Like a painting, the topic of virtualization is subject to interpretation and can mean different things to different people. To some, virtualization is synonymous with the consolidation of hardware and the product offerings of Palo Alto, Calif.-based VMware Inc. Others see virtualization used best at the operating system and, increasingly, the application level. Still others see the true value of virtualization coming outside the data center, and regard it as a business strategy unto itself.

Despite its recent ascendancy in data centers, virtualization technology has been around for quite some time, and its roots trace back all the way to the mainframe. However one defines virtualization, it’s impact on the way carriers run their businesses is likely to grow in the coming years.

Keith Lippiatt, managing director, technology consulting, financial services, for Bermuda-based Accenture LLC, says that insurance carriers that have adopted virtualization are already reaping tangible benefits in simplicity and cost savings. Yet, “insurance companies are running at a higher cost basis than their peer groups in other industries,” he notes.


As head of Global Technology for G-ITO (global IT operations) for Zurich North America Commercial, John Laferriere says the company initially went through a phase of virtualization to consolidate servers and boost utilization. “We used virtualization to homogenize our hardware and software environment,” he says.

Laferriere says the Schaumburg, Ill.-based company then used virtualization in non-production and, subsequently, production environments. “We are currently using virtualized and non-virtualized environments for production,” he says, adding that the company also used virtualization to improve application efficiencies. “We’ll run an application family within a virtual environment.”

More recently, virtualization complements the company’s move toward a service-oriented architecture (SOA). “We should be able to increase utilization of a particular piece of hardware through virtualization, and also use that virtualization to spit out more of the SOA components we’re going to require to handle the request.”

Likewise, Jack Wilson, enterprise architect—AVP for Farmington Hills, Mich.-based Amerisure Mutual Insurance Co., says the company employs virtualization solutions on its application, database and file servers. However, Wilson wasn’t content to just introduce virtualization into his data center, Wilson virtualized his entire data center.


Wilson says the increasingly complex and layered modern IT environment prodded him to look for a way to streamline operations. Thus, his philosophy was to use virtualization strategically—not just tactically as in the past. “My experience in the past was that virtualization was always used tactically, for a small portion of a company infrastructure. So, it ended up being just another layer of technology in the mix of technologies,” he says.

Wilson’s most radical step was to jettison the company’s menagerie of laptop and desktops PCs in favor of thin-client models running application virtualization software provided by Fort Lauderdale, Fla.-based Citrix Systems Inc. He initially met with resistance and worried about the psychological impact of taking away an employee’s PC and replacing it with the smaller, thin-client devices provided by San Jose, Calif.-based Wyse Technology Inc.

To keep the workstations running, Amerisure uses a 10-server Citrix farm that is load-balanced. Wilson says he could probably get away with using six or seven servers, but likes the redundancy.

Wilson also discovered that instead of meeting resistance from the company’s employees, he found them to be happy with their virtual desktops. “They didn’t have any problem at all,” he says. “It worked out better than I thought.”

Since deploying virtualization on a strategic basis, Wilson says the paybacks have been numerous. One primary benefit has been simplicity. For example, problems that were formerly remote have returned to his data center. “I wanted to simplify our remote pieces and bring all our complex pieces back into the data center where the experts are,” he says. “It’s a much easier environment to manage.”

Also helping simplify matters is that the range of software and hardware under Wilson’s purview has narrowed. “There weren’t two PCs in the company that looked alike,” he recalls, adding that Amerisure went through a software governance process in which users had to justify the software that would be added to the servers that support the thin client workstations.

As a result, the number of software programs used by Amerisure’s 800 employees shrank from 375 to 60.

Now, the only software that goes on the system has cleared the governance process, and is added to the server by IT department.

“It means we have much less software to manage and upgrade,” Wilson says. “We don’t have all the hardware failures and software and virus issues we used to have on the individual PCs because we don’t have individual PCs anymore. It has saved us a lot of headaches.”

Another benefit of virtualization has been to decouple software performance from expensive proprietary hardware. As hardware becomes ever more commoditized and prices drop, data centers employing virtualization technology will reap the benefits.

Wilson says he can run 80-90 workstations on a $9,000 Dell server. This is all the more impressive when one considers the hardware upgrades that may be necessary to run Microsoft’s newest operating system, Vista, on a PC. Indeed, one immediate headache Wilson is happy to avoid is the current conundrum over the migration to Vista. “I go to conferences all the time and people are worried about Vista,” he says. “I don’t have a desktop OS. We won’t replace these thin clients for eight to nine years. With PCs, we were on a three-to-four-year refresh cycle.”


