Project-based Funding Tends to Produce Poor Asset Utilization
by David Merrill on Feb 1, 2013
In my last entry, the concept of project-based funding for IT resources was started. I want to take a deeper dive into some of the problems of project-based IT funding, and how these methods may have to change in the future as procurement and ownership of IT will likely change in the next few years.
One set of traditions in project-based funding goes like this:
I. The project gets approved and receives funding to get started
1. The budget includes some IT funds—some of which are for IT infrastructure such as storage
2. The storage budget is reviewed and presented to the storage team
a. The project managers will not want to come back for more resources, so they tend to request and buy all the capacity up front
- The storage team uses the project funding to purchase new storage
a. The project personnel often assumes that since the assets were bought with their money, the storage assets belong to the project and they have some say on how the assets are used, shared, managed.
- Some sharing is allowed, but there is still a feeling of ownership rights to XX TB of disk space
a. The project can get reports and “see” their total storage estate
b. The project DBA start allocating and writing to capacity within their estate
- Project growth rates always start slow, so usually only a small fraction (<10%) is used in the early months or years of the project
- Excess or reserve capacity is not shared with another project, or a shared IT infrastructure, since the project owns it
- Utilization rates start slow, and even if they grow at a moderate level, the overall utilization is still relatively low
a. Projects don’t have to account for poor utilization since it was a project-sponsored purchase
- The central IT storage team may not get to share with the project on excess or reserve capacity
- The projects may produce low utilization of the assets over time, but the IT department will be paying for this poor utilization for a longer time
a. More cabinets and drive trays installed than what is needed
- Higher power and cooling
- More floor space
a. Higher SW and HW maintenance costs in year 2-n
b. More monitoring and management effort
- At the end of the project, the IT department usually has the chance to archive or decommission the data for long-term retention
- At this time, compression, de-dupe, thin volumes can be used to store the data in a tier that is appropriate for the data value
- This process is repeated for virtually every project that comes into the IT department
Compare this internal approach with that of a hosted service provider (cloud, IaaS, PaaS), in that a pay-as-you grow and pay for consumption approach is taken. Monthly bills are sent for allocated capacity. The service provider has more capacity so the project does not need to purchase reserve resources on day 1. These types of cloud services don’t necessarily have to take your storage and data off-site. Many offerings can provide this kind of pay as you go utility that includes having the assets on your data center floor.
Project-based procurement and ownership tends to lead to poor storage asset utilization. Poor utilization increases the total cost of ownership, and since our CFOs are always looking for better ROA, we may have to challenge some of these project-ownership traditions. New procurement models will help reduce costs, but new project-based protocols for funding will have to be re-engineered to accommodate these new trends.