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IBM Transformation:Major IT Virtualization Initiative“IBM’s Consolidation Story, We Eat our own Dog Food” Jim VincentDecember,2008 2008 IBM CorporationBill Reederbreeder@us.ibm.comIBM Systems

IBM Virtualization – Enterprise Data Center JourneyAgenda– IBM Commitment/Announcement Highlights IBM Transformation and “Big Green” Internal Infrastructure Challenge, Approach and Benefits– IBM Virtualization Update Virtualization Progress Business Case Approach and Client View of Savings Application and Workload Selection Successful Techniques and Lessons Learned2IBM Systems

Project ‘Big Green’Major proof point for Project Big GreenDouble computecapacity with noincrease in consumptionor impact by 2010IBM to reallocate 1 billion each year To accelerate “green” technologies and services To offer a roadmap for clients to address the ITenergy crisis while leveraging IBM hardware,software, services, research, and financing teams To create a global “green” team of almost 1,000energy efficiency specialists from across IBMRe-affirming a long standing IBM commitment Energy conservation efforts from 1990 – 2005have resulted in a 40% reduction in CO2emissions and a quarter billion dollars of energysavings Annually invest 100M in infrastructure to supportremanufacturing and recycling best practices3 IBM will consolidate and virtualize thousands ofservers onto approximately 30 IBM System z mainframes Substantial savings expected in multiple dimensions:energy, software and system support costs The consolidated environment will use 80% lessenergy and 85% less floor space This transformation is enabled by the System zsophisticated virtualization capability

IT Organizations are Challenged by Operational IssuesChallengesRising costs of systems and networking operationsCosts &ServiceDeliveryExplosion in volume of data and informationDifficulty in deploying new applications andservicesSecurity of your assets & your clients’ informationBusinessResiliency& SecurityLandslide of compliance requirementsSystems and applications need to be availableRising energy costs & rising energy demandEnergyPower & thermal issues inhibit operationsRequirementsEnvironmental compliance & governancemandates4IBM Systems

IBM’s Globally Integrated Enterprise Data CentersIBM Strategic Delivery ModelData Center Efficiencies Achieved Consolidation of infrastructure, applications Enterprise architecture optimization Global resource deploymentTECHNOLOGYIBM Metrics1997TodayCIOs1281Host data centers1557Web hosting r IGAEthernet &Power9NetworksNext Level of Infrastructure Challenge 5Floor space challenges in key facilitiesUnderutilized assets in outdated Web infrastructureContinued infrastructure cost pressureIncrease % IT spending to transformation initiativesIBM Systems

Stages of Adoption: IBM JourneyHighly responsive andbusiness goal drivenRapid deployment of newinfrastructure and servicesDrives IT efficiency Physical consolidation of datacenters, networks and applications Simple like-for-like server andstorage virtualization Service tools, energy facilities mgmt6 Significant progress toward highlyvirtualized environment to enablepooled System z, Power Systems,System x and storage Green production and advanced datacenter facilities Shared service delivery model IBM Research “Cloud” Business-driven servicemanagement pilots Globally IntegratedEnterpriseIBM Systems

Enterprise Business Value – ExpectationsBusinesscase Early modeling identified significant potential for savings through zLinux virtualizationPerformed TCO virtualization assessment on IBM portfolio as cross-IBM effort– Identified substantial savings opportunity––EnergysavingsQualityservice System z, SW Migration Services, STG Lab Services, IBM Academy, ITO Migration FactoryEnergyFloor space––LaborSoftwareAnnual energy usage to be reduced by 80%Total floor space to be reduced by 85%–11,045 square feet for distributed solution–1,643 square feet for System z solutionLeverages maturity of System z stack products - high availability, resiliencyReduces complexity and increases stability, centralizes service mgmtPotential for faster provisioning speed (months days)Dynamic allocation of compute powerProvides world-class securityDistributed SolutionComparison of AnnualEnergy Usage forWorkloads7System z SolutionKilowatt hours (K)Cost* ( K)Kilowatt hours (K)Cost* ( K)Power24,000 2,4004,796 479Cooling**14,400 1,4402,877 287Total Energy38,400 3,8407,673 767* Electrical cost calculated at rate of .10 per kW** Cooling is 60% of power costIBM Systems

IBM Virtualization – Enterprise Data Center JourneyAgenda– IBM Commitment/Announcement Highlights IBM Transformation and “Big Green” Internal Infrastructure Challenge, Approach and Benefits– IBM Virtualization Update Virtualization Progress Business Case Approach and Client View of Savings Application and Workload Selection Successful Techniques and Lessons Learned8IBM Systems

IBM System z Linux Virtualization Progress Established phased approach for quick winsPhase 1 Migrated initial servers from early ‘wave’ teams–––“Quick wins”Thousands of servers inventoriedMultiple successful migrations delivering benefits as expectedDecommission pipeline of hundreds of servers for reuse or removalPhase 2Highest Savings First Comprehensive project plan and management system in place–––Phase 3-nFinish VirtualizationIntegrated business priorities with transformational objectives‘Work in progress’ approach to maximize server migrationsPipeline, process, technical, finance and communications support Developed internal business case (RACE*)–Created detailed cash flow and labor analysis, migration expense, iterated Technical solution, education plan and operational plan developed–Built upon IBM prior consolidation/simplification efforts, utilizing IBM offerings and capabilities Highest level of support from IBM senior executive team*Formerly zRace9IBM Systems

