise is that it costs nothing to use the virtualization built into their operating systems. When a customer is running mostly Linux and only a few Windows servers, these are excellent choices. Novell's Steinman further points out that SUSE Linux Enterprise 10 Service Pack 1, released in June, includes the latest updates to the Xen virtualization platform. The new updates include drivers that improve performance for customers running virtual Windows and Linux servers as "paravirtualized guest operating systems" on one piece of hardware. (Paravirtualized means a guest operating system is aware that it's on a virtual machine.)

On the Microsoft front, Virtual Server 2005 R2 SP1 is available as a free download for Windows Server 2003. And Microsoft has promised to release the beta version of Windows Server Virtualization when it ships Longhorn, the next generation of Windows Server.

6. Propose Disaster Recovery for Retired Hardware
A couple of years ago, full-fledged disaster recovery meant owning or leasing a complete set of backup equipment forced to sit relatively idle unless a disaster struck. This was not affordable for many businesses. Virtualization changes all that.

If, after an initial project, the customer retires hardware servers with life still in them, a disaster-recovery project can be a good way to reprovision those servers, says ISG Technology's McAleer. They can even continue to operate in the daily production environment while they provide reserve capacity for their new business-continuity roles. This newfound safety net will make customers happy while increasing your project’s scope and revenue.