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1 Cisco flexpod express Study Virtualization at Small and Medium Sized Firms on the Rise Prepared by a group of Cisco Partner Firms. Research conducted by The Blackstone Group

2 Executive Summary Server virtualization still leads way in workplace virtualization technology adoption; remote desktop and virtual desktop infrastructure are trailing but more prevalent A recent Cisco partner whitepaper titled Virtualization: The Public Knowledge Gap found that 40% of information workers hadn t heard of server or desktop virtualization. While the lack of knowledge in the workspace is intriguing, it perhaps says the most about how well managers and other high-level executives are integrating virtualization into their companies. While more publicly known trends such as BYOD (Bring-Your-Own-Device) and cloud computing are dominating headlines, virtualization is creating a more efficient department behind the scenes. According to a new, in depth Cisco partner survey of managers, directors and CIOs in the middle market (small to medium sized business), 77% is already using some form of virtualization and nearly all companies are aware of how much it can benefit a workplace long-term. 91% 91 percent of all respondents said that virtualization implementations provide their companies with a competitive advantage over those without. 96% Of those who were already employing virtualization solutions, 96 percent felt they were gaining an advantage 71% While 71 percent of those who don t currently have virtualization in place agreed it could provide them a edge over the competition. In general, no matter the size of the company or budget, the study found that professionals don t need to be sold on virtualization. Many companies are already realizing the benefits and its adoption should continue to increase until virtualization is simply a mainstay in the workplace. 2

3 Adoption Already at High Levels Virtualization is a technology that s been employed in data centers and large companies for years. Its use in the small-to-medium sized business has been less proven. However, because most executives realize the value that virtualization brings to the workplace, adoption levels are high. 77 percent of survey respondents already had some type of virtualization in place around their office. jumped to 79 percent with medium-sized businesses ( employees). The same correlation held true with budgets as 65 percent of businesses with an budget of $100,000 or less have implemented virtualization while 80 percent of businesses with budgets greater than $100,000 already have virtualization technologies in place. This leads to the logical conclusion that while smaller companies do realize the benefits virtualization can offer, many don t currently have the access to financing or capitalization to adopt the technology. When broken down further, the adoption rates correlate closely with the size and budget of a company. About 65 percent of small businesses ( employees) were currently using virtualization technologies but that number Those that do have the budget for virtualization are taking advantage of a wide variety of features. Remote Desktop Access While larger companies were more likely to be using most of these applications, server virtualization was particularly popular among small ( employee) companies. Nearly 70 percent of small firms who reported having virtualization technologies were using them to move servers from hardware to software, likely to reduce server sprawl and maintenance costs. Storage virtualization, another application that helps condense necessary infrastructure, was another popular application among 19% 23% Disaster Recovery 25% Network Virtualization Thin Clients 37% Storage Virtualization 40% 42% 44% Virtual Desktop Infrastructure Application Deployment 57% Server Virtualization 59% Among the applications of virtualizations used by survey respondents were: Mobile Device Management small business with 53 percent implementing it as compared to just 42 percent of larger companies. Virtual Desktop Infrastructure, or VDI, appeared to be the biggest luxury application as 60% of medium-sized companies employed VDI compared to just 42% of small companies. Those with budgets over $100,000 also utilized VDI 62 percent of the time, well below the 35% using them with budgets under $100,000. 3

4 Those who Adopt Virtualization Seeing Variety of Benefits For the 77 percent of professionals who have already incorporated virtualization into their workplaces, there certainly seems to be no buyer s remorse. In fact, 95 percent of companies with virtualization are seeing an immediate impact on efficiency and cost-reduction. That number rises to 97 percent amongst middle management as the benefits appear to be especially clear and wellunderstood by those who use it on a daily basis. A slightly lower 92 percent of upper management and executive-level respondents noted the impact of virtualization. Also of significance is that the cost-savings companies are experiencing due to virtualization are consistent or even better than respondents expected. Seventy percent of medium sized firms realized 100 percent or more of their expected cost-savings after implementing virtualization applications. Those expected cost-savings come as added benefit. 90 percent of respondents said they are confident virtualization can provide their organization with sufficient redundancies to ensure better business continuity and client service. 90% Ninety-three percent of those who already employed virtualization were confident it was providing significant redundancies. 93% 80% And perhaps even more interestingly, 80 percent of those who had not yet implemented virtualization were confident it could benefit their business continuity and client services. 4

