In my experience doing sales for ENKI, I've begun to form an idea of why companies are not seeing the savings from virtualization and cloud computing that they have been expecting.  I call it the "virtual physical server problem" because I think they're treating their virtual servers like physical ones, from specifying them all the way through managing them.

It all begins with specifying the server.  I find that most of my prospects don't know how much computing they really need.  But they think they do ... and the conversation goes something like this:

Me: "How much horsepower do you need?"

Prospect: "Oh, I'm running on an 8-core, 16GB server and it works well, so I really need 8 cores and 16GB."

Me: "Have you done any monitoring or used your systems performance tools to check that?

Prospect: "No, everything is working fine, so why should I do that?"

Since the industry average even for virtualized servers is less than 30% utilization, this prospect will end up spending three time what he needs to in the cloud.   Even considering that cloud is often 50% more expensive than leasing a server (in part because it delivers other benefits like scalability and reliability), this prospect is throwing away a potential 55% savings by specifying his cloud deployment to look like his physical deployment.

The next place that the virtual physical server problem costs organizations is in deployment.   On physical servers, applications are designed avoid hitting the resource limits of the server and crashing, and scaling is a arduous affair in which reserve servers must always be running, since they can't be allocated on demand.  Surprisingly, prospects often order the same amount of "extra" servers for the cloud as they would in co-location.   If, for example, an application only needed 10x the base server count for 10% of the time, the deployment would cost over ten times what would actually be necessary if the scalability of the cloud were appropriately used.   With PrimaCloud, it is even possible to scale on end-user SLA compliance rather than the common CPU utilization, allowing you only to pay for what you need to meet your SLAs.

The last place that the virtual physical server problem impacts cost is in management.    This is the single largest cost factor that prevents cloud from delivering savings, and it's invisible to most consumers of cloud, because they're locked into physical virtual thinking.  Companies that move to the cloud from colo - or even move from one cloud to another - all end up hiring administrators for their applications and "cloud datacenters" which cost about the same as managing physical servers.    Let's face it, most applications don't need a true 24x7 Ops team, which can often consist of as many as 6 or more people if you want to avoid burnout.  Instead, they just need someone to be there when there is a problem or a code push.   These companies have virtualized their computers, but not their IT, and so the bulk of their costs are still there.  I can't tell you how many times I've spoken to a prospect who ended up going with Amazon and heard that they didn't save any money.

The solution is to treat your cloud deployment as Virtual IT - everything is in the cloud, and everything scales as you need it: servers, IT operations, costs.