A growing challenge facing enterprises is the difficulty in managing the financial complexity of IT infrastructures, particularly with the emergence of Corporate Governance and a renewed focus on Profitability.
Technology and Solution providers are finding it increasingly difficult to sell their solutions on their technical and operational merits alone. Enterprises are now demanding in-depth financial justifications and expect substantial returns on their investments.
Are there any formulas for determining cost savings from integration of IT infrastructures – the opportunity is from an acquistion of a compnay about 1/2 the size of my own.
I would like to know how deep companies are measuring the cost of their assets (from acquisition to disposal). What do you consider more important; measuring TCO or ROI?
There is not a single formula that can determine cost savings. It is based upon how deep your company wishes to measure and manage. A rule of thumb is the deeper and wider you go the more opportunity you will have to improve fiscal control and governance of your assets. Properly administered asset management implements a formal set of integrated controls such as activity-based costing, billing and charge-backs, procurement modeling, TCO analysis and forecasting, opportunity cost comparisons, contract management (including compliance audits), a centralized financial reporting systems and a formal investment justification process.
These are very different measurements. TCO measures all the costs assumed by the business over the life of the technology when it is purchased. ROI measures the profit implications of the investment. TCO deals with costs only. An ROI calculation concerns the percentage return above and beyond costs (investment) that the technology gives back to the company. An important point is that vendors can only be trusted when the numbers can be backed up with benchmarked, real-world data from a customer production environment. These numbers must be independently verified and the vendor must share its methods for tracking these measured results. Different industries, different size businesses will have dramatically different results from IT — this gets to IT as strategic advantage. Some companies do not seize what the IT can do as well as other companies.
Besides managing software and hardware costs what else can be done to help reign in costs?
Given the current economic climate, cutting costs and saving money is on everyone’s mind. The IT industry is not immune to these concerns, and many data center managers are looking for ways to improve the efficiency of their infrastructure and get the most for their money.
The cost of operating a data center is directly related to the cost of power. New equipment offers improvements in performance and space, but these assets require greater operational and cooling power to function. This need and the growing cost of power and the effects on global climate are challenging enterprises to operate with higher efficiency and conserve more.
Beyond improving the corporate image, going green can generate hard dollars to a company’s bottom line and free up operating budgets to address the need for new equipment and applications. This new reality was reiterated in a recent study by analyst firm Gartner Group, touting “green IT” as one of the “top ten strategic initiatives” a company should consider in 2009.
Before a company begins the process of getting “greener,” it is paramount that current power consumption rates are measured to accurately establish a benchmark for efficiency. With enterprises of all sizes investing in eco-friendly technology, the demand for tools that accurately measure the effects of green initiatives is set to skyrocket this year, as managers and executives attempt to show true ROI and validate their efforts.
The biggest mistake a company can make is not using a consistent baseline for data. That said, simply taking the manufacturer’s power consumption figures for servers and other equipment is a mistake. Vendor estimates have a significant protection margin added to their published power consumption figures, and will significantly skew any end-user measurement. Accurate measurement software solutions will have de-rated values for specific equipment, which provides a more true-to-life measurement of power consumption.