Finding the Inflection Point
by David Merrill on June 29, 2010
One of the primary objectives that I teach our storage economic consultants (blue and black belts) is to identify the inflection point, or the cross over point. This is the point in time and costs where the fundamental parameters and results change (in calculus you may recall this is the point where the curve actually changes sign). In economics this is the point where the status quo is no longer sustainable. The point where business as usual will create unusual costs. A great example can be explained with tape vs. disk for backup. Tape has been cheaper for years, but due to recovery times, recovery points, and advanced backup requirements, the inflection or cross over point between tape and disk has moved forward or closer to disk over the past few years.
Earlier this year I assisted our marketing group in developing the economics for a new Cloud Storage (managed) Services Offering, and I spent time looking for the cost cross over points of managing a NAS or archive solution yourself, and paying for an external service. If you have ever tried to comparison cost managed services or outsourced services – you know that you have to look at the costs that are relevant to you. In this new managed service utility (MSU) offering from HDS, I was surprised to see how with a few cost variables over time (usually referred to as OPEX or recurring costs), these MSU can have a very clear inflection or cross over point. People who price outsourcing services do this analysis all the time, but my simplified view was around a few parameters:
• The cost of power, cooling and floor space for the storage and infrastructure
• Labor to manage the storage, data, lifecycle
• Labor to ingest, index and process the data and meta data
• Depreciation or lease costs
• Labor to upgrade microcode, add new disks, replace and refresh every 3-5 years
• Technology refresh (CAPEX) again every 3-5 years
In a table comparison view, the responsibility of your customer costs looks like this:
You have to determine your own crossover points. You know the costs of labor, migrations, ingestion, power etc. When your capacity and costs hit a critical mass, you can look to MSU or outsourcing services to provide better TCO and price points.
