Top Ten IT Trends for 2013–Trend 1
by Hu Yoshida on Dec 5, 2012
Over the past few Decembers I have posted on the top 10 trends that I expect to see in the coming year. This blog post is the first in a series on my top IT trends for 2013.
The Background for 2013 Trends
The explosion of data will continue to be the biggest concern for the IT industry as Big Data begins to takes center stage. Exabytes will begin to enter into planning discussions and petabytes will be the new norm for large data stores. A lot of attention will be focused on secondary data that is generated for copies and backups and stale data that is not immediately needed, but that chews up a lot of the IT budget for retention and maintenance. Workers will have multiple smart devices that they will use to create and access data outside of the data center, which will increase their productivity, but will create new headaches for the IT department. The total cost of ownership for storage will go through a major change as operational costs come down and capital costs begin to creep up. Against this backdrop, I have put together my trends for 2013.
1. Dramatic Changes in OPEX and CAPEX
Over the past 10 years the total cost of storage has been increasing by about 7% per year while the growth of storage capacity has been growing at about 30 to 40%. The increase has been mainly due to operational costs (OPEX), while the cost of hardware (CAPEX) has been relatively flat. Disk technologies have had a phenomenal run with increases in recording densities doubling every 18 to 24 months, causing disk prices to erode about 30% per year. Containment of hardware costs was also helped by the introduction of Storage Area Networks (SAN), which eliminated direct attached silos and made better use of hardware through consolidation, but added another level of management and complexity to operational costs. As more applications and data share larger and larger storage frames it becomes more difficult to schedule and execute backup, maintenance, and migration windows.
These trends in CAPEX and OPEX are about to change dramatically. The good news is that the introduction of server and storage virtualization is having a major impact on operational costs and is reversing the trend of increasing OPEX. Storage virtualization technologies from Hitachi Data Systems have been shown to reduce TCO by 40% or more, with payback in less than a year. On the other hand, CAPEX, or hardware costs, have begun to trend upwards as more functions are delivered in hardware and the demand for storage capacity has exploded due to the pressures of Big Data and the need to retain data forever. At the same time, advances in recording technologies have slowed as I showed in my post back in June of this year.
The price erosion for storage capacity is projected to be only 20% per year through 2020.
The chart above comes from a customer who has been implementing storage technologies like replication, virtualization and automated tiering over the past five years while their capacity requirements were growing by 40% per year (they did not provide measurements for 2010). When they began in 2007 the capital cost of hardware was less than 25% of the total cost of ownership on a cost-per-TB-per-year basis. Through the use of capacity efficiency technologies this company has been able to reduce their TCO/TB/year from about $11,000 to less than $4000 and now the cost of CAPEX is over 50% of TCO. In order to continue to reduce their TCO this company must focus on tools and processes to reduce CAPEX. The increasing demand for capacity along with the deceasing price erosion of storage technology will make it more challenging to reduce CAPEX; however, there is a lot of waste in the way customers acquire and utilize storage today. I will identify these areas of waste in future posts in this series on my 2013 IT trends.
OPEX and CAPEX are changing rapidly as new demands are created, new technologies evolve, and older technologies begin to age. IT must employ economic principles and measurements to eliminate waste and insure that they are making the right investments for a sustainable IT budget.
Comments (2 )
As always, a good article. I’d agree OPEX & CAPEX are naturally starting to trade places; I see a slow down in the rate of capacity growth of the traditional disk drive, meaning the volume & variety of the data explosion requires simply more drives.
This is balanced by the advances in controller intelligence, which offer a very much simplified management interface, allowing a larger volume to be managed by individuals, and removing the management of data from the “dark art” it was a few years ago.
Converged infrastructure based solutions, providing orchestration & automation functionality, also reduce the OPEX. This OPEX reduction is further enhanced by the advances in environmental savings offered by the latest technologies.
Whilst I’ve not yet seen CAPEX reach the 50% mark referenced, I have seen it move from the 15-25% range to get closer to 40%. A future 2-tier model of performance & capacity, combined with greater intelligence in the management and controller levels should see us get closer to 50% over the coming years
Thanks for the comment and agreement that CAPEX and OPEX are beginning to trade places. These costs seem to go in cycles. Before the introduction of SANs, storage hardware costs were more than 50% because storage was directly attached and adding capacity was used to solve management problems. With the introduction of SANs, we consolidated more servers onto shared storage resources and got rid of the storage silos. We replaced as many as 6 to 8 direct storage units with one storage frame that was shared by multiple servers and we started to look at what was actually used versus what was allocated. Storage technology was still advancing, capacity prices were eroding at 30% or more per year and CAPEX as a percentage of TCO began to stabilize despite the increasing demand for storage. However, OPEX was increasing because every time we changed the shared storage infrastructure we had to manage the impact on all the servers and applications that shared that storage. Now that we are addressing this with storage and volume virtualization and simplifying the management interface, we are seeing a dramatic decrease in OPEX as a percent of TCO versus CAPEX. What is different this time around is that the hard disk technology has slowed down and the price erosion that we have enjoyed for the last 50 years has slowed to less than 20%. So the rise in Hardware costs is accelerating CAPEX costs. See David Merrill’s take on CAPEX and the impact of depreciation. Those of us in the US may have another reason to worry about the fiscal cliff!