We have established the terms and parameters for an (IT) economic crisis, the general behaviors and reactions to a crisis, and how to grow to meet IT demand when cash-hoarding is prevalent. Now let’s talk about technology and organizational options to consider before or during a local spending reduction. I will do this in an outline format to summarize and not turn this into a 10-page thesis paper.

Technology Options

• Reclaim current capacity (allocated or usable).
  • Virtualization can help consolidate and reclaim usable capacity
  • Zero Page Reclaim, thin provisioning will reclaim allocated and written-to capacity
• Tier your storage.
  • Vacate higher tier capacities by moving stale data to lower cost tiers or archives
  • If you have to purchase, you can typically buy lower cost tiers
• Migration costs can be significantly impacted with storage virtualization.
• Consider RAID level implementations; many new RAID 5 solutions can perform well enough to replace RAID1/0. Also, look to move some from RAID 5 to 6.
• If power and cooling costs are high in your location, doing a tech refresh of older assets may go a long way to recover OPEX costs and use these savings for new investment.
• Again, if lots of older sprawl disks, consolidating and shrinking floor space, and/or SW contract costs exist, wasted capacity can be used to justify or off-set new systems.
• Challenge your current data protection mechanisms and calculate how many copies exist to protect your data. You may be surprised how much capacity is consumed with copies and data protection.

Business Options

• Perform a simple storage software audit, and determine if there are licensing costs no longer in use that you are still paying for.
• Implement some simple metering systems to track allocation and utilization by project, department or user.
• Move from simple metering to a show-back system, to again demonstrate the consumption patterns and relative costs of each systems storage allocation.
• If #3 above goes well, then move into a full charge-back system. If you want to change consumption (bad) behaviors, then you need to have measurements and penalty systems in place.
• Implement a common storage services catalog system to standardize storage deployments.

There are other options—both technical and operational—that can be put into place to reduce costs. Your level of budget crisis will determine how fast you have to react, and reduce costs.

Some of the above actions will have immediate impacts (weeks and months), where others may take up to a year for some organizations. Your mileage will vary.

I would like to hear your stories and experiences with business and technical changes implemented in times of financial pressures, and how those actions made a positive impact for your situation.

For other posts on maximizing storage and capacity efficiencies, check these out: http://blogs.hds.com/capacity-efficiency.php

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.

There is a lot of strange news, frightening news, and pretty funny (given economist humor) stuff out there. Let’s take a look at some of the global economic trends that are happening now:

• Currency de-valuation in India, Vietnam (and forecast for some in Europe), and the impact to purchasing power
• Government debt downgrade
• Austerity programs and all the trickle-down results to government and private sector spending
• Rise in HDD – due in part to natural disasters and other calamities
• Bankruptcy from notable companies like Kodak and American Airlines

One could certainly make the case that the sky is falling. Capital funding is being preserved, even from companies that are flush with cash. What impact of capital spending do you see locally in 2012? Gartner has revised their IT outlook,down to 4% growth with year on year IT purchases. Capital may be tighter, but OPEX is still (and probably always will be) under pressure. Our methods around storage, cloud, VM and VDI economics are very popular with IT planners and executives to identify, measure and reduce the cost of IT infrastructure.

The strange part of any economic crisis is that data and workload growth does not take a holiday. Upward trends continue putting more pressure on CAPEX and OPEX. Storage, servers (VM) and mobile computing (VDI) seem to continue a steep growth curve. New CAPEX, OPEX and procurement ideas need to be factored in to accommodating growth while in the middle of an economic crisis.

I am developing several internal papers on how to position growth options while in the middle of current (or future unknown) economic uncertainties. I will be sharing some of this content in my next 2 blog entries:

• Part 2 will talk about CAPEX pressures, and how CAPEX will (probably) be replaced with contract/consumption pricing over the next half-decade.
• Part 3 will outline storage and server architecture strategies/technologies that can help stretch your limited capital budget, outline work-arounds when your local currency does not buy what it used to, and how to really measure, track and improve real costs. This is often referred to as capacity efficiencies, but goes way beyond reclaiming a few GB of storage.

I do not want to be accused of being an ambulance-chaser, or even a chicken-little, but we have to have a sense of our surroundings (government, social, economic, political) as a backdrop to IT spending, and IT architecture decisions. These next few years may cause some hardship if traditional methods and architectures continue without challenge. IT planners need to step back and have a strong strategy to meet IT business demands, while working within (possibly) new financial restraints.

Oh, and I joined Twitter. Follow @StoragEcon for all of your storage economist needs!

