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Dell: IT Can Create $200 Billion In Efficiencies

Virtualization could take a large chunk out of the $1.2 trillion spent on IT in North America each year, Michael Dell said at OracleWorld.

IT budgets in North America amount to $1.2 trillion, but through widespread adoption of x86 servers managed in a more automated fashion, $200 billion could be saved, asserted Michael Dell, president and CEO of Dell. Dell provides two of every five x86 servers shipped, he said.

"We're making a public commitment to take $200 billion out of IT spending," CEO Dell said as spoke at Oracle OpenWorld in San Francisco Tuesday. He used as an example Dell's own plan to take $200 million out of its own IT spending by the end of 2010.

Server consolidation through virtualization will account for a major chunk of the savings. Dell is shipping more servers as "virtualization ready," although he didn't spell out exactly what that meant. In some cases, x86 servers ship with VMware's ESX Server or Citrix Systems XenServer preloaded. In other cases, extra memory and I/O devices have been included to enable the operation of more virtual machines.

One third of the IT budget is tied up in hardware purchase and operation; two-thirds is in labor and services. To reduce those costs, it's necessary to standardize on fewer types of servers so that their configuration and maintenance are simpler and easier to perform.

By restricting server types, Dell can automate configuration and management of servers, Dell's CEO told a Moscone Center crowd thinned out by a heavy San Francisco rain storm. Only a few years ago, Dell had Sun Microsystems, IBM, and other types of servers in its IT infrastructure, but is gradually converting them to its own x856 servers. "The first secret is to run x86 everywhere," and research by IDC and other parties indicates that the conversion to heavy reliance on x86 servers is well underway, he said.

Dell maintains just two x86 server images, one for Windows Server 2008 and one for Oracle Linux, which now accounts for 97% of its servers.

His company has a goal of saving $80 million on power consumption by installing its latest PowerEdge servers based on Intel's Nehalem chips. Over a three year period, the single largest cost of operating a data center is electricity, said Dell. His firm reduces electrical consumption by refreshing 25% of its server hardware each year, with the latest chips consuming less power.

Dell also saves power through virtualization. It is shooting for a 20:1 server consolidation through virtualization. It uses both VMware and Microsoft Hyper-V hypervisors. By managing virtual machines instead of physical servers, Dell will free up one third of its IT staff resources and gain a 50% operational savings.

Dell's CIO Robin Johnson joined the CEO on the stage and said the firm has virtualized 65% of its servers, or more than double the national average of 31%, Johnson said. Dell's electricity savings by the end of this year will be enough "to power a town of 5,000 for a year," he said.

Dell is also trying to reduce its total number of applications, consolidating them wherever possible, and will rely on Oracle Applications to further reduce its current total of 3,500, Johnson said.

By standardizing and simplifying his infrastructure, he will make it possible to automate management that is currently laboriously done by IT staffers, such as server configuration, patch maintenance, and security maintenance. Dell IT has to deal with 7.5 million security patches a year and runs 6,500 virtual machines, reported Johnson. Dell has 73,000 employees in 12 countries.

InformationWeek Analytics has published a guide to the business realities of virtualization. Download the report here (registration required).

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