Money Tree

Money Tree

Do you know IT’s typical utilization of hardware (workstations, servers, storage, and network), software, and facilities in “lights on” operations and maintenance is ridiculously low!!  Millions of servers run at less than 12% of capacity.  Storage is utilized at less than 30% of capacity.  What a HUGE waste of money.  Why do IT organizations run such low utilization?  Mostly to CYA – Scope 2, Buy 3.  Other parts of the business avoid these costs.  For example: 

1)    Would a COO spend $30 million on about a 100K square foot distribution center if during the life of that facility they would use only 15-30% of the total floor space?

2)    Would an airline CEO buy a $20-30 million passenger jet if the average load factor during its life was going to be 15% and at peak occasionally 40%?

3)    Would any executive hire 5 new, permanent employees to do a total of 40 hours of work per week instead of just one person?

NO, if they plan on having a job – or a company!  Yet this mass under utilization – or over provisioning – of IT assets has occurred for at least 2 decades and is not getting much better.  Plus most CIOs do not know the utilization of their IT physical assets, including me for most of my career. 

Let’s look at a real life example based on total cost of ownership (TCO) for a server.  A CIO that buys a mid-level enterprise server for around $50K in acquisition costs will pay a 3 year TCO of over $250K, assuming the acquisition cost is 20% of the TCO.  These TCO ratios can vary but are backed up by published research from several IT research groups.  But the “relative” TCO of that server is over $800K, if it is utilized at only 15% of its capacity.  Now multiply this actual or relative TCO by the “hundreds” or “thousands” of servers a large company has in its data center(s).  These costs are not soft costs.

Tags: , , ,