IBM Offers Virtual Servers on CPU/Hourly Basis

by Timothy Prickett Morgan

IBM's Global Services unit announced another facet of the company's on-demand strategy this week, when it debuted virtual server capacity on an hourly rental basis to corporate customers. While much of IBM's on-demand strategy has so far been focused on helping customers build more flexible IT infrastructures in their own data centers, the Virtual Server Services offering allows them to just have IBM build the whole shebang and to be charged on a metered basis.

In the summer of 2002, IBM first beta-tested the idea of offering customers virtual servers over the IBM Global Services network when it announced a Linux test drive on zSeries and then iSeries servers, both of which can support Linux inside logical partitions. The idea was popular with commercial customers who were unsure of what Linux was, and who wanted to test Linux running on IBM's zSeries mainframe and iSeries midrange iron.

Virtual Server Services offers virtual servers on more than Linux platforms and on more than just IBM's zSeries and iSeries platforms. Under the new offering, customers can buy processing capacity on zSeries mainframes, iSeries midrange, pSeries midrange, and xSeries Intel-based servers.

The zSeries mainframes only offer Linux on a rental basis, and it is unclear if IBM will ever offer virtual z/OS, MVS, VM, or VSE servers to customers any time in the future. IBM has strong partnerships with Red Hat and SuSE for Linux, and these are the ones that IBM is pushing with this offering, says Mike Riegel, who is the manager of e-business hosting services at IBM. The virtual iSeries machines can be equipped with OS/400 V5R1 or V5R2. IBM's plan, says Riegel, is to support the current release of any operating system, plus one prior release, so that customers don't have to be on the bleeding edge. IBM eventually will offer virtual Linux servers on the iSeries platforms, but right now it is only peddling OS/400. On the pSeries, which is also based on IBM's Power processors, IBM is offering AIX 5L 5.1 and 5.2 for virtual servers, and it will soon have Red Hat or SuSE Linux as options. The xSeries virtual servers are being equipped with virtual partitioning software from VMware and can run either Linux or Windows 2000 (but not yet Windows 2003) in virtual partitions.

The IBM servers behind Virtual Server Service are located in an IBM data center in Boulder, Colorado. At press time, IBM was not able to provide a breakdown of the machines that it had dedicated to this offering or to tell how many customers it was expecting to host on the services.

The interesting bit about this will be the pricing, of course. For the idea to work, IBM has to make more money renting network and server capacity over the long haul to many customers than it would for selling the devices to a fewer number of companies, or else it would not bother. According to recent IBM customer surveys, says Riegel, the number-one thing that chief information officers want is to reduce IT costs. The Virtual Server Service bills using a CPU/hour metric, so if companies have predictable and steady workloads, this kind of service might make good economic sense. The interesting thing is that, because IBM can offer increasing capacity as customers need it--this is what "on demand" is supposed to be all about--companies can rent the server capacity that meets their average workload, instead of having to acquire the server capacity for in-house processing that will meet their peak workload. Many companies are sitting on lots of excess capacity that they use only rarely. This is money up the chimney. Under the standard terms for Virtual Server Services, IBM guarantees that customers have an additional 20 percent capacity at their disposal and that they can acquire more as needed, depending on the availability in the server complex that IBM is running.

Precise pricing was not available for the Virtual Server Services at press time, but it stands to reason that zSeries capacity is more expensive than iSeries or pSeries capacity, which is again more expensive than xSeries capacity. IBM could, however, be normalizing pricing on a per-processor or per-unit-of-work basis.

In the example that Riegel gave to illustrate the savings that customers can see by going virtual, IBM went into a customer site that had a six-server environment, supporting an application set that cost $1.8 million over three years to support. By moving it to a dedicated hosting environment at IBM Global Services (including network, caching, firewall, and other services), the customer was able to drop costs by 16 percent, to $1.5 million, on a six-server setup. By moving to a Virtual Server Services setup, the number of servers was consolidated to three from six; firewall and caching servers were virtualized on IBM's network, and the price dropped to $1.1 million over three years. That is a 39 percent drop over the cost of supporting the applications and running the server and networks in-house. IBM said in its announcement that companies could expect to see a savings of 15 to 30 percent, depending (presumably) on the platform.

The Virtual Server Services offering is available to all customers worldwide, but they will be supported from the data center in Colorado until IBM rolls out more iron for the offering in other data centers in the United States, as well as in Europe and Asia. Customers are charged a one-time setup fee, which IBM did not specify, and are then charged variable monthly charges based on CPU usage per day during the course of a month.

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