subscribe: Daily Newsletter

 

The economic imperatives of IT

0 comments

At the end of the day, companies are in business to be competitive and profitable – and they need to maximise the advantages that their IT systems give them.
This is according to David Merrill, chief economist at Hitachi Data Systems, who told delegates at today’s Hitachi Innovation Forum in Johannesburg that companies have become more conservative in recent years.

“We can’t allow for runaway growth. There is a process for costs to be controlled.”

Most companies have a policy of reducing IT costs, he adds, and CIOs are under pressure to do this. They can’t get rid of people, they can’t stop buying equipment – so what can they do?

With relentless data growth, there are reducing budgets, faster turnaround is required, and there is increasing complexity.

“The CIO is being asked to do more with less, to get more from your investment. Adapt to new devices, big data – all at the same time, with less budget.”

Patterns emerge in companies around the world, he says, and companies need to see unit costs come down. CIOs have to use money to show value, he adds, since the CEO doesn’t understand the technology-speak that CIOs often use.

“It’s easier for you to learn the concepts of money than for them to learn the concepts of technology.”

To start with, says Merrill, CIOs need to start measuring the unit cost of things: of mailboxes, or terabytes.

“Let me suggest that you should measure these things,” he says. “You are not going to get a unit price reduction just by going after price,” he stresses. “Price does not equal cost – not even close. We could give the disk away for free and your cost will not go down.
“I recommend that you take a total cost approach. We have figured out how people can reduce their costs,” he adds.

It’s important to get the basics right, and most companies already do that.
The next step is the golden age of virtualisation. Most companies are virtualising their servers, but fewer are doing storage virtualisation – but this can be as powerful as virtualising the server to reduce costs.

“In fact it’s the single best thing you can do to reduce the cost of a terabyte.”

These two stages can be bought from a vendor, but phase three requires a change in behaviour: IT needs to check how users are using the storage.

“Everyone else in the company would be fired for the utilisation rates that IT has – 30% utilisation of storage is ridiculous. We have to start changing behaviours, and how we engage with customers.

“The last phase, that the most advanced customers are doing, requires a change of ownership and of location. Depreciation for IT is going away, probably four or five years. We need to get to a more flexible model.”

The end result of this could be getting away from infrastructure within the company.

“It is possible to reduce unit cost,” Merrill says.

HDS can help CIOs to maximise their IT, he adds, and can help them to talk about the money.

“If we convert problems to money and opportunity cost, we can get action from the business.”

CIOs talk about performance, efficiency and economics. All of these can be related to cost reduction or better profitability. “You have to convert the technical benefit into money benefit.”

In terms of efficiency, Merrill points out that most companies have 12 copies of each database. This is not efficient and costs money.

“We have to re-tier and reclassify how we present IT. If we don’t get to multi-tier architecture, you can’t afford bit data.”

Management also speak to efficiency, and automation can help to reduce management costs.

“We need to look at our technologies and out products, yes. But first and foremost let’s look at where the money is going. We are fundamentally changing how we deliver services.”

Merrill says some customers have implemented the cloud incorrectly and their costs have gone up. Companies that implemented it correctly have seen their costs go down.
Again, he warns not to confuse low cost with a low cost.

“A lot of customers have been seduced by a low-price offering, only to find that their costs have gone up.
“We need to understand the efficiencies and understand where the money is going – but you need to be willing to take the actions to reduce those costs.”

HDS stands behind its products, Merrill adds, and can put together economically superior architectures and work with customers to deliver the right kind of systems and designs that can bring down their costs.