Microsoft Virtualization: Data Center to DesktopCustomer Solution Case Study

Oil Distributor Fuels Operational Cost Savings by Using Virtualization Solution

OverviewCountry or Region: LatviaIndustry: Oil and gas

Customer ProfileHeadquartered in Riga, Latvia, LUKoil Baltija R owns one oil terminal and 44 fuel filling stations across the country. The company employs 480 people.

Business SituationLUKoil Baltija R wanted to improve scalability, reliability, and manageability of its data center. Its aging servers were vulnerable to power outages, and downtime affected the company’s operations.

SolutionLUKoil Baltija R virtualized its server environment using Windows Server 2008 R2 Enterprise with Hyper-V and Microsoft System Center data center solutions—and located its new servers in a third-party facility.

Benefits Reduced hardware and power costs Better business continuity Improved infrastructure management Room to grow and adapt at no extra

cost

“I estimate that if we had not virtualized our infrastructure with a Microsoft solution, our data center rack and power expenses would be 250 percent higher.”

Jurijs Vasilevics, Chief Information Officer, LUKoil Baltija R

Based in Riga, Latvia, petroleum marketer LUKoil Baltija R wanted to upgrade its data center, which consisted of nine aging servers in the basement of the head office. Given a one-time budget for improving IT operations from parent company LUKOIL, the company chose a virtualization solution using Windows Server 2008 R2 Enterprise with Hyper-V—saving U.S.$17,000 in licenses compared with VMware. LUKoil Baltija R closed down its data center at headquarters and installed six blade servers hosting 15 virtual machines at a third-party data center, saving approximately U.S.$30,000 in hardware costs. Power consumption is down 43 percent compared with the old data center. And using Microsoft System Center data center solutions, IT employees have reduced downtime by 50 percent and data center administration time by 13 percent.

SituationA subsidiary of Russian oil company LUKOIL, LUKoil Baltija R was formed in June 1993 to distribute and sell oil products through its oil terminal and a network of gas stations in Latvia. The company’s mission is to increase sales by offering good service and high-quality petroleum products, including gas and diesel fuel. LUKoil Baltija R serves individuals, large transport companies, local municipalities, and departments within the national government, such as the Ministry of the Interior. Customers can take advantage of the LUKoil fleet payment card to purchase fuel, goods, and services at LUKoil gas stations. In addition, the company owns the largest oil warehouse in Latvia, which offers railway tank-car forwarding, handling and storage of oil products, and laboratory gas quality testing.

Business Continuity IssuesLUKoil Baltija R has a four-person IT department that is responsible for maintaining the company’s infrastructure, including 120 desktop computers used in the head office, oil terminal, and gas stations. An additional 50 ruggedized PCs at the gas stations run a point-of-sale application on the Windows XP operating system. The company’s data center was located in the basement of the head office in Riga. Here, nine rack-mounted servers, running either the Windows 2000 Server or Windows Server 2003 operating system, supported the company’s operations.

“It was a simple arrangement and, with the servers located in our administrative building, they were easy to access and maintain,” says Jurijs Vasilevics, Chief Information Officer at LUKoil Baltija R.

“However, we are in an old building subject to occasional flooding and power outages, and any downtime affected the entire company’s operations. This was a big problem for us because our gas stations operate 24 hours a day, 365 days a year. Our customers depend on our many services such as our fleet cards and loyalty system, and our point-of-sale systems cannot be down. To solve this issue, we had been thinking about moving our servers to a third-party data center, but we wanted to make this move as economically as possible.”

Opportunity to ModernizeWhen parent company LUKOIL decided to consolidate operations in the Baltic region, Vasilevics and his IT team were given an opportunity to reevaluate their IT infrastructure. “LUKOIL gave us the creative freedom to begin an IT renovation project with the goal to modernize our infrastructure and make it more reliable and stable,” says Vasilevics. “It was around this time that everyone was talking about virtualization. While I understood the cost savings behind server consolidation, I had previously thought that our simple server farm didn’t warrant any investments in this type of technology. Now, I felt the time was right to investigate how virtualization could improve business continuity and help us build a better disaster recovery scenario.”

There were other reasons for Vasilevics’s interest in virtualization. First, while the recent LUKOIL restructuring project offered the chance to make significant changes in the subsidiary’s infrastructure, the parent company warned the IT department at LUKoil Baltija R that there were limits. “We were told that after this project, there will

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be no new physical hardware for three years,” says Vasilevics. “So we needed to be very careful about choosing a scalable solution. Server virtualization would allow our existing workloads to be consolidated onto a smaller number of machines, while leaving room for growth.”

