The Cost of Change

The total cost of ownership of storage is a complicated thing to figure. The TCO includes a wide variety of factors, from purchase price to operational considerations to power usage to failure rate and much more. David Merrill, who was named chief storage economist at Hitachi Data Systems (HDS) last year, has come up with 33 costs that go into the TCO of storage. How many do you use when making a buying decision? And how do you factor in the cost of not making a change?

Most storage managers know that the purchase price of storage is a small piece of the overall TCO, but often that is the main consideration at many companies. And when the cost per terabyte keeps falling, it can look as if the IT department is saving money as it buys more capacity. Yet cutting the overall TCO is much more difficult. There are opportunities for cost reductions in each of the many factors that go into the overall cost of buying and operating storage systems. Merrill argues that storage managers serious about reducing overall costs need to define and measure current costs and then develop a strategic plan to reduce those costs.

Most storage vendors have TCO tools that are supposed to help customers or potential customers make buying decisions, but for the most part they are really tools for the sales department. Merrill acknowledges he developed his list of TCO factors to help HDS salespeople "not panic when they are losing on price. I teach them to tell potential customers that we may not have the cheapest system to buy, but they are cheaper to own."

He argues that purchase price is only about 20 percent of TCO and that the other 80 percent includes costs like maintenance, power and cooling, space, cost of disaster recovery, and many other factors. "I help them to make the argument that with Hitachi, your labor costs will be lower, your cost of waste will be lower, we will reduce your migration costs, the cost of copies, and more."

Those are the arguments you have to make when you can't win on price, competitors will say. And there is some truth to that. But Merrill makes a valid point that a lot of factors need to be considered when making purchase decisions. In addition to the obvious hardware, software, labor, and maintenance costs, his list includes virtually everything that an IT manager does with a storage system (provisioning, backup, encryption) and everything a storage system touches (floor space, power, and cooling) and other things like the cost of hazardous waste and litigation and discovery risk."The burden is on us to show how we are economically superior, so we need to help the customer to understand the value of faster discovery, faster migration times, small floor space, and things like that," Merrill says. "We try to discuss hard costs versus soft costs. Of our 33 factors, customers may pick 10 or 12 cost elements they really care about, and we can make recommendations based on their specific issues and concerns."

Merrill's list misses two key costs -- one that often dominates buying decisions and one that isn't given as much consideration as it should.

The first is the cost of change, and that cost is viewed as very high for many enterprises and IT departments that have computing and storage systems that work. The risk that comes with changing vendors can loom large for many conservative IT departments, and saving some dollars often isn't viewed as a worthwhile reason to swap out something that works from a long-time technology partner for something new from somebody new.

The second key cost -- the really important one -- comes from not changing, and it is the hardest to calculate. Too many IT departments are comfortable with their well established processes and procedures using familiar systems, and they aren't looking to shake things up or move in a new direction. Yet in this day and age of economic uncertainty, can any part of the IT department continue to do things in the same old way? Most IT departments will continue to be viewed as merely a cost center if they continue to spend 80 cents of every dollar on maintenance and keeping the servers humming and the disks spinning.

Technology managers can help to support and sometimes lead the transformation of a business, but only if they start to transform their own departments. Storage systems are one place to start. The wave of new storage technologies and applications now on the market can make storage a more important part of overall IT operations and business processes. And they give storage administrators the opportunity to play a greater role in the overall business -- working, say, with the legal department on e-discovery or the sales department on the benefits of faster database response times for online sales. But to take advantage of those opportunities requires careful thought and a commitment to analyze the real cost of not making changes. Do you factor that into your buying decisions?0