The Storage Economist

The other day I ordered this poster to hang in my office from one of those de-motivator sites…

Many people have predictions about the second coming of another recession, QE3, QE4 (what does queen Elizabeth have to do with our economy anyway), and long-term growth in a number of emerging countries.

(You can choose to listen or ignore the pundits)

Your micro economics will be tied to global and national economics, and your company’s mico-economics will impact your IT economics. This is the nature of trickle-down economics.

There are some proven and stable principles related to IT economics that are important to help you navigate current and future trouble-spots. Here are my top 10 ideas (for this month) if you are looking into a cost reduction exercise for your company’s economy:

1. Price is not cost, so focusing on price reductions alone will impact cost very little. The price of disk is only around 15-17% of storage TCO. So, even if you negotiate a 10% or better price, that effort will only impact 1.5 – 1.7% of the TCO.
2. Focus on cost reductions in a down economy by pulling a fine-tooth comb over operational costs. Labor, power, cooling, maintenance, data protection and DR protection all need to be reviewed to determine where costs can be trimmed.
3. Save some bullets for later – a cost reduction strategy is one that is planned for over a few years, two at a minimum. Take care of the easier cost reduction items first, saving the harder ones (political or organizational) for later.
4. Do the easy things first that impact total cost, but not all of them – remember to save some easy cost options for later next year, too.
5. Isolate and work on costs with those people that measure (or care about) and own the costs. You need alliances in cost reduction planning, and the IT department may not directly own all the related costs.
6. Beware of quick-fix solutions (and by the way, most solutions to reduce costs are not free) that appear too good to be true. Make sure that vendors are helping you reduce the costs that are important to you – not the costs that they can achieve for you.
7. Attitudinal and political changes are the most difficult to implement.
8. Changes often require rewards and penalties, so factor that into your plans.
9. Understand the differences of hard costs and soft costs
10. Measure twice, cut once – make sure that you can measure now and measure later what you can impact.

Nothing sparks a debate quite like a top 10 list. What do you think?

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[...] See what our storage economist, David Merrill, suggests as ways to navigate current and future economic uncertainties in his blog post “Go Figure – This Economy”. [...]

Whilst I think it is only natural to go for the “easier cost reduction items first”, I think the real savings, are in the “the harder ones” the “political or organizational” ones. In the UK, back in the 70′s and 80′s when redundancies were required, companies often went for the easiest option of ditching junior staff. The problem was that these people often did the nuts and bolts jobs and their removal was actually a real loss. To lose a lot of people also had a terrible effect on morale. In the 90′s we started to adopt an American concept of actually stripping out middle and senior managers instead. 4 clerical staff often actually equalled one senior manager in terms of cost. The managerial responsibilities were often easily adopted by another more capable surviving manager and the transition was fairly seamless. Also morale was hardly effected.
So what is my point. The tough decisions are often more fundamental and appear to be cataclysmic but actually achieve serious cost reductions but allow the business to carry on. These decisions are often organizational but if anything wastage occurs higher up in the food chain, than at the bottom.
It is a brave decision but I commend anyone needing to make cuts to look at the top first, not the bottom of the organizational pyramid, because you may end up not just saving the required monies, but also create a sleeker management vehicle.

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