Second, management had also given the directive that the IT department become more involved in business-specific projects. With a small IT staff and no budget to add employees, Vasilevics needed to simplify infrastructure management. “The business wanted us to be more available to develop specific projects for addressing business needs, such as new fleet card services and business applications for oil and oil byproduct sales,” he says. “We needed to have the right IT environment and management tools in place so we could actually free up time for the business.”

Third, LUKoil Baltija R already had some experience with virtualization in the desktop environment, running Microsoft Virtual PC 5.0 on several desktop computers at the head office. The company wanted to expand the benefits that it had begun to experience with desktop virtualization, including simplified centralized management of applications and the potential for purchasing less expensive thin-client terminals that consume less electricity.

SolutionTo help build a vision for its new IT infrastructure and define the role that virtualization might play, LUKoil Baltija R engaged Microsoft Certified Gold Partner Datakom in December 2009. “Our partners performed a complete audit of our

environment and recommended that we virtualize as much of our infrastructure as possible,” says Vasilevics. “We saw the value of server consolidation in saving us power and real estate costs at a third-party data center. The only thing left was to decide which virtualization solution to use.”

The Right Virtualization TechnologyLUKoil Baltija R evaluated virtualization technologies from VMware and Microsoft, and chose a Microsoft solution for a number of reasons. The company already had standardized on Microsoft technologies and could take advantage of its Microsoft Enterprise Agreement to upgrade to the Windows Server 2008 R2 Enterprise operating system with Hyper-V virtualization technology included.

“With VMware, it would have cost approximately [U.S.]$17,000 for licenses for virtualization technology that was too complex for our needs,” says Vasilevics. “With Microsoft, we got what we wanted with Hyper-V at no additional charge. But the savings don’t end there, because the Windows Server 2008 Enterprise processor license allows us to run up to four instances of the server software in the virtual operating system environment.”

IT staffers also liked the idea of an integrated suite of management tools, which Microsoft offers with System Center data center solutions. “When our partner showed us how other companies were using Microsoft System Center products, I was astonished,” says Vasilevics. “System Center products were a big part of our decision to choose a Microsoft Virtualization solution.” LUKoil Baltija R licensed Microsoft System Center Virtual

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“System Center products were a big part of our decision to choose a Microsoft Virtualization solution."Jurijs Vasilevics, Chief Information Officer,

LUKoil Baltija R

Machine Manager 2008 R2, System Center Operations Manager 2007 R2, and System Center Configuration Manager 2007 R2.

LUKoil had been interested in application virtualization for office workers before the company deployed Hyper-V, so it was an added benefit to find that the Microsoft Virtualization solution extends beyond the data center to offer integrated application virtualization technologies.

A New Data CenterThe data center migration project began in December 2009, when LUKoil Baltija R ordered six HP ProLiant BL460c G6 Server Blades. The company decided on blade server hardware to minimize space and power costs in the third-party data center.

As soon as the new hardware arrived in March 2010, Datakom began converting the nine servers at the LUKoil Baltija R data center to a virtual environment, creating new virtual machines from scratch. Then LUKoil IT staffers added another six virtual machines to run different Microsoft products, including System Center Configuration Manager 2007 R2, System Center Operations Manager 2007 R2, and Windows SharePoint Services.

“We deployed a four-node cluster with failover capability between the nodes,” says Ivans Dvoreckis, Key Account Manager at Datakom. “This cluster supports 15 virtual machines running all LUKoil Baltija R business applications, such as the accounting software, fleet cards, and loyalty systems, and critical infrastructure services such as file and print servers.” Even a few older applications that run only on Windows Server 2003 were migrated to the

new virtual environment, including the gas station head office application IPS MasterSoft Wizard, with its database engine, Pervasive PSQL v9.5 and company accounting software called Tildes Jumis. “These applications are important to our company’s operations and virtualizing them extended their productive life cycle for the company,” says Vasilevics.

The other two blade servers host a Microsoft Forefront Threat Management Gateway network security and protection solution that offers routing, remote access, security, and network performance features so LUKoil Baltija R employees can use the Internet for business without worrying about malicious software and other threats. The company added a HP LeftHand storage solution. The old data center servers were recycled for use as remote-site domain controllers and backup servers.

