Nationwide works to cut its server count by half

Nationwide Mutual Insurance's is on track to reduce its physical count of x86 servers from about 5,000 machines several years ago to 2,500 or so, through the use of VMware's virtualisation software.

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Nationwide Mutual Insurance's is on track to reduce its physical count of x86 servers from about 5,000 machines several years ago to 2,500 or so, through the use of VMware's virtualisation software.

Nationwide estimates that it has saved a total of about $2.2 million in server hardware costs since launching the consolidation effort. Its ratio of virtual systems per physical server is about 13:1 on average, and some boxes are hosting as many as 20 virtual machines. The company says that by reducing its need for more floor space and electrical power, it has been able to put off a datacentre expansion for three years.

Many companies have similarly been able to save large sums of money through virtualisation. But virtualising systems also changes the dynamics of how IT departments provide services to their users, and that is helping to set the stage for something much bigger: cloud computing .

Microsoft CEO Steve Ballmer said in a message to customers this week announcing Windows Azure , the vendor's cloud computing platform, that the IT changes now taking place are "transformational" in nature. Ballmer also made the argument that customers ultimately will want the scalability and flexibility that cloud computing promises.

But convincing end users to adopt both virtualisation and the cloud approach poses some challenges for IT managers.

Before Nationwide's IT staff can move an application or service running on a physical server to a virtual system, it first has to sell the concept to its customers on the business side, said Scott Miggo, vice president of infrastructure engineering at Nationwide Services, the insurer's IT arm.

The users often raise technical questions about proposed virtualisation moves, but Miggo senses a broader underlying concern. "It's almost a sense of ownership," he said. "They feel that they have more control [of physical servers]." There also are worries that problems with another virtual server in a shared environment could bring down the entire machine, according to Miggo.

"What we're trying to do is convince them that with virtualisation, there are all kinds of fail-safes," Miggo said. For instance, Nationwide is using VMware's VMotion tool to quickly move virtual machines to new servers as needed. The insurer also is working with VMware to build a "migration factory" to further speed up that process, he said.

In addition, IT points out that business users share in the cost savings generated by virtualisation. It can cost a business unit about $1,200 per month to run a physical server, Miggo said. Once a system is moved to a virtual environment, that cost is reduced by half. Nationwide has reduced the number of its physical servers to 3,500 thus far, and it hopes to remove another 800 over the next year.

Providers of cloud computing services see corporate adoption of virtualisation underpinning the eventual acceptance of cloud offerings. They face the same kinds of questions about performance and reliability that Miggo must answer at Nationwide.

Ballmer's message acknowledged as much and said that some users - financial services firms, in particular - may want to limit their use of the cloud and keep customer records in their own datacentres because of security concerns - at least initially.

Miggo said he would be interested in working on a proof-of-concept project in a cloud environment, and perhaps using cloud-based systems for testing and development work. But he isn't convinced that cloud providers can deliver service- and operational-level agreements with the 24/7 reliability required by production applications. "I'm not too sure anybody can tell me that," he said.

In addition to addressing the reliability concerns, cloud providers will have to convince users that running applications via the web is cost-effective. Tony Iams, a senior analyst at Ideas International Ltd. in Rye Brooke, NY, said users will want to have a good idea of their resource needs to model cloud costs that could include fees for storage, CPU and I/O usage. The potential business costs of a service outage will also have to be factored in, Iams said.

IDC analyst Frank Gens said that for a company the size of Nationwide, taking a guarded view on cloud services makes sense. Although software-as-a-service offerings are well established in some technology areas, such as CRM , Gens thinks it will be another 18 to 24 months before a large number of highly dependable cloud providers emerge.

He said that early entrants, such as Amazon.com and Google, "are still learning about service-level agreements, the sort of things that are commonplace in the world of managed services."

Even Microsoft, which isn't saying when Azure will be ready for use, is just at the beginning on cloud computing, according to Gens. But he does think that there will be a natural progression toward the cloud by corporate users that have virtualized servers and automated systems management. Cloud computing "is just an expansion of a service-level IT strategy that most CIOs are on the road to," Gens said.