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Cost-Per-Application – The Right Way To Estimate The Acquisition Cost Of Virtualization

As you might have already heard from our press release earlier today (see today’s announcement), we have announced the availability of the VMware Cost Per Application Calculator  – an easy-to-use web tool that aims at helping companies accurately estimate and compare the acquisition cost of virtualization. Understanding the true acquisition cost of a virtualization solution can be quite confusing these days, so in an effort to shed some light on this subject and get to reliable conclusions we have built a simple tool (the Cost Per Application Calculator) with the support of customers and industry analysts . The Calculator compares the acquisition costs of VMware Infrastructure 3 with the one of Microsoft Windows Server 2008 with Hyper-V plus System Center, using the standard metric of “Cost per Application”.    .   

Calculating acquisition costs by only looking at software licenses may be an easy thing to do, but it provides a simplistic and incomplete picture of reality because:

  • It does not account for VM density (i.e. number of applications that can be run on a virtualization host) – higher VM density means less servers, storage, networking, guest operating system licenses, etc. 
  • It does not account for virtualization management cost (both software and hardware) – hypervisors are free (or almost), but management solutions are not.

Cost Per Application (see definition below) addresses both shortcomings while still keeping things simple. Refer to the Calculator itself for more detailed information about Cost Per Application.


Although this first version of the Calculator can be used only to compare VMware and Microsoft, Cost Per Application as a methodology can be applied to determine the acquisition cost of any virtualization offering.

It is important to point out that while VM density is critical to realizing increased savings from virtualization (see Why Isn’t Server Virtualization Saving Us More?, Forrester Research), not all solutions provide the same level of VM density. Third-party validated tests demonstrate that:




Based on these results, Taneja Group concludes that on average VMware Infrastructure 3 can safely run 50% more VMs per host than Windows Server 2008 with Hyper-V, while providing the same level of application performance. But, as the Cost per Application shows, you don’t need to run 50% more VMs on an ESX host to realize a lower cost per application with VMware VI3 Enterprise Edition. With only 1-2 more VMs per ESX host, when compared to a Windows Server 2008 with Hyper-V host, VI3 Enterprise Edition is the lower cost solution – for a whole lot more functionality.


Example – Virtualizing 100 applications at different consolidation ratios


Results may vary depending on the scenarios, however there are some general lessons to be learned: 

1) Even when choosing the VI 3 Enterprise Edition and assuming equal VM density, VMware’s solution is never three times more expensive than Microsoft’s offering. At equal consolidation ratios, VI 3 Enterprise is only marginally more expensive than Windows Server 2008 with Hyper-V – and it offers significantly more capabilities. Any of these capabilities in its first year alone would generate enough operating expenses savings to more than compensate for such a small premium in acquisition costs

2) On average with only 2 additional VMs per VMware host, the fully featured VMware’s and Microsoft’s solutions are at cost parity. In most cases, lower priced editions of VI 3 Standard and VI 3 Foundation are at cost parity (or lower cost) even at equal VM density

3) At a reasonable 50% higher consolidation ratio, even VI 3 Enterprise Edition is significantly less expensive than Microsoft’s offering – and of course it is more feature rich. Note that examples of real life deployments show how VI 3 servers can scale even to 2x the VM density of Hyper-V hosts

Final note – the VMware Cost-Per-Application Calculator is not meant to be the end-all be-all cost analysis or to show cost estimates exact to the last digit. Our goal is to help people start in the right direction and provide a more solid baseline to look at acquisition cost for server virtualization. Clearly, it is impossible to keep things simple and, at the same time, account for everyone’s very specific situation (existing infrastructure, software ELAs, special OEM contracts, etc.). Out of the box, the VMware Cost-Per-App Calculator provides a good level of flexibility by allowing users to specify six input:

  1. Number of applications to virtualize (between 10 – 1000 VMs)
  2. Virtualization server types (low-end option $5,000 , mid-range option $8,000)
  3. VMware Infrastructure 3 Edition (Foundation, Standard, Enterprise)
  4. Virtualization management deployment (in VMs or on physical servers)
  5. Cost of electricity
  6. Cost of DC space

In addition, we also provide full disclosure of our assumptions and methodology so that people can adapt calculations to their specific case.


To learn more about the VMware Cost Per Application Calculator and how to use it check out this video.

Feel free to leave your feedback on how to improve our tool as a comment to th
is blog.

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Alberto Farronato

About Alberto Farronato

Alberto Farronato is Sr. Director of Product Marketing for Integrated Systems at VMware and is responsible for driving the go-to-market of VMware Cloud Foundation and other integrated offerings. At VMware, he has also been responsible for product marketing of VMware’s server virtualization, storage, availability and private cloud solutions. With over 12 years of experience in the IT industry, he worked for other leading technology providers such Accenture and EMC in addition to VMware. Alberto holds a B.S./M.S. degree in Electrical Engineering from the Politecnico of Milano, Italy, and an M.B.A. degree from the MIT Sloan School of Management.

2 thoughts on “Cost-Per-Application – The Right Way To Estimate The Acquisition Cost Of Virtualization

  1. Alberto Farronato

    We will be including XenServer in future versions of the calculator. As of today, Citrix hasn’t provided enough information on pricing and packaging of Citrix Essentials. We’ll need these datapoints before being able to extend our analysis.

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