Upgraded, Reliable ApplicationsOne of the first business applications that LUKoil Baltija R virtualized was Microsoft Exchange Server 2010 Standard, dedicating a virtual machine each to the Hub Transport and Edge Transport server roles within Exchange Server 2010. The company became interested in Exchange Server 2010 after seeing a demonstration by Datakom. Vasilevics liked the Outlook Anywhere feature, formerly known as RPC over HTTP. Employees can take advantage of this feature using the Microsoft Outlook 2010, Office Outlook 2007, or Office Outlook 2003 messaging and collaboration client to connect to the company’s messaging servers from outside the corporate network, without using a virtual private network. “We are one of the first companies in Latvia to deploy Exchange

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"We are one of the first companies in Latvia to deploy Exchange Server 2010, and virtualization made that upgrade possible without us having to purchase additional hardware."Jurijs Vasilevics, Chief Information Officer,

LUKoil Baltija R

Server 2010, and virtualization made that upgrade possible without us having to purchase additional hardware,” says Vasilevics.

All LUKoil Baltija R applications were migrated to the virtualized environment in the third-party data center by June 2010. Datakom tested how well the environment performed under several scenarios, including application failure, disk failure, and full server failure, taking advantage of the live migration capability in Hyper-V. IT staff perform live migrations using the System Center Virtual Machine Manager 2008 console to move a virtual machine between clustered hosts without incurring downtime incurred. “We never experienced any downtime in any of these scenarios,” says Dvoreckis. “And using System Center Operations Manager 2007 to proactively warn us about issues was really impressive.”

The IT staff is also testing a Microsoft Virtualization solution using Virtual Desktop Infrastructure technology. This is a desktop delivery architecture that the IT staff can use to centralize the management and storage of Windows desktops in the data center. LUKoil Baltija R is testing different business applications on the virtual desktop, and it expects to start migration from physical PCs to a Virtual Desktop Infrastructure at Riga headquarters in early 2011. Later that year, when the company’s new fiber optic network is deployed, IT staff will start virtualizing desktops at the oil terminal.

BenefitsTo coincide with significant corporate restructuring, LUKoil Baltija R made a strategic decision to migrate to a

Microsoft-based virtualized environment. A modernized IT infrastructure and a new level of business continuity to ensure that gas stations are operational 24 hours a day are the two most significant benefits for the company. “In just three months, we used our Microsoft Virtualization solution to completely overhaul our IT environment, introducing improved reliability, manageability, and scalability at significant cost savings,” says Vasilevics.

Also, with a scalable virtualization solution, LUKoil Baltija R can introduce the latest application versions running on the most recent Windows operating system without having to pay for new hardware. “We are already getting a productivity boost after upgrading to Exchange Server 2010,” says Vasilevics. “Our management really appreciates Exchange Server 2010 functionality, with Outlook Anywhere running very smoothly.”

Reduced Hardware and Power CostsBy virtualizing its data center servers, LUKoil Baltija R was able to carry out a significant IT infrastructure modernization project—including new blade server and storage hardware—and stay within the strict budget set by its parent company. Introducing six additional virtual servers instead of six physical servers saved the company approximately U.S.$30,000. “Our Microsoft Virtualization solution can be considered a real business enabler because it freed up funds to spend on strategic IT upgrades now and in the future,” says Vasilevics.

LUKoil Baltija R is also reducing its carbon dioxide emissions and saving ongoing electrical costs. When the company’s

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maintenance department noticed a significant drop in power consumption in the summer of 2010, the department attributed the drop to its power-saving program—but Vasilevics was able to show that the reduction was in fact the result of virtualizing the company’s servers. “We have decreased our server power consumption by 43 percent, saving $2,453 a year,” he reports. “The data center has a fixed price for customers that consume a certain low number of kilowatts, and we are always under the limit. I estimate that if we had not virtualized our infrastructure with a Microsoft solution, our data center rack and power expenses would be 250 percent higher.”

Better Business ContinuityBusiness continuity is the ability to continue operations despite both scheduled and unscheduled downtime. Since deploying its virtualization solution, LUKoil has experienced improvements in both areas. Today, the company is using System Center Operations Manager 2007 in production to monitor its data center, and recently IT staff added network hardware monitoring for the gas stations. Now, the company is alerted to potential loss of computing power so it can move quickly to mitigate its effects on employees and customers by reallocating computing resources where needed.

“Before, we had two or three scheduled and about two unscheduled downtime events for business-critical systems per year,” says Vasilevics. “Now, we can reduce both scheduled and unscheduled downtime by at least 50 percent.”

