In his article “Microsoft has nowhere to go but up in cloud market”, Robert Mullins examines BTC Logic’s cloud computing ranking report. As part of the cloud computing ecosystem, Microsoft could take a leadership role through cloud technology, to help the enterprise CIO understand their unit costs, and supporting how best to allocate costs across business lines. As a major player, they could support the revitalization of unit costing in data center management.
In a recent discussion with a top 10 cloud management company, the chief marketing officer mentioned a major sales challenge: getting the enterprise CIO to articulate their current cost of providing services. “It is hard to show the dramatic benefits of cloud computing when the customer has no clue what they are currently spending and for what.”
How do CIO’s manage and measure unit costs and allocate them across all business lines? The typical solution is a very complicated spreadsheet model, with major inputs consisting of budget/forecast dollars, some critical data center indices, some political / organizational hedging, and voila – a solution based on average costs and with little ability to provide insight and lots of opportunity to be challenged. In the end, out of necessity, it’s easier to create a single budget line for the IT and roll up all the costs to it, limiting clarity of resource consumption and often leading to server sprawl.
If you break down the current enterprise IT procurement process, the CIO needs to absorb and contain expenses in some sort of centralized ledger. Mixed together are such items as the costs of procuring hardware and software for core applications, corporate licensing agreements, managing core utilities and operating systems. The majority of shared components like employees, networking and storage are either absorbed as a shared cost or generally reported for chargeback purposes. Again, no insight into the unit costs.
Cloud computing can break this old model and can simplify cost measurement dramatically, simply by taking advantage of its unique properties and managing costs in a shared environment, including shared resources on the same server and providing specific resource services. Here is a new unit cost paradigm which requires support from major players, such as Microsoft. Potentially, the enterprise gets a new model with clear dynamic unit cost relationships between servers, applications, platform, infrastructure, network and users. This has tremendous benefits by actually measuring data center utilization. For the first time, CIO’s can work with businesses and make decisions about how to incrementally deploy resources and the businesses can clearly understand the associated costs of providing services.
As part of BTCLogic business practice, we spend time helping corporation understand the impact of this new model’s value proposition. Some of the benefits include:
- Manage multiple cost models that can account for actual usage, allocated resources, or customized fixed costs.
- Track resource utilization of all components by business, including CPU, memory, storage, storage I/O and network I/O.
- Can easily map to your organization’s structure and apply costs at the department or group level.
- Provide a robust reporting capability that lets you measure, analyze and share cost information with the rest of the organization
By putting together some basic cost metrics, the enterprise CIO can measure costs in a virtual environment and begin using the data to drive cost visibility and accountability in the datacenter; creating an outcome based model, and setting the stage for an effective discussions in the future. The data and analysis gathered and analyzed on costs will materially help, including being able to effectively manage expectations for higher and higher service levels from IT, showing the business how the potential cost impact of different options. When going into budget negotiations, the CIO will be able to quickly show where resources are over-utilized and how much it costs, and be able to make the case for resources – servers, storage, etc. – as they are needed.
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