Server consolidation in the data center usually means rolling up seven or eight low-end Intel or Unix servers into virtual machines on a single small server box.

At Nationwide Services Company, the business unit supplying information technology to all Nationwide Mutual Insurance Co. businesses, Scott Miggo, VP of technology solutions, is practicing a different form of server consolidation and practicing it with a vengeance. He's replaced more than 700 Intel and Unix small servers with two refrigerator-sized boxes -- IBM z9 mainframes.

"We came in with the assumption that everything in the data center can be virtualized. We know that's going to be the lowest cost option," Miggo says. Nationwide has set up an architectural review board for all new applications to make sure they conform to plans to virtualize them.

The IBM z9s are geared to run Linux virtual machines by adding specialized Linux processors to the mainframe's regular processors. Dubbed Integrated Facility for Linux, each IFL processor enables the mainframe to host 40 Linux virtual servers. Miggo has bought 20 for each mainframe, but that scarcely maxes out what Nationwide's mainframes can do. The z9s can take either 32 or 48 IFLs, if Miggo chooses to expand further, so he thinks he's still got plenty of headroom.

The IFLs don't come cheap. They're listed at $95,000 each on IBM's Web site. But hundreds of small servers didn't come cheaply either. Miggo estimates they averaged $10,000 each.

Part of the savings from server consolidation springs from software license costs.

"One IFL greatly reduces my licensing costs for [IBM's middleware] WebSphere" and other pieces of IBM software because the IFLs don't count as a processor in license prices. So adding virtual machines to mainframes via IFLs adds up to big software savings.

Over the course of three to four years, Nationwide will save about $30 million in hardware, software, and electricity operating expenses in its data center, thanks to Linux virtual machines, Miggo says. He's started virtualizing 15 months ago and is running a version of Novell's Suse Linux on the mainframes in VMware and IBM Virtualization Engine software. Recently, Miggo got another demonstration of the benefits of virtualization: more flexible allocation of computing power.

Salesmen were demonstrating Nationwide Better Health, a subsidiary business that offers an online service for tracking a company's employee absences and time off. The demonstration wasn't going well, the salesman said, because Nationwide's central servers hosting the application were experiencing heavy traffic. In five minutes, Miggo doubled the number of virtual machines dedicated to the application, and a few minutes later, the customer demonstration sprang to life.

"When they were done, I turned the dials back down again, so to speak," Miggo says.

In fact, Nationwide is now looking at some advanced tools to help it manage all the virtual machines it's created. It's experimenting with VMware's VMotion for moving virtual machines around and it plans to try IBM's recently introduced Virtualization Director, which works with its physical system manager, IBM Director Release 5.2.