Calculating the running cost of your IT…a tale of $$$ lost.

As business grows, the IT infrastructure & support organization to support the business needs tend to grow with these needs, but often the longer term efficiency of the IT investments aren’t tracked, leading to a un-necessary cost burden which seldom is pro-actively right-sized as long as the business is growing. Right-sizing typically happen only when the business is shrinking.

In this post we will cover some of the common issues often found and how to remediate them to get the most business value out of your IT investment.

First we’ll categorize by cost type and sort by direct cost pressure :

1. Manpower
   • In the vast majority of IT environments, the most significant running cost relate to the people running the IT.
   • Calculating the fully loaded cost (salary, pension, bonus, indirect cost from office building, parking, office equipment, training etc. etc.) quickly result in a big number.
   • Moving to a managed service or contractors may simplify things compared to an internal full time employee, and can be a benefit if it’s a shorter term assignment, not a core area of your business or simply due to lack of know-how in the area or to limit long term employee contract commitment. However the managed service provider has to make a profit.
   • Having the right amount & balance of FTEs vs. contractors & the right skill-set is key.
   • Highly skilled staff or contractors often provide return of investment well beyond their cost.
2. Support contracts
   • Support contracts come in many flavors, with the original manufacturer typically providing the best support, but also the most costly, and often ending up costing more during the full lifecycle of the equipment than the initial equipment investment.
   • For premium brand products, especially hardware products, there are many alternative support options available for a reduced cost.
   • Depending on how the infrastructure has been designed & implemented, often it can be beneficial to spend a bit more on a proper redundant design and then lower the support contracts to next business day, 3rd party support, or no hardware support at all, but having a private stock of key components. Especially if you are looking at buying refurbished equipment, having your own stock or relying on good sources for such is significantly cheaper compared to support contracts.
3. Infrastructure investments
   • Buying new gives you warranty and potentially some initial support, but if cost is a factor, consider the refurbished market.
   • The price erosion on refurbished IT infrastructure is significant, and for devices with few moving parts such as switches and servers with SSD drives, you can save a great deal of money going for equipment with 3-5 years of age which is still fully valid and in most cases will run without major issues for several years.
   • There is a significant after market for refurbished servers, storage and networking equipment with competitive pricing.
4. Power & cooling
   • The electricity cost to power your IT infrastructure, and cool it, is often a poorly monitored area from a cost perspective, however this can generate significant cost, especially in areas with high kWh price. Just 100 standard HP ProLiant DL360/DL380 servers running a common mixed workload can easily result in annual cost beyond 70 kUSD.
   • Let’s look at an example, a lightly used HP ProLiant DL360 G8 with 4 disk drives and 1 additional network card. This is a common small 1U rack server :
   • 
   • Averaging around 160 Watt, at a San Mateo, CA residential kWh rate at 15.59 cent, it amounts to ~ $220 per year in direct electricity cost.
   • The server generates ~ 540 BTU/hr of heat :
   • 
   • The electricity cost of cooling 540 BTU/h for a year with the same 15.56 cent per kWh cost as in the example above, result in ~ $216 per year.
   • So all in all, the power & cooling cost of running this server amounts to $436 a year.
   • Bigger servers like the HP DL380, 580 or larger blade enclosures come with significantly higher cost.
5. Lifecycle replacement & migrations
   • Lifecycle replacement & migrations are often seen as complicated & costly affairs, and the tendency is to postpone such till it’s no longer avoidable. Such often leads to increased support cost.
   • Often it’s beneficial to be pro-active with lifecycle-replacement & migration efforts and review how current running solutions are built and potentially do early migrations to get the benefits of new principles & technologies. A common cost saver in recent years is to containerize what in the past was either running directly on physical hosts or virtualized. Doing this also makes the application landscape more portable and will allow for more options to choose from in regard to running certain things in-house or in the cloud.

At DATAradical we have extensive knowledge in evaluating existing infrastructure and recommend/implement what can be done to it to improve running cost and effective utilization.

We focus also on finding underutilized assets and either consolidate or re-purpose to get the most out of your IT investment.