Headquartered in Hastings, Minn., Smead Manufacturing is a leading supplier of office filing products and records-management systems. The firm's products are distributed through the likes of Office Depot, Staples and other office supply stores and retailers.

Smead's IT department includes 42 people, according to Albert Lui, Chief Technology Officer. On the technical infrastructure side, there are 11 technicians responsible for supporting networks, servers, database, desktop infrastructure, telcom phone system and Voice over Internet Protocol (VoIP) plus other miscellaneous duties.

The firm's first foray into server virtualization occurred about six years ago. Since that time, Smead has experienced some network improvements related to the virtualization efforts. However, the company didn't fully buy into the application until the downtime occurred.

"Running a [legacy] PeopleSoft suite of SCM software, two versions behind, meant that the applications required an older operating system and older hardware technology to support it," Lui says.

"While security patches were being performed on the Microsoft Cluster Server Software [CSS], the configuration was broken," he adds. A break in the shared-disk configuration or damaged data on the disks meant the system was down for a few days.

Debilitating as it was, the breakdown confirmed the obvious. The firm needed updated server technology to sustain the legacy applications in the future.

"Furthermore, when we looked at the [server] utilization report, it confirmed the fact that we were terribly underutilized," Lui says. In fact, the report showed that 85 percent of servers were only running at an average of 15-to-20 percent capacity.

"We immediately presented virtualization as the solution. It would provide us with better utilization of all the resources on the server side," Lui adds. "In addition, we could support applications on older OSs in a virtual machine to continue sustained applications."

Given the potential ROI, Lui and his team got complete buy-in from the business side of the company. In fact, $1.3 million in funding was allocated to get the server virtualization project completed.

The Physical-to-Virtual (P2V) migration process began in April 2008, and the virtualized infrastructure was put into production at the end of last September. "We started with 206 physical servers in August 2008," Lui says. "As of March 2009, we only have 107 physical servers.

"We virtualized 99 physical servers in that time," he adds. "Now, when new applications come in, we don't buy more physical machines. We just add more virtual servers to the system. Thus far, we've avoided purchasing 48 new servers."

Moving from the P2V turned out to be a straightforward process. "Once you put it into production, it goes very fast," says Klaas Snater, senior network analyst. "Our original target was to virtualize 45 servers. We completed that within three weeks."

Once the company determined that server consolidation via virtualization was the best approach, one of the major objectives was to virtualize all commodity servers used to sustain the PeopleSoft suite of apps and other critical lines of business applications.

"We needed something to sustain use of the applications that we had [legacy PeopleSoft system]," Lui says. "This was rather than spending millions on an upgrade for the SCM system."

To the delight of all stakeholders, the project came in under budget by $380,000. What's more, according to Lui, "The cost avoidance of new servers within the first four-to-five months was close to $915,000 in commodity servers."

"We achieved our primary objective, which was the ability to support older operating systems where newer hardware was incapable of running the legacy applications," says Daniel Sorenson, lead technical analyst at Smead.

"We also realized power savings by utilizing fewer servers," Sorenson adds. "As we looked at our redundant Uninterruptible Power Supply [UPS] systems, we were using the maximum of our UPS load.

"Over the course of 12 months, we've dropped 10kVA, relieving the maximum threshold of the redundant UPS systems." Reductions in power and cooling costs are a by-product of server virtualization.

Smead has been avoiding buying incremental servers, beside the capital investment of the Unisys ES7000. "We haven't bought any commodity servers for two years," Lui says.

"I don't need to buy new servers for technology refresh or new applications," he adds. "And when we retire those servers, I cut down all the maintenance costs of keeping them."

By his calculation, the company has saved close to $915,000 in cost avoidance alone. "If I look at operations expansion and increase in application requirements, I figure we could save $3.2 million over five years," Lui notes.

In the next few months, Lui and his team will begin overseeing two branches of the seven total branches that Smead operates in North America. These are currently not under his administration and management.

"We're going to use virtualization to take them over and consolidate all their servers and applications on our data center here in Hastings," he says. That cost reduction has not been completed or counted in the noted $3.2 million in savings.