Primer on Storage Economics
February 2nd, 2007
Introduction
Storage economics is a suite of methodologies, tools, services and planning tactics that help IT Departments identify the total cost of storage ownership, and provides strategies that help reduce ongoing costs. Disk price is only 25 percent of the total cost of owning the disk over three to four years, so most of you need to employ an approach (storage economics) to identify and characterize the remaining 75 percent of the total cost of ownership (TCO), and to present how an architecture can be instrumental in improving your 2007 procurement return on investment (ROI).
Storage economics enables you to look way beyond the dollars-per–terabyte ($/TB) game and focuses you to reduce long-term storage ownership costs and risk. Through several years of economic analysis, Hitachi Data Systems has discovered that for every 12 terabytes (TB) of installed and used storage, the average customer is likely to find $1M U.S. dollars worth of operating expense costs that can be defined and eliminated; realized over a three-year period with a balance investment in people, processes, and products.
Storage economics is the suite of methodologies and tactics to help you desgin and implemnet the correct/economically superior solution. For lasting success, storage economics must be used in conjunction with good price negotiations, vendor customer support, and operational services execution.
Why $/TB is a Wrong Metric?
The $/TB metric is a popular technique used to compare vendors or track the downward trend of storage purchase price; however it is ineffective in terms of illustrating long-term ownership cost differences. The $/TB technique is popular because it does not require too much information or analysis. This metric alone is not sufficient to measure and compare long-term ownership costs of various solutions. The storage architect or planner must realize that there are many costs involved with owning and operating the storage portion of their data center. For example, one vendor solution may enter with the best $/TB but might be very expensive to own, which is why $/TB should not be the only economic metric used. As a consultant, it is my job to help customers look beyond price and scrutinize all the costs involved with their storage solution.
What are TCO and ROI?
TCO is a method for calculating all costs that will be incurred over the asset’s useful life. Purchase cost is only one-fourth of the total cost. Some solutions may be inexpensive to buy but very expensive to own if they repeatedly fail, require large amounts of management time, and perform poorly for the applications. TCO helps provide a better comparative measurement of all costs that are included in a particular storage decision.
ROI is a method to calculate the benefits of a particular investment and is effective if multiple investments are needed for a company, and if a decision must be made on those with the best return of profit (or reduced costs). If procurement is working on a non-competitive or unsolicited bid then calculating and demonstrating improved ROI on a vendor’s solution investment is a great approach. IT capital planners use ROI to show how a particular IT investment helps the company, and provides a normalized comparison for other company investments (since many projects compete for limited company capital funding).
Why Should You Care about Storage Economics?
Most customers around the world are concerned with operating expense (OPEX) cost reduction. These costs are those experienced after the sale and can include electricity, floor space, labor for management, risk of downtime, and hardware and software maintenance licenses, etc. Hitachi Data Systems has characterized 32 different types of storage OPEX costs. By working with customers to determine which of which of the 32 types of cost reductions they are interested in (every IT department has OPEX reduction interests) can lead us into discussions around storage consolidation, tiered storage, disaster protection, backup improvements, VTL, de-deplication, capacity-on-demand, thin provisioning and management automation, etc. These initiatives or investments can be linked to OPEX reduction.
Who Cares about Storage Economics?
Using storage economic principles to distinguish price and cost is essential. Most IT managers are concerned about OPEX reduction and not always capital expense (CAPEX) reduction. An important factor in using storage economic tactics is that you need to have access to the personnel who are motivated to reduce OPEX. The purchasing department is not usually concerned with OPEX, only the cost of procurement or CAPEX. A Vice President of Finance, the Chief Information Officer (CIO), or Chief Financial Officer (CFO) will be keenly interested in how certain solutions or architectures can reduce IT OPEX costs, specifically in the storage infrastructure.
Where can I get more information on Storage Econoimcs?
- I blog about this and other related topics, so you might want to start at the beginning of my blog links and read through the last 9 months of material
- I have a library section as part of this blog, many white papers and case studies can be found there
- Email me with a specific question or challenge at david.merrill@hds.com
- Come here a Storage Economic workshop/presentation. I post my speaking assignments on this blog space.
