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Getting real results by going virtual

When Deluxe Laboratories acquired a distribution business, it decided to let utility provider Savvis Communications worry about IT. Letting go is paying off.

Mark Winter decided to go virtual with St. Louis-based Savvis Communications Corp. A year later, he says the results are very real.

"I figure I'll save $500,000 over my two-year contract," said Winter, executive vice president of information technology for Deluxe Laboratories, a movie industry supplier in Los Angeles. Deluxe, with $500 million in annual revenue, claims to be the largest film processing company in the world.

Deluxe pays for a virtualized platform operated by Savvis. The Savvis platform provides utility services, including firewalls, servers, storage, network, intrusion detection, load balancing and web acceleration. And all this can be configured for a company is less an hour, according to Savvis' chairman and chief executive, Rob McCormick.

The Savvis virtual utility is "pay as you go," meaning customers are not required to make upfront capital expenditures for computing infrastructure. The virtualized platform can also be tailored dynamically to match the specific needs of each customer each month.

This kind of computing is catching on. A survey of business executives, IT buyers, systems managers and other strategic planners done by Boston-based Summit Strategies shows that 20% had virtualized either their servers or storage and another 50% were planning to evaluate implementing virtualization over the next three years.

"The market is hot but making it all work will take awhile,' said Summit analyst Joe Clabby. Companies will need to rebuild their infrastructures to make them service-oriented and put policies in place to enable virtualized computing. "Over the next five to 10 years, the industry will really start moving in this direction," Clabby said, who believes the biggest payback in going virtual is the potential to cut management costs.

One thing companies need to do is carefully vet the finances of service providers to determine their long-term viability. Clabby, for example, had not heard of Savvis, although it is listed second to IBM in Gartner Inc.'s "Magic Quadrant for North American Web Hosting, 2004."

For film company Deluxe, the decision to go virtual was prompted by an acquisition.

The new business, Deluxe Digital Media Management, operated a large warehouse which stored and shipped promotional items to movie theaters. The core applications, built around inventory control, seemed simple but customer orders often were highly customized and needed to be shipped quickly. Deluxe's Winter soon discovered that the IT environment he had inherited was inadequate.

"They had two hosting sites, one at WinStar and one at Quest. We started growing the business dramatically and found they weren't scaling at all. The hardware didn't scale and the applications didn't scale," said Winter.

Costs and consolidation

Bringing the system in-house would require replacing servers and adding staff. If the system stayed on the hosting model, Winter still would have capital expenditures and management issues. Moreover, it was not clear how fast the new business would continue to grow.

"I looked at the numbers, and I said, you know what, I'm not going there," Winter said. "First of all it was not something we budgeted for and to acquire staff that quickly to get it up and running was a recipe for disaster."

Winter considered other hosting and managed models, including a competitive leasing package from Quest, before deciding to go with Savvis. The company was already supplying a private-IP network to Deluxe Laboratories and came back with an attractive bid for virtual-computing.

Cost were based on usage only. The contract gave Deluxe the ability to scale up—or not—as the new business required and, even better, Winter didn't have to hire. "I'll be honest, hiring qualified resources is really tough," he said.

A year into the deal, Winter is happy enough with the Savvis contract to crow about it. The conversion took 45 days. The company was able to consolidate 18 servers to six. There were a few glitches, said Winter. Some customers didn't want to change their domain name server (DNS), which was required.

"It may sound like a trivial concern but their refusal to change caused us a good deal of grief during the conversion," Winter said. On the other hand, some of the conversion work went even faster than expected, he noted. "We needed to realign on of the applications between servers, and to tune the database," he said, a job that was expected to take a weekend and was completed by Saturday at 5:30. Winter says the company is looking now to see if other applications can be moved to a similar setup. "If it fits the hosting model, we're looking to move," he said.

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