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Last November at the Business Technology Summit in Bangalore, India I shared a few thoughts on how leaders of IT organizations can refresh technology, continue to deliver sound IT and meet customer needs, and, by taking advantage of on-demand infrastructure services, remain in the good graces of the company CFO. I’ll attempt to do a bit of a recap here, adding recent data points and additional thoughts along the way. Well then, shall we?
The US Department of Commerce reports (most recent Information & Communication Technology Survey, which was in 2007) that capital expenditures (CAPEX) make up, on average, 63% of companies’ IT spending.
CIO’s today are currently faced with decreased capital and operating IT budgets, as well as staffing reductions or hiring freezes. All the while, the expectation to scale applications and systems – and maintain performance and SLAs – remains.
In October 2009, Barclays Capital reported in its CIO survey that IT spending expectations would increase 0-5% in 2010 versus 2009, with priority placed on datacenter expansions, virtualization and Cloud initiatives. In the near term, CIOs had forecasted that their IT spend would be focused on storage, networking, and servers. Comparing the Barclays results with a more recent CIO survey – this one conducted by Gartner this past January, where some 1,500 CIOs surveyed yielded a similarly bleak forecast: IT spending will largely remain flat, and if it does increase, it’ll do so by just over one percent. (Which clearly isn’t great, but it also isn’t the elbow-drop of more than eight percent in IT budgets as seen in 2009 .) Oh, the CIOs in this latest survey also posited that their IT organizations have about the same level of resources now as they had back when Kelly Clarkson’s “Since U Been Gone” ruled the airwaves; yep, welcome back to 2005. The lesson? Wring everything you can from what you’ve got. Having fun yet?
Right, so how does one squeeze blood from this proverbial IT turnip? The first step is to dig into your IT spending a bit – gain as much understanding and insight as to what you have in your arsenal today – and the related costs – as possible. This sounds like a simple task, but you’d be surprised how many IT directors and CIOs don’t really know just exactly what they are using and how much they’re paying. (Sidebar: If you haven’t yet read my partner Brian Superczynski’s article from last week, I’d encourage it; he offers good thinking and a few tools around this business insight)
The CIOs surveyed by Gartner report that their top three business priorities for 2010 are:
- Business process improvement
- Reducing enterprise costs
- In the use of informatics/analytics
In addition, their top three technology priorities for this year:
- Virtualization
- Cloud computing
- Web 2.0 (read: Social Networks)
Taking a cue from this, the next step to a CAPEX-free world is to first address how the data points above stack up against your own business and technology priorities, then explore ways in which you can reduce capital costs by taking advantage of outsourced infrastructure and related services like virtualization. Hang on now…don’t be afraid of that Cloud…embrace it. I’m not suggesting you entrust your most valuable corporate crown jewels to a multi-tenant (shared) Cloud service (Amazon Web Services/Elastic Compute Cloud and Rackspace Cloud largely fall into this category). These services do have their place and you may find they will play an important role for your organization at some point. However, I’m referring to enterprise-class, private datacenter services, where you retain complete control over access and to your infrastructure above the operating system; it’s just that someone else manages everything else – hardware/upgrades/monitoring, inter-networking, bandwidth, power, etc are all taken care of. Think of this as an extension of your own datacenter that simply lives elsewhere…you still have the master key and you pay for everything “as-a-service”, largely free of capital costs.
These as-a-service solutions take on many forms, each designed to address specific IT needs: Compute Clouds for development or testing, storage arrays, backup datacenters/Disaster Recovery (DR) services, email, or simply a rack of dedicated servers with your name on it. A few providers to consider in this area: private Cloud services like Terremark’s Enterprise Cloud, SoftLayer’s CloudLayer, or datacenter replication/DR from nScaled, CA’s ArcServe, or dedicated, managed servers from Latisys, The Planet, Rackspace, and others. The point is to spend the time. Sit in on a few webinars. Perform your due diligence, seek help if you need it, and I think you’ll find that utilizing tools like infrastructure-as-a-service for some applications or areas of your infrastructure makes sound business sense. Also, if you have a technology refresh initiative as core to achieving your goals in 2010, these services typically deploy on the latest hardware…double bonus!
By the way, much of the data from the Gartner survey can be found on the author’s blog post here.
The Japanese pioneered a concept you are probably familiar with called Kaizen: calculated steps, taken daily, designed to achieve a larger goal. Applying this methodology is key to a sound migration path away from capital IT expenditures and toward infrastructure-as-as-service. (I know, I could have just said “baby steps” but this Kaizen thing just sounds better, no?) Here’s how you apply it:
- Start small
- Find a service that meets your liking then deploy – perhaps just one or two applications or projects
- Monitor performance and costs for a month or three, using the service as a Litmus test to evaluate and design the migration for the rest (or most) of your infrastructure.
If they pass muster, simply add more fuel to this as-a-service fire and before long, you’ll find yourself on the receiving end of praise from the CFO, your own team, and your customer as well. Or maybe you’ll find yourself singing happily along to “Since U Been Gone.” If the latter, you just might want to keep that one to yourself.
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