Case Study: Transforming Private Cloud Efficiency with Instelligence — Migrating from VMware to Proxmox

Overview

A mid-sized Managed Service Provider (MSP) managing its own data centres faced unsustainable costs, vendor lock-ins, and scalability limitations with its VMware environment. With licensing renewals approaching, the MSP sought a cost-effective, open-source alternative to align its infrastructure with business objectives.

Instelligence provided a seamless migration to Proxmox Virtual Environment (VE), complemented by managed services priced according to the complexity of the environment and a co-design retainer to assist the MSP in transitioning the sales team to its new environment. This case study explores the challenges, migration process, and transformative outcomes.

The Challenge

The MSP operated a 40-host VMware cluster across two data centres, supporting 400 virtual machines (VMs). Key metrics included:

Core Count: 1,280 cores (32 cores per host across 40 hosts)
RAM per Host: 768 GB (total 30.72 TB across 40 hosts)
Storage: 800 TB serving raw vSAN storage (array storage was out of scope)
VMware Licensing Costs: $448,000 annually (calculated at USD$350 per core per year for VMware Cloud Foundation bundle)
vSAN Storage Licensing Costs: $0 (vSAN storage usage was within the 1,280 TB included with licensing)
Hardware Maintenance: $150,000 annually (estimate)

Primary Challenges:

Cost Pressure: Licensing fees represented the most significant IT expense, limiting the MSP’s ability to reinvest in growth.
Operational Complexity: Managing proprietary infrastructure required significant overhead and limited the ability to innovate.
Coordinating Downtime: With workloads spanning multiple operational teams, scheduling downtime for migration was complex and required careful coordination.

The MSP sought an alternative that would drastically reduce costs, simplify operations, and provide the flexibility to innovate.

The Migration Plan

Instelligence implemented a phased approach to ensure a seamless migration with minimal disruptions:

Initial Assessment
- Conducted a detailed audit of the VMware environment using RVTools and in-house analysis tools.
- Mapped workload requirements and compute configurations to equivalent Proxmox VE configurations.
- Proposed a Ceph-based SDS solution to replace vSAN storage.
Architecture Design
- Designed a Proxmox cluster to host 400 VMs with room for growth.
Pilot Testing
- Deployed a 5-host Proxmox cluster for validation.
- Migrated 50 VMs to test performance, compatibility, and failover capabilities.
Full Migration
- Phased migration plan transitioning 20 VMs per week over four months.
- Provided Proxmox training to the MSP’s internal IT teams.
Managed Services Integration
- The MSP opted for Instelligence’s Managed Services, priced based on infrastructure complexity:
  - Proxmox Base: AUD$800/year per host for all 40 hosts (AUD$32,000 annually).
  - Ceph SDS: Additional AUD$800/year per host for all 40 hosts (AUD$32,000 annually).
  - Total Annual Managed Services Cost: AUD$64,000.
Co-Design Retainer
- Instelligence provided a unique co-design retainer at $2,500 per month for 12 months, giving the MSP’s pre-sales and operational teams access to consultants to assist with solution design and unique client requirements.
Post-Migration Support
- Delivered three months of support before transitioning fully to managed services and the co-design retainer.

The Results

1. Cost Savings

Licensing Costs Eliminated: Instelligence removed $448,000 per year in VMware licensing fees by deploying an open-source Proxmox solution.
Managed Services Costs: Added $64,000 annually ($192,000 over three years), tailored to the complexity of the environment.
Co-Design Retainer Costs: $30,000 for 12 months ($2,500 per month).
Net Annual Savings: Instelligence delivered $384,000 in savings compared to VMware pricing while providing enhanced operational flexibility and greater access to specialists.

2. Leadership Peace of Mind

The MSP leadership team reported significantly reduced stress levels with regards to licensing, as Instelligence’s comprehensive migration plan and managed services provided a clear path forward for their IT infrastructure. This enabled leadership to focus on strategic growth rather than infrastructure challenges.

3. Operational Simplicity

Instelligence’s use of Proxmox simplified the MSP’s operations, reducing reliance on restrictive licensing models and proprietary solutions. With Instelligence’s managed services, the MSP was able to offload infrastructure management and focus on core business activities.

3-Year Cost Comparison

Cost Category	VMware 3-Year Costs	VMware 3-Year Commit Costs	Proxmox 3-Year Costs	Savings Delivered by Instelligence (vs. Standard VMware)	Savings Delivered by Instelligence (vs. Commit VMware)
Licensing Costs	$1,344,000	$739,200	$0	-$1,344,000	-$739,200
vSAN Storage Costs	$0	$0	$0	$0	$0
Managed Services	$0	$0	-$192,000	-$192,000	-$192,000
Co-Design Retainer	$0	$0	$30,000	-$30,000	-$30,000
Hardware Maintenance	$450,000	$450,000	$450,000	$0	$0
Total Costs	$1,794,000	$1,189,200	$672,000	-$1,122,000	-$517,200

Key Observations

Standard Pricing Savings: Instelligence delivered $1,122,000 in savings over three years compared to standard VMware pricing by designing and deploying an open-source Proxmox solution.
Commit Pricing Savings: Even with VMware’s 3-year commit pricing at a 45% discount, Instelligence’s approach still delivered $517,200 in savings over three years.
Managed Services Tailored to Complexity: Instelligence’s managed services pricing reflects the unique needs of Proxmox and Ceph deployments, ensuring optimal performance and value.

Disclaimer

This case study is a fictional scenario based on real-world experience. Instelligence has worked with environments of this size and complexity and used industry-standard benchmarks and practices to create this example. While specific details are fictional, they reflect the potential outcomes organisations can achieve by partnering with Instelligence for a Proxmox-based migration.

Conclusion

By leveraging Instelligence’s expertise and services, the MSP achieved $1.12 million in savings compared to standard VMware pricing over three years. Even with Broadcom’s discounted 3-year commit pricing, Instelligence delivered nearly $517,200 in savings while simplifying operations and eliminating proprietary constraints.

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