5 The Top Benefits of Virtualization Here are the percentages of respondents ranking these benefits in their top 3 Improved System Scalability 61% Better Business Continuity 37% Lower Unit Cost for 51% Reduced Energy Costs 35% Business Flexibility 48% Better Client Services 24% Productivity Improvements 44% Scalability was especially important for organizations with employees as 65 percent listed it as a top benefit of adopting virtualization compared to just 48 percent of smaller organizations. The same correlation held true for companies with budgets above and below $100,000, showing that as a company grows, flexibility becomes more and more important. As expected, upper management respondents also placed a high priority on cost-savings. Fifty-five percent of highlevel management (VP or above) respondents listed lower unit costs as a major benefit as compared to 47 percent of middle managers. Efficiency was more important to the organizations with budgets under $100,000 as they try to squeeze the most out of their expenditures. Fifty-eight percent of those companies listed productivity improvement as a major benefit. For the firms with budgets over $100,000, reduced energy costs were important. Thirty-nine percent listed it as a key benefit while only 19 percent of companies with budgets under $100,000 thought it was of top importance. In general, it appeared smaller firms were using virtualization to improve efficiencies with a limited budget while the larger companies look to it as a means of growth. 5

6 Long Term Benefits Drive Companies to Virtualization Server Sprawl professionals made it abundantly clear that virtualization is not a trend, but rather a long-term solution to problems that have plagued the departments for many years. Server Sprawl is one specific problem virtualization helps tackle and survey respondents agreed. Ninety-one percent of respondents who had already adopted virtualization felt it was a cost-effective and long-term solution to server sprawl. also more likely to use financing to adopt virtualization. Sixty-three percent of firms with revenue over $100 said they would consider financing a virtualization purchase as compared to just 47 percent of firms with under $10 million in revenue. This is most likely due to the fact that larger companies have easier access to financing, meaning they re more willing to use it in order to reap the benefits of virtualization. Small businesses must be more cautious however many would still consider financing as a means to an end. Virtualization cutting down on Infrastructure, even at small organizations The biggest driver of virtualization, however, may be its ability to reduce existing tech infrastructure, cutting down on energy and maintenance costs. The majority (54 percent) of survey respondents said their virtualization implementation is meant to replace 25 to 50 percent of their internal infrastructure. This was especially true for smaller firms with company revenue below $10 million as 63 percent said they use virtualization to replace 25 to 50 percent of infrastructure. Upper management was also more optimistic about virtualization as nearly a fifth of respondents believed the technology could replace 50 to 75 percent of existing infrastructure while only 8 percent of middle management held the same beliefs. Budget Allocation to Virtualization Most professionals needed only a relatively small push to begin the virtualization process as 87% of survey respondents felt forecasted cost savings of 10 to 30 percent was enough to justify the purchase. Larger companies on average needed less cost savings to make a compelling case for migrating to server or storage virtualization. This is likely due to the fact that companies over 100 employees were more familiar with virtualization and it s benefits in general. According to the survey, 92 percent of respondents working for those companies were very familiar with virtualization while just 62 percent of small business leadership felt comfortable with it. This unfamiliarity may be a key reason why more small businesses have not yet adopted today s virtualization technology. It s likely as they start understanding the ins and outs of virtualization, more small business will become adopters over the next few years. When it comes to budgeting for virtualization, the larger companies appear to be making it a bigger priority at this time. Eighty percent of firms with employees say the virtualization aspect of their budget is dedicated, meaning it s a regular part of their strategy. Only 50 percent of firms with under 100 employees have funds dedicated for virtualization. Larger companies were 6