LUKoil Baltija R is using live migration to mitigate the effects of planned downtime so that work done on the servers is transparent to employees. “Live migration helps us during maintenance,” confirms Vasilevics. “Last week, we were configuring SharePoint-based servers, and we used live migration to move workloads from one node to another while we did the work. Because of the solution’s failover capabilities, we are no longer worrying that our employees won’t be able to provide services and fleet cards to customers at our gas stations. In this example, none of our end users were aware of the project!” During an extremely unusual power outage at the data center, System Center Operations Manager 2007 notified IT staff immediately so they could start working with the data center to solve the problem. “Although in this instance, we couldn’t avoid service outage to the business, we were the first customer to call: the data center’s engineers were working on a solution, but the managers weren’t even aware of the problem yet,” says Vasilevics. “System Center Operations Manager 2007 showed us that when you have information, you have more control over business continuity.”

Improved Infrastructure ManagementIT staff members are impressed with the System Center data center solutions that they use to manage both physical and virtual servers, and Vasilevics is relieved that the move to virtualization didn’t increase IT workload. “While our IT infrastructure became more complex, interestingly, with the System Center solutions, it is more transparent than ever,” says Vasilevics. “System Center Operations

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Manager 2007 quickly became one of our main tools in daily infrastructure maintenance. We save about 13 percent of department work time thanks to outsourced and simplified administration.”

Using System Center Virtual Machine Manager 2008 and System Center Configuration Manager 2007, the IT staff can launch new virtual machines easily, responding more quickly to business needs, controlling deployment and maintenance costs, and quickly testing systems and applications before actual rollout. “With System Center Virtual Machine Manager, we can create new machines from clones, so there is almost no manual work,” says Vasilevics. “With our new virtualized infrastructure, the IT department can focus more on business-specific projects and corporate goals.”

Room to Grow at No Extra CostBecause the parent company stipulated that LUKoil Baltija R had a finite amount of funds to modernize its IT infrastructure, with no further hardware budget for three years, it was important that the IT department deploy a scalable infrastructure. A Microsoft Virtualization solution provided LUKoil Baltija R with increased business agility and the ability to accommodate IT and business objectives as dictated by headquarters.

“Here in Latvia, we haven’t used an enterprise resource system, but LUKOIL wants to maintain all financial data in its databases so it mandated a move to SAP,” says Vasilevics. “Luckily, we’d deployed a cost-effective Microsoft Virtualization solution so we could comply with the parent company without having to spend a

lot of money buying hardware. We are only using 75 percent of the rack space we have rented and there is still a place for two more blade servers in the chassis. For the next three years, we can grow the business infrastructure with minimal investment.”

With its Microsoft Virtualization solution, LUKoil Baltija R has gained an enterprisewide, extensible platform that includes server and desktop virtualization capabilities, all monitored by an integrated suite of management products.

“A Microsoft-based Virtual Desktop Infrastructure solution will help us simplify desktop management and reduce costs, and we already own the resources required to extend virtualization to the desktop,” says Vasilevics. “Now that we have a Microsoft Virtualization solution, we can finally move ahead with long-term plans.”

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Microsoft VirtualizationMicrosoft virtualization is an end-to-end strategy that can profoundly affect nearly every aspect of the IT infrastructure management lifecycle. It can drive greater efficiencies, flexibility, and cost effectiveness throughout your organization. From accelerating application deployments; to ensuring systems, applications, and data are always available; to taking the hassle out of rebuilding and shutting down servers and desktops for testing and development; to reducing risk, slashing costs, and improving the agility of your entire environment—virtualization has the power to transform your infrastructure, from the data center to the desktop.

For more information about Microsoft virtualization solutions, go to: www.microsoft.com/virtualization

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For More InformationFor more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:www.microsoft.com

For more information about Datakom products and services, call (371) 67 628 888 or visit the website at: www.datakom.lv

For more information about LUKoil Baltija R products and services, call (371) 67 066 400 or visit the website at:www.lukoil.lv

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Document published February 2011

Software and Services Microsoft Server Product Portfolio− Windows Server 2008 R2 Enterprise− Microsoft System Center

Configuration Manager 2007 R2− Microsoft System Center Operations

Manager 2007 R2− Microsoft System Center Virtual

Machine Manager 2008 R2

Technologies− Hyper-V

Hardware Servers− HP ProLiant BL 460c G6

Storage− HP LeftHand storage area network