Price per VM calculations, an exercise in crazy

First let me preface that the pricing involved here is generalized at best, and should in no way be a true 100% accurate reflection of any named Vendors pricing.

I’ve tried to provide a true cost of ownership for the ESXi hosts in my environment.  This takes into account all aspects of the hardware and software involved in the Data Center.  Host Hardware, Storage, Networking and Software Licensing are all included.  For determining a “price per vm” the cost is being based primarily on the amount of memory that a VM will require. The bottom line is that for every GB of RAM a VM needs, the price will be roughly $350. Secondary to memory is storage, with every GB of storage required beyond the initial 50 allocated, requiring $5 per GB.

For Networking I have tried to break down the cost per port as if we had to buy or chargeback for the total purchase price for the current networking infrastructure. Currently we have spare networking capacity on the 10GB LAN side for an additional 2 ESXi hosts. After that, new 10GB  switch blades will be required along with the various GBICs and cables.  The same can be said for the Storage Area Network, where SAN switches have spare capacity for additional hosts, but would require larger or more switches if we move past an additional 2 ESXi hosts.

Host System: $31,500

ESXi Hosts are IBM 3690 X5 Servers with redundant components running 16 Cores and 256GB of RAM each. Price at time of last purchase was roughly $31500 for the hardware with 3 years of support.

Networking:  $12,000

Networking comprises of a pair of redundant 10GB LAN ports in conjunction with 6 additional 1GB LAN ports for management, iSCSI, and vMotion/HA/FT networking.

Storage: $10,000

Storage in this instance takes account for 2TB of Tier 1 provisioned storage for the standard Virtual Machine. Additional storage beyond a simple 50GB image is charged at $5 per GB.

Software Licensing: $16,000

Licensing costs include the cost per socket for vSphere Enterprise Plus licensing, Veeam Monitor and Backup, Microsoft Data Center Edition per socket. This pricing includes 3 years of support for all products.

Total Pricing Per ESXi Host: $68,750

The price per host at first glance can seem very expensive. It’s not until we take into account the consolidation ratios on each ESXi host that we can see the real cost benefit is achieved when certain ratios are met. The largest VM’s in our system currently utilize 4 vCPU with 16GB of RAM, the average VM is 1 vCPU with 3GB of RAM.  This gives a feasible consolidation ratio 64:1, though we currently do not load up a single host with 64, 3GB vRAM virtual machines.

This price breakdown takes into account the maximum allocation of 192GB of RAM per host based on the vSphere5 licensing allocations. Even though our hosts have 256GB of RAM, we do not run the hosts at 100% Memory utilization. ESXi hosts will be striving to attain 192GB of vRAM utilization, or 75% of capacity. At this level N+1 is attained with the 4th ESXi host.

Price Break Down per VM:

Currently on the primary production ESXi cluster we can achieve consolidation ratios of up to 40:1. Even though the total average across all VM’s is 3GB of RAM for each VM, the consolidation ratio doesn’t necessarily work that easily. 40:1 is an achievable ratio for the mixture of VM’s within my current environement, which brings the cost per VM to around $1680 per VM. The table below shows pricing per VM based on the memory allocated. Memory is the constraining resource in nearly all virtual environments, thus it is the key component that my pricing model is based on.

Item Quantity Cost Each Cost Total
10 G Switch Port




1G Switch Port




SAN Switch Port












ESXI License




ESXI Support




Veeam License




Veeam Support




XIV Space




MS DC License




Price Total Per ESXi Host


Total Costs Including Network/Storage/Host/Licensing
RAM per VM Number of VMs Price Per VM  
































Caveat: storage throws a wrench in pricing

The prices above reflect general averages, expecting the storage requirements of the VM’s to be within the 2TB LUN created for each host. We achieve great reductions in storage usage utilizing thin provisioning which reduces the actual amount of storage used. Still, based on a consolidation ratio of 40:1 the result is 50GB of storage per VM.  Additional storage outside of the base VM will add additional costs at a rate of $5 per GB of additional storage.

Recent Request Example: Hyperion Upgrade

I had a request for 7 new VM’s for a Hyperion upgrade. The break down for each VM is as follows:



50 GB C Drive Partition

150 GB Data Partition

The initial cost for the 7 physical systems comes out to $5950 per server excluding storage for a total of around $41650 in physical server costs.  One item to note is that if the servers require direct SAN access at the Fibre Channel level, prices will increase significantly as the need to expand the SAN port count would be required. Additional or larger SAN switches would need to be purchased to accommodate the number of systems that would need Fibre Channel SAN storage access. The servers quoted above have the required HBA’s to access the Fibre Channel SAN, we simply do not have the spare number of ports required for that access. iSCSI is an alternative that can meet the requirements of the servers, and iSCSI HBA’s are cheaper than Fibre Channel HBAs and this would reduce the price per server by approximately $850 each resulting in a total hardware cost of $35,700.

From a virtual machine cost standpoint, the 112GB of vRAM required for the 7 servers above brings the price per server to around $5600 (excluding storage) with a total price of $39200 which is slightly less than the cost of the physical systems, and requires no additional SAN ports, but slightly more expensive if iSCSI HBA’s are utilized for the SAN access.

What this cost analysis does not take into account is the remaining 80GB of vRAM capacity that is remaining on the ESXi host. That spare capacity could accommodate approximately 20 standard additional servers. The resulting host as configured would achieve a 27:1 consolidation ratio, or an average cost of $2488 per server.

To further illustrate the cost savings within the virtual environment, 20 additional standard workload servers would price out at approximately $2750 per server, for a total of $55,000. Add that to the 41650 needed for the 7 original server systems and not taking into account any network port or storage costs and the base cost for the 27 servers will result in $96,650 in cost.

$96650 (cost of physical systems) – $67850 (cost of ESXi host) = $27,900

Further cost savings are realized if you take into account exclusion of the network components, as the initial infrastructure is already in place for 2 additional ESXi hosts. Purchasing a single ESXi host and its licensing and allocating the initial storage required will cost $58,750, which increases the cost savings over the same 27 physical servers to $37,900.

Base Conclusion:

In totality, it is difficult to provide exact dollar to dollar costs and pricing in a virtual versus physical comparison. There are many factors that can be missed such as the costs involved in SAN and Network access. Furthermore, licensing costs are drastically reduced when a virtual environment is used versus a physical environment were licenses are tied to individual servers.

The purpose behind all this is to help me understand how to approach charge back operations as I deploy virtual machines. I could be 100% wrong in my assumptions and missing something that is glaringly obvious. So if anyone sees something or thinks I am fully out of my mind, please let me know. I like to do little exercises like this to help understand and quantify the benefits in virtualization beyond simple pricing and consolidation ratios.

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2 Responses to Price per VM calculations, an exercise in crazy

  1. Pingback: HDS Blogs: Evolution of VM Total Cost Calculations and Methods - The Storage Economist

  2. Pingback: How to make the cloud cheaper | Backup Central

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