The Internal Revenue Service saved approximately $10.2 million in equipment costs in fiscal year 2011 by implementing virtual server technology, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found that server virtualization technology allowed the IRS to reduce the number of computer servers it needed to maintain for tax administration and lower operational costs to the taxpayers. The IRS expects to save approximately $1.3 million annually in decreased electrical costs beginning in fiscal year 2013, thanks to the technology.

However, the report noted that the number of servers could be further reduced for increased efficiency and cost savings of approximately $7.73 million.

Server virtualization is a technology that allows a number of virtual servers to run on one physical host. The technology enables improved hardware utilization, electrical savings, and reduced server replacement costs. Virtualization helps an information technology organization improve efficiency and productivity by simplifying server deployment and administration.

For example, the impact of any hardware issues on a virtualized server can be minimized because the applications and data on the affected server can be switched to other servers in the pool. This allows for decreased server downtime due to hardware failure because the system can continue running while the hardware is replaced. 

Implementing virtualization technology at the IRS also supports the Federal Data Center Consolidation Initiative. In February 2010, the Federal Chief Information Officer launched the initiative, mandating a reduction in the number of federal data centers. 

TIGTA found that the IRS successfully implemented server virtualization technology to improve server efficiency and realize cost savings. The Server Consolidation and Virtualization Project focused on establishing a virtual server infrastructure and moving approximately 2,500 physical Wintel (Windows and Intel-based) servers at 13 data center locations to the virtual environment.

As of the end of fiscal year 2011, the IRS had approximately 1,800 virtual servers operating on 234 physical host servers in the virtual environment, resulting in the previously stated decrease in equipment and electrical costs.

The IRS does not have a plan for virtualizing Wintel servers at its field offices outside of the 13 data center locations, TIGTA noted.The IRS estimates there are approximately 650 Wintel servers in its field locations that can be decommissioned and added to the virtual server environment.  By virtualizing these servers, the IRS estimates it could realize additional savings of approximately $7.73 million ($7.26 million in equipment savings and $0.47 million in electrical savings over five years).  Aside from the cost savings, these actions also help the IRS to meet Federal Data Center Consolidation Initiative goals.

TIGTA recommended that the IRS Chief Technology Officer develop and implement a process to identify servers currently located in field offices that can be virtualized, and create and implement a plan to virtualize those servers.

In response to the report, IRS management agreed with both recommendations.  The IRS plans to develop and implement a process to identify servers located in field offices that can be virtualized, and create and implement a plan to virtualize those servers.

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