Economic Crisis Part 2: Hoarding Cash
by David Merrill on Feb 3, 2012
This is part two of a three-part blog series on strategies and tactics during an economic crisis. You can read part one here.
We have already covered what makes a crisis (since your mileage and conditions will vary), so this entry will focus on CAPEX pressures, and how traditional capital will (probably) be replaced with contract/consumption pricing over the next half-decade. The raw cost of procurement alone will not drive our industry to this new acquisition model, but when combined with current and future economic conditions, it will set the stage for new consumption models (i.e. cloud computing).
During an economic crisis, there are some behaviors that can be observed. How many of these apply to your IT department?
- Most of the world is in the middle of a recession, and recoveries tend to be a long, slow process. CEOs and CFOs respond to an economic crisis by building up their cash reserves. See this article on what Apple (for example) could do with their cash reserves.
- When hoarding cash, companies are reluctant to also commit monies to long-term IT investments, and are more open to operating leases, and consumption models to finance new growth and expansion.
- Company leadership and the CFO will slow down or severely restrict capital purchases.
- Operational costs will be reviewed with great scrutiny, and labor costs can be one of the first areas targeted.
- When purchasing is allowed, procurement groups tend to go for the lowest price to maximize the limited funding, and often this can be without understanding the downstream impacts to cost, quality, reliability etc.
Re-stating this strategy in poetic or chiasmus prose, the approach looks something like this….
My next and final entry in this series will discuss technology and attitudinal changes that can be adopted to reclaim what you have, and improve IT efficiencies.
For other posts on maximizing storage and capacity efficiencies, check these out: http://blogs.hds.com/capacity-efficiency.php
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[...] This is part three of a three-part blog series on strategies and tactics during an economic crisis. You can read part one here and two here. [...]
[...] from one generation to the next becomes more disruptive, expensive and riskier. David Merrill, who tracks this on a regular basis, estimates that the burdened cost of doing a migration today is about $15K per TB, which is more [...]