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The Storage Economist

Hidden Costs

It is common to blame vendors and IT service providers with hidden costs. It is true that maintenance fees, transformation services, new training or adjacent system upgrades are required when new equipment is installed.

Source: http://dilbert.com/strips/comic/2009-11-23/

But I also see internal hidden costs within some IT organizations. There are many variations on what might be hidden:

  1. Some costs that are hidden from upper management, such as a stealthy, non-standard system that exists in a part of the company for a specific purpose.
  2. Costs that are known, but not reported.
  3. Costs that are not within the span-and-control of a particular organization. A good example might be power consumption or the circuit cost, where those funds are accounted-for by another group.
  4. Don’t ask, don’t tell costs – such as contract workers or vendor staff that has to provide a certain function, and there is a lack of transparency for how these are paid.
  5. Future costs (see cartoon above) that may or may not exist, and where some people may not be around at that point in time to take responsibility for the expense.

There are several more categories or examples of hidden costs. When I hear people tell me that they have to reduce costs, I always inquire as to the nature and quantity of these costs. We have to look beyond the obvious—and quite often dig deeper—to understand hidden risks and expenses so that the proper remedies can be applied to ultimately produce real cost reductions.

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Comments (2 )

Hu Yoshida on 06 Apr 2012 at 12:13 pm

Great insight, also a lot of shared costs are not identified or under estimated, because it is hard to identify what portion of the cost should go to a particular project.

John Nicholson on 15 Apr 2012 at 10:03 pm

Spot on. I’ve seen a number of highly inefficent storage replication systems deployed that required huge amounts of bandwidth or WAN accelerators. They saved money on the array purchase but created huge monthly reoccurring bills, that was never tied back to the storage operational budget. Even worse, once people find out about these costs its in their interests often to hide or downplay them.

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David Merrill - The Storage Economist

David Merrill
Chief Economist

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