How to calculate cost/benefit of hardware expenditures? (move to virtualization, upgrades, etc.)

Doing a cost-benefit analysis involves speaking the language of business, which is (mostly) money.

You have to demonstrate that the course you want to take is cost-effective. This can be done several ways, but you do need to break down certain costs. There are direct costs, indirect costs, as well harder to quantify things like opportunity costs and risks-to-the-business costs.

Some examples of the types of costs:

Direct costs

• Cost of service-contracts of the servers. The older the server, the more expensive the contract.
• Cost of keeping the servers powered and cooled. Older servers are less power-efficient than newer ones on a per-server basis.
• Cost of parts replacement as things break (if no service contract).
• Cost of keeping adequate backup protection.

Indirect costs

• Cost of downtime per hour/day (in your case, it's probably lost-work time for the devs)
• Cost of not having a service-contract.
• Time charges for handling repairs by staff (this could be a direct cost, or it could be an indirect cost if exchange-time is used)

Opportunity costs

• Development paths not able to be taken due to antiquated hardware (your stuff is old enough it might be on the wrong side of the 32-bit/64-bit divide)
• Time lost due to emergency parts replacement
• Time spent working around old stuff in order to get job done
• Lack of virtualization makes existing work-flow less efficient

Risks to business costs

• The likelihood of the indirect cost of downtime happening goes up with age

Quantifying all of these into money will go a long way to persuading the powers that be that you need more resources. It does take some good writing, knowing who you are talking to, and having an idea of the kinds of arguments that will convince them. Money convinces most management, which is why I'm suggesting it, but other approaches may be more valid; only you can tell that though.

Start with a single email and throw in some teaser numbers (with just-enough justification) to let them know you've thought about this, and only drop the stats-bomb on them when they ask for elaboration. You really want to avoid the tl;dr problem that most middle and upper management suffers from.

I keep it simple when presenting to the higher-ups. The hardware I deploy is meant to live a 3-5 year cycle, depending on application. 2005-era HP ProLiant systems have been revised FOUR times since then. That's four big jumps in processor, RAM, storage and power technology that should not be ignored.

The arguments are easy.

• Technological improvements: Even the lowest-end system you can buy today is a huge step up from what you're using now.
• Support: The present systems are way beyond end-of-life. Continuing to run them can have dire consequences. Finding parts and the resources to support them means scouring eBay. A good measure is checking the street value of your current equipment. If it's less than $200, you're on the wrong side of technology.
• Virtualization: More effective use of hardware resources.