Virtualization is already considered a mainstream technology among IT professionals. According to Forrester Research, within the past two years, the number of enterprises and small- and mid-size businesses in North America using virtualization has increased from 29 to 40 percent.

As virtualization becomes more widespread and the software gets cheaper, virtualized environments will proliferate even more than they are today. And IT departments will be presented with a new challenge since each virtual operating system will demand its own care and management, overwhelming IT's ability to respond unless all of the costs are thought through.  If this sounds familiar, it is probably because this is the same situation faced by IT 15 years ago when Intel servers exploded onto the scene like so many rabbits.

While mainframes always had virtualization, today virtualization is used across all hardware platforms, whether they are AIX, Solaris, Intel or AMD. VMware ESX is the predominant virtualization flavor in the Intel/AMD space, but the entry of XenSource, SWsoft, Virtual Iron, among others, and especially Microsoft's Longhorn hypervisor, codename "Veridian," will widen the virtualization selection for IT staff.

Virtualization promises enormous potential benefits in hardware costs as well as in provisioning speed, flexibility, disaster recovery support, etc. But just because IT is seeing initial savings on the server bills doesn't mean they are taking into consideration the true economics of virtualization.

True, significant money can be saved through server virtualization. It can take servers running at 5 to 8 percent CPU utilization to 60 to 70 percent utilization. There's a very real initial cost savings on the hardware front. A two- or four-processor Intel box virtualized is certainly less expensive than eight single-processor boxes. So the first check you write in the virtualization process is certainly smaller. You will also achieve real savings in cabling costs, data center floorspace, and ongoing electric power consumption. John Humphreys, director of virtualization for IDC, reported earlier this year that most IT managers believe they have saved upwards of 23 percent over the last 12 months in hardware, real estate, and power and cooling by implementing virtualization.

However, there are other costs of virtualization that have been overlooked and must be factored in.

1) Software license-A high-end version of VMware ESX, running on a four-processor box, will cost close to $20,000 over a four-year period. Once the open source alternative Xensource or Microsoft's Longhorn hypervisor become more prevalent, this cost will decrease. Overall, however, simply consolidating 10 standalone servers into one virtual server will not bring your upfront expenditures down as much as the hardware alone might indicate.

2) Daily operations-The operating costs of any IT environment are largely driven by the number of operating system instances in the environment, not the number of servers. Although the IT staff monitors every server, they also monitor each and every operating system and application. They patch the machines and fend off viruses and worms. So depending on what is virtualized, moving to a virtual environment may, or may not, save money.

Even virtualizing on bare metal, which is the VMware ESX approach, means that within each virtual partition a separate operating system is loaded. So 10 operating systems on 10 physical computers are still 10 operating systems in the ESX server. Except it is really 11 operating systems because ESX itself is an operating system that needs to be managed. The lesson is if you don't reduce the number of operating systems, virtualization will not drive daily operating costs down.

3) Backup/recovery-One hidden cost that actually increases in a virtualized environment is the backup/recovery cost, due to the increased complexity of backing up multiple operating systems through a single physical server's infrastructure. Another complexity may come in if operations relies on certain technologies, such as layer 2 network separation, that are immature currently in a virtualized environment. Similarly, troubleshooting and performance analysis tools that operate on a physical basis, i.e. HBA throughput, physical disk I/O, do not tell the whole story in a virtualized environment, where many operating systems are sharing the physical computer components. The big opportunity in virtualization comes when IT Operations can behave differently than it does with standalone servers.

Typically, in a non-virtualized environment, much care and time is devoted to backing up and monitoring each server. However, if you have a development box, then maybe it doesn't need to be backed up to tape and the tape stored in a costly off-site vault. Since a virtualized operating system is just a file, IT can snapshot the operating system, back that snapshot up to disk on a daily basis, and provide a means to restore the file as needed (essentially re-imaging the operating system instance). Once IT takes a different approach, then costly tape drives, media and Iron Mountain expenses are replaced by less expensive alternatives. Modifying how IT performs monitoring, patching, and other routine activities can also dramatically reduce the ongoing cost of operations.  Moving operations to self-service functions, such as allowing developers to push a button and re-image their own virtual server, can dramatically reduce the IT Operations cost.

While this approach is not appropriate for production environments where high availability, immediate response and performance management are mandatory, it can make a huge difference in development environments. By modifying IT operations in a virtualized environment, up to 70 percent of the cost of a traditional non-virtualized environment can be eliminated.

Overall, virtualization, on a cost basis, will only be slightly cheaper than a physical environment until IT starts to change its habits. Savings will be seen with hardware, maintenance, power, network and cabling. But operating systems costs may increase while backup, virtualization software and virtualization management costs are guaranteed to spike. The key is to balance out the new expenses by changing operating practices.

Dave Leonard is chief technology officer of Infocrossing (IFOX on the NASDAQ), a fast-growing, publicly traded provider of selective IT infrastructure, enterprise application and business process outsourcing solutions headquartered in Leonia, N.J. Infocrossing's services are built upon the strength of the company's award-winning data centers located nation-wide and a world-class team of more than 700 IT professionals bringing unmatched expertise and best practices that offer Infocrossing clients a competitive advantage.