In a land where people walk bare feet, what is the scope for selling shoes? Although perceptions may differ, there is no denying that there is a huge market that remains untapped. The same holds true for server virtualization in the SME space in India. While it is human nature to be edgy when it comes to accepting something that one is not used to, consolidation of physical servers onto virtual platforms will be the next imminent step as virtualization matures as a concept.

Server virtualization today stands on the brink of this new wave. Large enterprises in India today have more or less taken a call on whether this appeals to them and fits within their IT needs. The enterprise market is being efficiently catered to by a network of virtualization vendors and their channel partners. Similarly, the reasons why this should appeal to the SMEs in India are also many.

Nearly 90 percent of the server market is composed of x86 architecture servers. Based on a conservative model of one application per server, roughly 80 to 90 percent of the x86 computing capacity is unused at any given time. This unused capacity needs to be managed. This takes up data center space and requires power and cooling. Virtualization promises to unlock much of this underutilized capacity.

Current Scenario

The reality of the virtualization market in India is that it is not performing at the level that most companies originally expected. Analysts suggest that in most cases the cost of IT deployment in an SME is restricted to a fraction of the overall investment. This together with ambitious RoI expectations cuts the pace of adoption of virtualization technology in India. Uttam Majumdar, Founder, Locuz Enterprise Solutions, says, “The SMEs are still investigating and are not going into it big time. They want to know if virtualization makes sense for them and if it is going to get them a real rate of return.”

Faiz Ahmed, Business Head, New Wave Computing, informs, “My market research and the feedback that I get tells me that the current level of adoption is less than three percent. The market penetration of virtualization in the SME space is almost non-existent.” The SMEs were initially reluctant as this is a new concept but now those that were planning to buy two servers have now started looking for ways in which they can optimize the existing servers to meet their growing demands. “I will not say that it is too much but yes it is picking up and within the next two quarters we can expect to see a good change in this,” says Arunachalam S, Business Head, Frontier Business Systems.

The Prospects

The benefits of consolidation are well known, and these include reduced TCO, which implies that the more virtual machines one can run on a physical server equates to the lower cost per virtual machine. By creating several virtual machines on one physical server, one can bring down the cost of running multiple hardware machines and significantly save the dear power resources. Virtualization is thus also being perceived as a major step towards energy-efficient business operations.

Enterprises using virtualization require less amount of floor space for storing physical machines, thereby steering clear of expensive real estate investments. This clubbed with its enhanced scalability makes server virtualization a platform that offers operational efficiency, improved availability, and a smarter way of computing.

The Hurdles

In spite of all this, server virtualization has faced several roadblocks since the time it has been introduced into the SME space in India. Though there is adequate knowledge on the benefits of virtualization, direction in terms of actual implementation in scenarios is lacking. “Manageability of physical and virtual environments is a crucial element, which can be rather complex and difficult if not performed end to end, especially when all enterprises today work in heterogeneous environments — where they work across platforms and applications offered by different vendors,” says Pallavi Kathuria, Director- Server Business Group, Microsoft India. She also has a word of caution for the SMEs and suggests that different state of affairs will dictate some change to sequences, but a steady planned roadmap can steer organizations to effectively utilize virtualization in their respective circumstances. They should consolidate themselves during the tough times of recession and be ready when the economy booms.

It may ring true that physical systems are tested and known whereas virtual systems are unknown but the people who have the authority should open up and check this out. “A negative mindset towards the new restricts the possible spread of the concept,” feels Majumdar of Locuz. It is also seen that the SMEs do not have the kind of infrastructure, which probably requires them to opt for virtualization at this point in time. “If you look at virtualization as a concept in India right now, most of the SMEs are very clearly way short on the basic hardware needs,” suggests Ahmed of New Wave. “These companies have a lot of other investments to make and consolidating and containing around the hardware is clearly not a priority for an SME at this point in time,” he adds.

Arunachalam of Frontier shares a similar view. He says, “The smaller companies have a mindset that they are already over-utilizing and hence they are apprehensive of putting multiple things onto one server.” Doing a capacity planning for one or two servers may not sound as an exciting option for an SI. Also, the SMEs lack the patience to go through the proof of concept or to try it out because they don’t want to spend this money unless they are totally sure of what it is. In this, the transaction gets fizzled out and influences the lack of adoption of virtualization.

