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CIOs concerned about virtualizing their ERP infrastructure can take small steps toward reaping the benefits virtualization can offer.

IT organizations have steadily adopted virtualization technologies in recent years to reduce the size, cost, and complexity of their infrastructure. Virtualization technologies let IT departments run multiple operating systems and applications on the same physical server, thereby allowing them to consolidate server hardware.

Today, many organizations run their corporate email (e.g. Microsoft Exchange), collaboration tools such as SharePoint, and database servers on virtual platforms, according to “The Virtualization Practice.” In fact, various surveys show that companies have already virtualized about 60 percent of their x86 server workloads.¹

But few IT organizations at large companies have begun to virtualize their ERP systems. The infrastructure (storage, networking equipment, and servers) that supports ERP systems is often so vast (it can be between 50 and 70 percent of the total IT infrastructure footprint) that CIOs worry the risk, cost, complexity, and scale of such a transition would simply be too much to undertake.

Their concerns are justifiable. No company wants to find itself unable to create purchase orders, close its books, or accept payments because the virtual ERP infrastructure malfunctioned. Other barriers to ERP virtualization include security concerns and a shortage of skills, as existing IT staff may not have the relevant skills for architecting, deploying, and managing virtual machines.

The risks associated with migrating to a virtualized ERP environment may be significant, but the benefits are equally hard to ignore. The hardware consolidation that ERP virtualization facilitates can lead to significant cost savings; in a recent case, one company saved roughly 30 percent on infrastructure costs. Moreover, a smaller ERP footprint requires fewer support resources and fewer software licenses, thus further reducing operating costs.

Beyond cost savings, ERP virtualization can confer other benefits to IT organizations. A virtualized ERP platform may help an IT organization improve its quality of service for a variety of “run and maintain” activities. For example, virtualization can provide IT with the ability to create on-demand systems for proof-of-concept and prototyping; enhance or fine-tune the testing environment during integration and regression test cycles; or increase flexibility during cutover cycles.

Finally, virtualization accelerates an organization’s move to cloud computing by creating a pool of computing, storage, and networking resources that can grow or shrink according to demand. By virtualizing IT infrastructure assets, companies can create their own private clouds. Transitioning from a private cloud (whether on- or off-premise) to a public or hybrid cloud is less complex and requires less effort than transitioning from a non-virtualized environment.

A Path to ERP Virtualization

Companies should consider combining ERP infrastructure virtualization with a broader IT or business initiative. Possible initiatives include hardware refresh cycles, data center migrations, ERP upgrades, ERP instance consolidations, business transformations, or mergers and acquisitions.

Even though an event like a merger or data center migration may provide a CIO with an opportunity to virtualize the company’s ERP platform, many CIOs question their companies’ readiness for ERP virtualization. They may be apprehensive about the potential for extensive business disruption, or may question the maturity of virtualization technologies. But that’s precisely why companies may opt to combine ERP virtualization with another initiative: Mergers, ERP upgrades, and the like invariably cause business disruption and downtime. Adding virtualization won’t necessarily cause more downtime. In fact, the ERP virtualization effort can be staged to coincide with any disruption that occurs as a result of the larger initiative.

CIOs concerned about the potential perils of ERP virtualization should conduct a risk assessment to identify existing and potential risks associated with the effort. The risk assessment can be used to pinpoint potential security, business continuity, disaster recovery, and staffing issues. The goal of the risk assessment is to identify the low-risk elements of the ERP infrastructure that could be virtualized promptly and the higher risk elements that should be deferred. Depending on the size of the company and the scope of the initiative, the risk assessment may take between four and eight weeks.

A risk assessment should include an implementation and deployment road map. This road map should align with the company’s existing or planned initiatives, events, and projects, and it should chart an appropriate timeline for the ERP virtualization project.

The risk assessment and road map can help CIOs choose the appropriate migration path for their companies. For example, risk-averse companies may opt for minimal virtualization, choosing to virtualize only the application tier of their ERP infrastructure, as opposed to the higher-risk database tier. Partial virtualization may include servers and databases hosting non-critical ERP application components. Full virtualization could include all application servers and databases.

Another lower-risk option: Begin by virtualizing the infrastructure for non-production ERP systems, such as the testing and development environment. This gives IT organizations the opportunity to learn the ropes and get comfortable with virtualization, but using non-critical systems. Since the non-production environment can comprise a significant portion of the overall ERP infrastructure, a company can realize substantial savings by virtualizing this portion alone—at least in the near term.

Depending on the organization’s size and the complexity of its ERP solution, the virtualization project may take from six to nine months.

In summary, the decision to migrate to a virtualized platform should rest on the risk, impact, and alignment with existing or in-flight initiatives. The maturity of cloud and virtualization technologies should no longer be an issue. They’ve advanced in the past decade and are ready for the complexities and processing demands of large scale ERP applications. Consequently, some organizations have begun to realize the benefits and value associated with this transformation. Yours could be among them.

—by Abdi Goodarzi, director, Deloitte Consulting LLP and Pavan Srivastava, senior manager, Deloitte Consulting LLP