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This post is Part 1 of a 2-part blog series on how to best use and interpret the vCloud Availability for vCloud Director Business Calculator. Part 1 provides a broad overview of the market and VMware vCloud Availability for vCloud Director. Part 2 takes a deeper dive on how to utilize the Business Calculator.

By Guy Bartram

Service Providers are keen to grow their bottom line revenues with existing customers and also seamlessly on-board net new customers. Attracting customers into their data center enables providers to upsell additional services and products to tenants and generate multiplier revenues.

The 2015 IDG Enterprise Cloud Computing Survey identified Disaster Recovery as a Service (DRaaS) as the largest opportunity area for providers (fig1), with the next most likely being Storage as a Service. This survey of enterprise customers shows that they are not only concerned about recovery ability, but also that traditional syndicated recovery services are not as financially viable as cloud storage and disaster recovery which (activated on demand) provides far more flexibility and costs saving over traditional approaches.

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Figure 1

This market is clearly a growth market; Gartner predicts that by 2018 there will be more organizations using Cloud based Disaster Recovery Services than traditional methods (2015 Gartner MQ for DRaaS G00270861). The target customer base according to Gartner would be organizations with a typical infrastructure of less than 100 servers; the sweet spot for many vCloud Air Network (vCAN) providers. Disaster Recovery is a great on-ramp or first use case for enterprises who are unfamiliar with the cloud, and from there can lead to an upsell of additional managed services.

According to 451 “Cloud Enabling Technologies Market Monitor Overview,” VMware is still the predominant virtualization platform leveraged for infrastructure workloads; hence a vSphere-focused disaster recovery service is the best bet for providers to focus on in order to attract the largest organization customer base. VMware is classed as a maturity level, but not saturation, in virtualization adoption for majority of SMB and enterprise.

Data Application Protection services are set to rapidly catch up (fig 2) as more regularity compliance for disaster recovery and business continuity is introduced and pricing of cloud storage lowers, making protection a financially achievable prospect.

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There are multiple vendors in the DR services environment (451 research indicate approximately 34 for Data & Application protection services), each has differing features and functions and naturally a price tag, so understanding the operational and capital expenditures for such a service can be complex. Equally given the multiple workload varieties within the customer base, the solution for DR is un-likely to be a ‘one horse race’, multiple best of breed vendors will be required to fulfill the features and functions necessary to support customers.

The new VMware vCloud Availability for vCloud Director, as announced at VMworld 2016, enables vCloud Air Network cloud providers to offer a simple, cost-effective cloud-based vSphere Disaster Recovery service that seamlessly supports your customers’ vSphere environments. Providers wishing to provide a VMware-powered Disaster Recovery service should utilize the vCloud Architecture Toolkit (vCAT) Business Value Toolkit (BVT) to understand how VMware vCloud Availability for vCloud Director can add value to a disaster recovery and data protection portfolio.

The VMware vCloud Availability for vCloud Director business case calculator is designed to assist cloud providers in modeling the value of providing a tiered portfolio of services across the data protection continuum; from high availability and disaster recovery services down to backup and restore. To achieve maximum revenues, providers need to service tenants with choice; choice about the features and functions of disaster recovery service and critically the recovery point objectives for their data. This means that a variety of vendor products is most likely to be used, as most provide best of breed in certain characteristics and commercial models.

In order to assist cloud providers in thinking through the value of a tiered portfolio, we have developed the model using three tiers of service: “Premium,” “Standard,” and “Basic.” However, to minimize complexity, providers may wish to simply focus on the top two tiers, “Premium” and “Standard,” and differentiate the “Basic” tier as a pure backup service.

  • Premium could be defined as a mission critical workload data protection service, designed to provide seconds or minutes RPO (Recovery Point Objective). This could be a multi-site high availability configuration for continual operation or could be fully automated, self-service, copy and failover solution with no IP re-addressing and full application recovery. High availability or RPOs of seconds both come at a price: the license costs for such as service are typically high, shared infrastructure costs are high as well due to lower contention ratios, and dedicated infrastructure would be still more expensive.
  • The Standard tier could be defined as a business critical data protection service, designed to provide a reasonable RPO objective of 15 minutes to hours, with an RTO of a few hours. Unlike the Premium service there may be costs associated with application reconfiguration. It is most logical and economical for this service to leverage a shared recovery environment, using a contention ratio of 2:1 (50%) for compute (note – RAM is not contented in any model)
  • Optional — Basic could be defined as a data protection service that simply replicates data, i.e. a backup. Any restoration of the data would be a manual task from the available backups. Hence this level of service will have a longer RPO, typically 24 to 48 hours, and a longer RTO of a 48 hours or more

Using multiple tiers of disaster recovery offerings can provide differing commercial results, based on VMware’s analysis typical:

  • ‘Premium’ offerings (high availability or DRaaS for tier 1 workloads) provide premium capabilities, but are typically needed for only a sub-set of workloads. They typically entail higher infrastructure and licensing expenses.
  • ‘Standard’ offerings (DRaaS for tier 2 and tier 3 workloads) provide greater functionality, cover a large set of potential workloads, and are offered at a medium price point to the end user. The cost to deliver the service is a bit lower than premium since the hardware contention may be higher while still meeting SLAs.
  • ‘Basic’ offerings (often pure backup) are a high-volume service, with simpler functionality offered at a lower price point to the end user.

Utilizing these characteristics, a Premium only offering covering a 750 VM estate would need to drive a high price of around a $110 per VM reaching positive revenue at 25 months with a gross profit of $227k and a gross profit margin of 14%.

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A tiered offering of 100VM in the Premium tier, 400VM in Standard and 250VM in Basic, with tiered pricing from $110 for Premium, $60 for standard and $35 for Basic will provide a gross profit of $518k and a gross profit margin of 33%.

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Stay tuned to Part 2 of this blog, which will explain how to use the Business Calculator.

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