Another impediment is the lack of availability of affordable skilled resources clubbed with the lack of awareness about the technology. “The customer might think that this is a good technology but who is going to maintain it for him,” asks Arunachalam. What generally happens is that a partner who might be supplying licensed software from a particular vendor over a period of time would be asked if they sell virtualization technology. They would answer in the affirmative and sell it but when it comes to implementation they experience a bottleneck. This puts off the clients and prevents them from extracting the full potential of their investment

Some SMEs due to size restraints also do not possess the technical know-how within their organization to be able to evaluate the server’s capabilities and the licensing costs involved to execute the virtual process and understand the impact of the transition on other software licenses.
While each vendor’s free product is adequate for a basic server consolidation project, companies looking to achieve other benefits of virtualization, such as disaster recovery, agile capacity management, and load balancing, will need to purchase a commercial product. Moreover, even though the ability to create multiple virtual systems on a single piece of hardware has become a commodity, free for the downloading, the problems associated with managing a potentially chaotic virtualized environment with an exploding number of virtual machines (VMs) has become the latest vendor battleground.

According to a market report by the Enterprise Strategy Group, even the lure of a minimized TCO fails to hold water because it is generally calculated without factoring in the related IT infrastructure management and the service costs related to the virtualization platform. Even if these are considered, in reality the number of virtual machines per physical server remains relatively low. This is because the business risk rises as companies optimize their virtual environments to achieve higher density, which equates to more VMs relying on a single server. The risk in turn grows higher and, even if the hardware can support more VMs, the companies would avoid this for the fear of physical server failure.

The Way Forward

Despite all this, the partners and vendors feel that the scope for the spread of this technology is very high. They have also brought special offers packaged specifically keeping the SMEs’ IT budget in mind. Moreover, most vendors are closely monitoring the demand for skilled resources and the lack of awareness among partners and SMEs. These vendors are working towards tackling this upfront by conducting training programs across various regions.

Upping their marketing is also a top priority for the vendors to improve visibility of these SME-specific virtualization products. Ahmed of New Wave feels that if the same energy and rigor used in targeting the large enterprises is shown while catering to the SME space then there would be more willing customers.

The initial cost of setup was initially high but is now being taken care of by the Xen servers from Citrix, low cost models from Microsoft, and essential plus packages from VMware. Recurring costs are being avoided by providing support on the software as an optional component. “Earlier it was an annuity-based support contract. Flexibility was brought in by a per incident-based support, which means customer doesn’t end up paying for a year of support,” explains Vinod Krishnan, Regional Manger, VMware India.

The downturn in the economy that has had a negative impact overall has had a slight positive role to play with respect to virtualization. The recession factor makes them look at this very seriously. And that is a positive influence because they are unwilling to spend additional money tobuy new servers and are investigating ways to do more with less.

“What would also help in penetrating into this market would be the hardware manufacturers like IBM, Sun, HP, and Dell having a default virtualization engine pre- loaded onto the machines that they sell. So a tie-up between, say, a VMware and an IBM to offer its entry-level service with an entry-level virtualization license can help the SMEs to openly start exploring and toying with the idea of virtualization because it is coming bundled in (with the equipment that they are buying),” feels Ahmed of New Wave. This could be a definite option that propels the growth of virtualization. Also, we see that the concept has picked up outside India and now even here a lot of large enterprises like data firms that deal in hardware computing have started looking at virtualization as a serious alternative and the small and medium businesses will definitely take a cue from this.

While commenting on the scope of this concept, Majumdar of Locuz emphasizes, “Scope is definitely bright. There are many that want to do virtualization. We can see volumes of virtualization happening.” Moreover, virtualization allows companies to align their IT more closely to their business changes and with the changing dynamics of businesses; the SMEs are showing an increased interest in the adoption of virtualization. They also need to adapt to their needs for a growing IT infrastructure. The unique nature of the SME infrastructure, Majumdar feels “is that they were always grappling with a need for more.” Virtualization helps in the scenario where organizations could expand rather than getting locked into the silos of infrastructure.

TN Srinivasan, Business Head- IBG, Veeras Infotek, suggests, “Even though the most recession-hit are the SMEs, they’ll be able to manage their business because of their size. Survival in general is difficult but a moderate-sized SME who has got niche business will be able to survive better. So those SMEs that have a niche market and have got businesses that flow irrespective of the recession will survive and these need to be identified and targeted for the virtualization front.”

In terms of the overall IT adoption, the West definitely leads the way. India undoubtedly experiences a lag in terms of adoption but the mindset is positive and the lag-time is dropping. Krishnan of VMware concludes, “There is a set of customers who want the best of new cutting edge technology. But the classical adoption curve would be followed with any new technology. It is beyond the buzz phase and is recognized as a stable technology that deserves a serious thought.”