7 Cost The Top Barrier to Entry Unsurprisingly, the majority of firms that do not employ virtualization list cost of adoption as the number one issue holding them back. Middle managers were particularly concerned with costs as 61 percent listed it as the largest barrier to entry while only 33 percent of upper management cited cost first. Security was also a common concern as 51 percent of respondents named it a barrier. Companies with over 100 employees found security especially important as 60 percent worried about the safety of their virtualized network. Only 33 percent of smaller firms listed security as a major barrier to their entry. Other barriers to entry listed by respondents included reliability (40 percent), implementation effort (29 percent), learning a new vendor technology (23 percent) and lack of management buy-in (23 percent). Overall, however, it appeared that once companies adopt virtualization, many of their barriers to entry concerns are left behind. Sixty-three percent of firms who didn t employ virtualization felt service quality and performance were high barriers to adoption however only 54 percent of companies listed this as a concern once virtualization was adopted. A Middle Ground between on-site and The Cloud Where mission critical applications should reside was one area where most respondents agreed, with 75 percent saying they would prefer moving those applications to a virtualized server onsite rather than an off-premise cloud provider. Upper management respondents and those who have already employed virtualization were particularly strong about this preference. Solutions like Cisco s Flexpod Express, which centralizes applications on-site for small and medium-sized business, may be the preference for companies with these concerns. 7

8 Upper, Middle Management Divided on Virtualization One trend that was consistent throughout the survey of professionals was the relative divide in opinions between those in VP and above (upper management) positions and those listed as director and below (middle management). As illustrated in the chart below, upper management respondents were far more confident in virtualization overall. Will there by organizational changes within your firm as a result of the adoption of virtualization solutions? Has your organization achieved 100% of forecast cost-savings after virtualization implementation? Has virtualization caused significant impact on efficiency and cost-savings? How enthusiastic are you about virtualization technologies? Upper Management 75% yes 76% yes 70% yes 71% very enthusiastic Middle Management 25% yes 43% yes 45% yes 41% very enthusiastic This wide gap is not surprising considering virtualization cost-savings could very well be those middle managers salaries. By nature, virtualization technologies create a more efficient workplace that could often lead to the reduction of employees. The chart reflects that trend as upper managers were very confident that virtualization adoption would lead to organizational changes. This supports the belief that company executives are more likely to view virtualization, and emerging technologies like it, as keys to company growth. The upper managers are most confident, and more enthusiastic, that their bottom line will ultimately improve due to new efficiencies. Middle managers appear more skeptical as they might realize the challenge of adopting new programs and new processes, including changing job roles. 8

9 What s next for virtualization? How much will budgets for virtualization increase this year? As more business leaders learn about the capabilities of virtualization, it appears it will quickly become a mainstay of the department. Seventy-one percent of survey respondents said dollars budgeted for virtualization will increase up to 20 percent over the next two years compared to just 25 percent who said the budget would stay the same. The key to this growth will simply be awareness. Sixtyfive percent of respondents admitted they are concerned about the lack of knowledge regarding virtualization among the general public. Seventy percent added that they feel their management is not familiar enough with virtualization benefits. The positive note is that when it comes to virtualization technologies in general, nearly all (97%) of respondents said they are enthusiastic and excited for their capabilities in the industry. Upper-level managers, no doubt more concerned with overall cost-cutting, were especially excited, with 71 percent saying they are very enthusiastic about using virtualization in their department. Overall the professionals surveyed left no doubt that = 25% 71% +20% Majority of managers expanding virtualization spending by 20% this year virtualization is a long-term investment that will continue to grow over the next few years. While there are still barriers to entry, especially for smaller companies, we can expect to see more and more adopters as common concerns like cost, security and scalability are addressed. Just as with any technology in today s world, virtualization will continue to improve to the point where it is no longer a luxury, but a must for any business seeking an efficient solution. 9

10 Methodology From The Blackstone Group: The nationwide survey was conducted by the Blackstone Group, a custom marketing research and consulting firm. The online survey was conducted in September 2013 among 150 professionals (manager level and above) employed by midsize organizations ( employees). Respondents were recruited from an established online research panel of professionals. Prior to completing the main survey, potential respondents were asked a series of qualifying questions (job role, level, organization size) to determine their eligibility. 10

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