IBM System z Linux Virtualization Progress IBM implementing New Enterprise Data Center through achievements in– Server and storage virtualization– Energy efficiency and resiliency improvements Benefits are on track with expectations– Migration management key– Business case is compelling– Using System z10 technology, the number of machines could be cut byabout half, with greater savings in energy, floor space, software andsupport costs Lessons Learned, including:– Enterprise strategy and sponsorship needed to drive business caseand execution– Compelling business imperative accelerates execution and drives support– Enterprise view of migration managed by waves drives experience;savings for investmentCumulative 5-Year CostComparisonDistributedCumz9 Cumulative1stYear2ndYear3rdYear4thYear5thYear IBM experience is driving Time to Value initiatives, integrated into IBM capabilities– Dramatic reduction in labor through new processes supporting workload migrations– Fall in/out analysis, working with business units, to close gaps in workload pipeline– Piloting new testing strategy, processes & tools to automate10IBM Systems

Virtualization Benefits are Significant; Migration Management is KeyExpected Benefits of VirtualizationLarge Scale Migration Challenges Exist Substantial savings in multipledimensions: energy, software andsystem support costs Decision-making: Integrating Enterpriseand Business Unit view 80% less energy, 85% less floor spacefor consolidated environment Improved inventory hygiene, includingapplication to server mapping Dramatically faster provisioning Improved security and resiliency Higher quality through reducedcomplexity, increased stability andavailability Mindset/Culture related to distributedand mainframe worlds Workload selection - multidimensionalnature of selection process Dated inventory records that are notcentrally maintained Detailed data required for internalbusiness case Project and program complexity –integrating multiple prioritiesClients are able to leverage IBM experience andcapabilities to accelerate value11IBM Systems

Business Case Leveraged RACE Tool, Iterative ApproachUtilized RACE commercial modeling tool– Foundation for internal business case, constructed specificenvironmental variables. Created financial plan for “known universe”– Identified relevant sample (5-10%) of most likely servers to be migratedand gathered financial profile information for eachEngaged SME’s within IBM– Provided business case assumptions (i.e. depreciation/maintenance),modified as appropriateIterative Process– Continuously engaged with core SME’s to ensure most currentinformationProject Metrics– Weekly report of migrated servers and their disposition status (reuse ordisposal using GARS*) and Energy Certificate status- Working to incorporate actuals into the Business Case such that wecan refresh our assumptions*IBM Global Asset Recovery Services12IBM Systems

TCO: A Range of IT Cost Factors – Often Not Considered Availability– High availability– Hours of operation Backup / Restore / Site Recovery–––––BackupDisaster ScenarioRestoreEffort for Complete Site RecoverySAN effort Security––––– Deployment and Support– System Programming Keeping consistent OS and SW Level Database Effort Infrastructure Cost–––––––SpacePowerNetwork InfrastructureStorage InfrastructureInitial Hardware CostsSoftware CostsMaintenance Costs Additionaldevelopment/implementation– Investment for one platform – reproductionfor others Controlling and Accounting– Analyzing the systems– Cost Operations Effort––––13Monitoring, OperatingProblem DeterminationServer Management ToolsIntegrated Server Management –Enterprise WideAuthentication / AuthorizationUser AdministrationData SecurityServer and OS SecurityRACF vs. other solutions– Middleware SW Maintenance SW Distribution (across firewall)– Application Technology Upgrade System Release change without interrupts Operating Concept– Development of an operating procedure– Feasibility of the developed procedure– Automation Resource Utilization and Performance– Mixed Workload / Batch– Resource Sharing Integration– Integrated Functionality vs. Functionality tobe implemented (possibly with 3rd partytools)– Balanced System– Integration of / into Standards Further Availability Aspects– Planned outages– Unplanned outages– Automated Take Over– Uninterrupted Take Over (especially for DB)– Workload Management across physicalborders– Business continuity– Availability effects for other applications /projects– End User Service– End User Productivity– Virtualization Skills and Resources– Personnel Education– Availability of Resources shared nothing vs. shared everything––––Parallel Sysplex vs. Other ConceptsResponse TimePerformance ManagementPeak handling / scalabilityRoutinely AssessedCost FactorsIBM Systems

Client View of TCO Comparison for Similar Distributed Workload vs.System z Linux results in Potential 60-75% Gross Costs Savings / 5 yrsOperating Cost: Distributed vs. MainframeDramatic SimplificationRelative CostLaborConnectivitySoftwareDistributedSystem W MaintenanceHW AcquisitionFacilitiesDistributed CostSystem z Linux CostPotential Savings: Categories as a% of Gross SavingsHW Acquisition*17%HW ctivity2%* HW Acquisition compares server/disk refresh of distributed environment tothe cost of acquiring new lts will vary based on several factors including # of servers and work load typesIBM Systems