Pendleton Bank claims server virtualization is slicing so much energy use that it's become a fountain of youth for old batteries.

"We've been able to postpone a server battery replacement project for at least another year," says Dan Hansen, head of technology for the $265 million West Virginia-based bank, speaking to the benefits of a project that reduced the 85-employee institution's server count from nine to two. Beyond lowering stress on the batteries that run the servers, the bank estimates that the outsourced deployment of VMware to Jack Henry will reduce server-related electricity use by about 80 percent-allowing a 300 percent ROI for a $140,000 project that absorbed 40 percent of the bank's overall IT budget for 2009.

That's a big outlay, but even budget strapped community banks are embracing server virtualization, attracted to the energy savings and other benefits such as improved up time and business continuity. And unlike other innovation, such as mobile banking, community banks are less apprehensive about dedicating IT dollars to virtualization, given the short-term ROI from energy reduction due to reduced cooling needs and server space is immediately apparent.

"The uptick [among smaller banks] is more rapid than in large institutions," says Cameron Haight, a research vp at Gartner. "Virtualization can minimize oversight and operations support. There's a premium on [tech labor] efficiency when you have a smaller IT organization."

Haight adds the energy savings aren't lost on smaller banks. "Overall, the banking industry averages about five-to-ten percent server utilization. And just turning one on will consume 65 percent of the available power draw of that server," he says.

At Citizens Bank (MS), a server virtualization implementation is only a couple of months old, but the bank's confident the sheer space savings should add up to additional cuts in energy spending beyond utilization improvements. "We were able to consolidate five server racks into one that runs all of our networks, and can place that rack in the best spot for cooling. That's certain to show up on the power bill," says Shane Callahan, svp and technology services manager for the $1.1 billion Citizens Bank.

The bank, whose project was mainly executed in-house, used VMware to consolidate 62 servers into five and increase utilization by a 17-to-one margin. Like Pendleton, the $100,000 project took up 40 percent of Citizens' IT budget, but the bank has already seen return on its investment and vast improvements in server utilization-some of its servers had utilization rates well below 10 percent prior to the virtualization project. "We were shocked at the results," Callahan says, saying additional efficiencies are due VMware's use of Intel's quad core processors, which allows multiprocessing (or more than one CPU). "It's like having four processors in one."

While VMware remains the dominant player in the virtualization space, there's emerging competition from Oracle, Microsoft and others. Haight says there's room for Microsoft to make inroads with smaller banks, where "homogenous, Windows centric" operating systems prevail. "There's less of a combination of Windows and Linux, etc. in these segments."

The gaudy utilization increases and electricity bill reduction possibilities aside, there are some concerns regarding server virtualization. With more functions being performed and more virtual servers deployed on a shared infrastructure, the possibility of backlogs becomes a concern, Haight says.

"Virtualization giveth, and it also taketh away," he says. "Provisioning is improved, but you also potentially have users running applications on other servers that can impact the availability."

This article can also be foudn at AmericanBanker.com.

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