According to Wilson, another large benefit is the flexibility a virtualized data structure affords. Despite considerable efforts, IT departments have all too often found their architectures misaligned due to the changing strategic needs of their business units.

“By having a virtual architecture, it really doesn’t matter what the business strategy is,” he says. “If they want to centralize, decentralize or outsource to India, this architecture will support that. Any place you can get an Internet connection you can do business. It’s a much more flexible architecture than before, and we’ve eliminated the chance that our infrastructure could be a detriment to our business strategy.”

Another benefit to completely virtual data centers is the reduced stress on IT staff. By making the data infrastructure more centralized, it helps eliminate the headaches from managing desktops and servers in remote locations.

“Virtualization frees up the people in IT, and changes how you allocate IT resources,” says Accenture’s Lippiatt. “The technology itself is actually doing a lot of the blocking and tackling that would normally be done by people in the IT organization. You can now focus those resources into more strategic activities.”

Wilson says that since Amerisure switched to its virtual model help desk, calls have gone down 75%.

Another possible benefit to employing virtualization is security. Wilson says that because no data is stored on the company’s thin-client laptops, this renders them essentially worthless should they fall into the wrong hands. “From a security standpoint, it’s a godsend,” he says.


While the consolidation afforded by the likes of VMware has helped cut down on server sprawl in a physical sense, it also begat the problem of virtual sprawl. Instead of managing 500 physical servers, an IT department can find itself in charge of 500 virtual ones, each running a separate OS.

“You’re able to consolidate your hardware with VMware, but you still haven’t consolidated your operating systems or anything else,” says John Hamilton EVP & COO of Jersey City, N.J.-based Trigence Corp., a maker of application virtualization products that enable enterprises to run multiple applications per OS on virtual machines.

David Patrick, CEO of Boston-based xkoto Inc., which offers virtualization technology for databases, agrees that consolidation at the operating system level is just the first stage in virtualization. “The problem gets exponentially more complicated for enterprises when you deal with virtualization,” he says. “It used to be one box, one application. Now, with virtualization, you can’t keep track of assets the same way you used to. You need a new management framework to manage virtualization capability.”

Indeed, many already see virtualization as key element to a redundancy and backup. Rather than active/passive or one-to-one back up, a virtualized data center may keep one server that’s physically empty for every 30 blades they possess. If one of those blades fails, they’ll simply fail over to the empty blade.


Such efficiencies highlight one of the ancillary benefits of virtualization: its role in reducing power consumption in data centers. While servers running a single application will often tally utilization figures in the single digits or teens, virtualized servers can operate at 90% or better.

“There is starting to be a greater push in the United States toward ecologically friendly, “green” IT environments,” Lippiatt says. “The ability to virtualize is core to reducing the amount of power consumption. Many data centers are power constrained and space constrained and will adopt out of pure necessity because they’ll run out of space.

Virtualization is also seen as key to utilizing the new generation of multicore processors being produced by Santa Clara, Calif.-based Intel Corp. and Sunnyvale, Calif.-based Advanced Micro Devices Inc. “When you think about power consumption and footprint consumption, these [multiple] cores are really going play into virtualization,” says Zurich’s Laferriere. “We’re going to see virtual machines really pushing the limit on the number of CPUs that you can handle at any given time.”

In addition to using less electricity, another green aspect of virtualization is that by eliminating layers of technology, it requires fewer hardware components. What’s more, aging components can be given a second life through virtualization and avoid winding up in a landfill.

A fully virtualized data center, such as the one Wilson set up for Amerisure, also opens up the option of telecommuting. This keeps cars off the road by giving employees, including his IT staff, the option of working from home. “I don’t think I appreciated how much of a productivity boost we would get from that,” he says.


One of the best indicators of the future for virtualization is the fluidity of the marketplace: Citrix recently acquired open-source vendor XenSource; Microsoft is set to unveil virtualization capability in its next iteration of its server software; and database giant Oracle Corp., Redwood Shores, Calif., also made a recent push into the market.

“There still are a fair number entrants into the space,” Lippiatt says. “The market hasn’t fully matured yet, given the amount of innovation that’s happening. There’s a lot of good innovation in the space, and the technology is only getting better.”

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