Quite often we talk about an efficiency theme, and jump right into the solution or options to improve that efficiency. In my work, I tend to recommend that organizations:

• Identify the measurement system clearly
• Measure the area that is to be optimized
• Improve with specific actions and plans

The recent blogs talk a lot about the step to identify and improve. For example: you can impact storage utilization efficiency with virtualization, thin provisioning, reclamation activities and de-duplication. One can improve energy efficiencies with virtual machines, thin volumes, SSD, storage tiering and an aggressive archive program. As I mentioned, the identify and improve aspects go hand in hand, but we often forget to take the intermediate step to measure (before, during and after) our efficiency program.

A wise colleague shared this idiom with me 15 years ago – “you cannot improve what you cannot measure”. This expression has been core to our storage economics framework from the beginning.

Measuring efficiencies can sometimes be difficult and subjective. That is why financial or economic measurements are most effective. Turn the efficiency or inefficiency into money and measure the costs (or unit costs). The simple table below outlines a series of efficiency options, potential measurements and then the options that can improve the results. If measurements are taken before and after the effort, we can be sure that we have actually achieved a measurable improvement.

This is a simple outline, but you can see how the intermediate step of measurement is key to ensuring that the right actions are taken to produce the efficiencies required. Many differences may exist as to the best approach to achieve improvement, but an organization should have a singular focus on the measurement systems to align them with local goals and objectives.

Here are more posts on capacity efficiency:

• A Consensus on Storage Efficiencies
• How Much Does it Cost to Spend Money?
• The Tipping Point for Hard Disk Prices?
• Buying Disks or Buying Storage Efficiencies
• Look Beyond the Price of HDD
• Capacity Efficiencies, Again and Again
• How Thin Provisioning Contributes to Storage Efficiency

Does storage virtualization make sense for you and your storage environment now? Are there economic benefits for you with this technology? What benefits and cost metrics do you need to build your own business case for Storage Economics? Are you aware of the compound advantages that storage and server virtualization make on your data center operations and costs?

Join me, Hitachi Data Systems chief economist and global business consultant to understand:

• Types of costs that virtualization can directly address (and reduce)
• Qualitative benefits of virtualization and how to convert them to cost savings
• Quantitative methods to measure and predict cost savings of virtualization in data migration, space reclamation, storage management tools, storage management effort and consolidations
• Qualitative impact of combining server, desktop and storage virtualization
• Cost savings by large and small IT organizations around the world through virtualization of their storage infrastructures

Speakers: David Merrill, Chief Economist

Feb 1, 9am, 12pm ET

To register for this webinar, click here, or visit: https://hdschannel.webex.com/hdschannel/onstage/g.php?t=a&d=928422534

• Buying Disks or Buying Storage Efficiencies
• Look Beyond the Price of HDD
• Supply-side Economics
• Storage Virtualization – A Foundation for Economically Superior Storage Architectures

To learn more, please see below for details about a webinar on this topic tomorrow, Wednesday January 25, 2012.

Webinar: Manage Rising Disk Prices with Storage Virtualization

Wednesday, January 25, 2012 9:00 am Pacific Standard Time (San Francisco)

Technical Session: Learn how storage virtualization can reclaim existing storage on the floor. Extend thin provisioning to existing storage to increase disk utilization and defer capital purchases. Take advantage of zero page reclaim and write same to reclaim storage reclamation. Use Hitachi Dynamic Provisioning over provisioning capability for automatic optimum storage utilization.

We’ll also cover dramatic enhancements to Hitachi Switch IT On III program that make this extremely attractive and affordable. Register for this WebTech and learn from HDS experts how to use these technologies to increase your customer satisfaction and sales despite impending increases in disk prices.

This webinar will also cover:

• Thin provisioning options for storage reclamation and expectations that depend on customer environment
• A “how to” on reclaiming storage from existing systems using Storage Virtualization
• Details of Hitachi Switch IT On III enhanced program

Target Audience: Hitachi Data Systems Customers, TrueNorth Partners, and Employees

Register by either clicking or pasting the link into your Web browser:

https://hdschannel.webex.com/hdschannel/onstage/g.php?t=a&d=928626897

Source: http://dilbert.com/strips/comic/2004-10-14/

Source: http://dilbert.com/strips/comic/2002-09-27/

Source: http://dilbert.com/strips/comic/2002-06-08/

Anyway, I believe that traditional capitalization for IT will diminish over time, and we will move to contract or consumption-based contacts to secure IT resources in the future. I can image an advanced version of an app-store and facebook where I can ‘like’ a storage consumption model, then download it to my infrastructure to upload with my internal apps and systems.

In the meantime, we are left with more traditional procurement models that require a set of methods and rigor to get assets approved, justified, certified and priced correctly. The entire procurement process can take months and significant effort, so IT planners have become experts in forward-planning to meet capacity demands. There are many options to reduce the time and cost of procurement, but I wanted to start with some simple metrics that may helpyou get a jump start on efforts to reduce this time and cost of procurement.

The first step is to dollarize the cost of procurement. Easier said than done.

Last March, Forrester released a paper covering eProcurement software and the impact this can have on the entire process. I found this to be an insightful read on the software automation side of the equation. Then a colleague sent me some information on the efficiencies of procurement personnel, and that the average procurement employee spends US $25M per year. And those employees burdened cost, on average in the US, is $112K.

Simple math then helps us to create a simple metric: to spend a million dollars on IT assets will cost (in labor) about$4,500. Now there are other aspects of procurement that will not be in this number (such as RFI, ITT generation ad review, treasury funds, certifications) but assigning a rough cost of $5K to acquire $1M is an interesting start. This procurement cost can be seen as a tariff of 0.5% (.0005%) of all IT spending. Perhaps this is the kind of metric that can be used to start measuring the cost of spending money.

For years, HDS economic consultants have modeled total costs for customers, thousands of customers, in vertical markets in all parts of the world. We know that price of the hardware and software is just two of the 34 elements that can constitute the total cost. And although most organizations are sensitive to the purchase price, we have seen empirical data that suggests that price (lease or depreciation expense) is just 17-20% of the multi-year total cost of storage ownership. Many other costs (such as labor, power/cooling or migration) can often eclipse the purchase price when looking at four year costs.

So a 5-15% increase in the price of arrays/HDD then translates to a potential 1-3% net increase in total cost:

• At the low end, a 5% rise in HDD price impacting a TCO model where price is 17% of the TCO produces <1% increase in Total Cost (.05 x 17%)
• At the higher end, a 15% rise in price for an environment where HW is 20% of the TCO creates a 3% rise in TCO (.15 x 20%)

This 1-3% increase in cost is not as devastating a number compared to the bad news of a catastrophe-driven price increase.

With the right storage architectures though, total costs can be driven down by reducing the storage footprint, total power consumption, faster (or no) migration time and effort, and reduced wasted capacity. Economically superior storage architectures tend to have some common ingredients to produce these kinds of results:

• Storage Virtualization can significantly reduce migration time, reclaim white space, provide better/unified management and reduce license and maintenance costs for the subordinate (heterogeneous) storage arrays
• Thin provisioning can reduce wasted, allocated capacity and provide improved performance with wide stripping
• Data de-duplication can reduce total disk space requirements
• Dynamic tiering and auto-tiering can put data in the right cost of tier, based on rules setup around access, retention or QoS
• Intelligent archive solutions can cut down backup costs, and move stale data to a lower cost tier for retention or immutability requirements
• Control user behavior or appetites with service catalogs, charge-back/show-back reports and basic consumption metrics

So the price of HDD and arrays may be out of your control due to natural or un-natural events, but you can take better control of your total costs by considering and implementing the right storage architecture that meets your cost sensitivities. 2012-13 may produce other problems that impact price and some of the cost factors, and all of these events cannot be predicted. Therefore the burden of implementing economically superior (and price-fluctuation-tolerant) architectures should be high on your 2012 to-do list.

Also, take a look at Hu Yoshida’s recent post on storage efficiencies.

I came across this news article from Sweden, where web and data sharing has been recognized as an official state religion.

So, some quick thoughts come to mind:

1. Can your storage investment now be considered a charitable tax-exempt contribution?
2. Do you need to purchase some priestly robes for your storage administrator?
3. Will we only have to limit our time and attention to data management for an hour only on Sundays?
4. How will governments’ IT departments now effectively separate church and state?
5. Will this new religion require some type of sacrifice? (that is a loaded one…)
6. Will the data center now require gold leafing and vaulted ceilings?
7. Will a religious connotation change (raise) your perception of database or storage sales people?
8. Can you now use the freedom of religion argument to increase your mailbox quota?
9. Does that 20-year-old 9-track tape now become a sacred religious relic?
10. Will you have to canonize your storage technical architecture?

Feel free to add to this list.

I do not condone this definition of religion, but it may put a new light on the value and importance of data and information.