Cost of IT part 2 NIL
06.4.2016

Today it is time to look at the investment part of IT, or the so-called capital expenditure (CAPEX). What do we have to invest in the long term in order to own the IT environment we are building? The investment (cost) part of the equation in IT is pretty straightforward – we need hardware and software. Or is it?

Let's do it the old-fashioned way. Hardware is the boxes that we can see. Everything that we see in the data center and around offices at different locations goes under hardware. And yes, this includes the mobile devices that we so faithfully carry around with us every day. Software runs on the hardware we use – more on it later on.

BYOD trick played on employees

There is a slight trick in place when it comes to mobile devices. The BYOD (Bring Your Own Device) trend has really reshaped IT environments. At first, users were happy for the first five minutes, maybe the first hour. They got to bring their own bought and owned gadgets to work and use them the way they wanted. For the first five minutes, that is. Then the IT personnel had to do something about it as they posed a big security hole from the security point of view. The IT had to manage these devices, so it locked them down and limited their options to the best of their knowledge and abilities. “Why is this important for IT costs?” you ask. Well, because if you're going to do it right, then you should count the stuff you actually pay for (and not the stuff that others pay for). BYOD in the enterprise environment soon turned to “Buy Your Own Device” as far as employees are concerned. The accounting department is/was happy as well. So was the CIO. If a PC costs around 500 or 1000 EUR, a smartphone 500 EUR, then yes, you can save a lot with »the new BYOD« approach alone. A true CAPEX reduction trick that didn't backfire – just because there is/was a nice story of freedom of choice behind it.

Storage is expensive, so is backup. Can you do it differently?

Servers, storage, backup, networking equipment, cooling, PCs, printers, phones and other hardware represent fixed costs of IT. There are a lot of factors to be considered. Some people say storage and backup are one and the same, but they certainly are not. Not if you do them properly, since backup should be done externally as well – on secondary locations. There is no 100% reliability in the digital world, and having all your eggs in one basket is a true recipe for disaster. But to be totally honest, and at the same time blunt, with you – you do backup only because of hardware failure rates (which are low) and you do data restore mainly because of human stupidity. And once you have implemented the backup solution, you soon realize that when you actually use it, you use it 90% of the time to restore something that shouldn't be damaged/erased/broken in the first place.

Don't save on networking costs

An important and often overlooked piece of the puzzle of IT costs is the networking equipment. Routers, switches, firewalls are turning out to be quite on the pricey side if you want a really high‑performing and reliable network. And since in the years to come, most of IT will be run from the cloud, it makes no sense being stingy and cutting corners when it comes to networking.  In the long term, this will hurt the company and users.

Software shenanigans

Software is the most difficult part of IT that you should/have to manage. Piracy rates, even when it comes to the enterprise level, are alarmingly high (they might even reach an astonishing 50%!). But they don't really surprise me. Software licensing can be easily compared to the Church and its position on sex. You're always in some sort of violation. The terms of use that are defined by software vendors are so complex and strict that no company that uses business software on several levels can say it is 100% compliant. Well, some might say it, but an audit could easily prove them wrong. Software vendors are well aware of this fact, so they don't go for absolute in any case. It is not in their best interest to annoy their clients for just about every penny once they got them to pay hefty sums on a yearly basis.

Software represents around 15–25% of CAPEX in an average enterprise. So it is not something you wouldn't look into when you try to cut down the costs of IT. Software licensing becomes a true CAPEX problem when companies start buying the software they don't actually need. The so-called over-licensing is way more common than you would imagine. Some licenses, especially those for endpoints, are very likely to be nontransferable. So each desktop or laptop adds around 500 EUR of extra cost to the equation with the business software alone.

Virtualization doesn't change (almost) anything

I imagine this title raised quite a few eyebrows. But, being honest again, virtualization won't solve you CAPEX challenges. Yes, by virtualizing the infrastructure, you can significantly lower the number of servers you have to manage, and save on electricity, cooling etc. But what you save by server (or hardware) consolidation in general, you later pay with software licensing – yes, those not so nicely priced virtualization licenses. Virtualization software vendors such as Microsoft and VMware have done their homework and their math as well. They have calculated precisely where the limits are and have set the prices accordingly. They know how much companies are (still) prepared to pay and how much they aren't. So by virtualizing your environment, you save a little money and keep the CFO and CEO happy.

Putting money in CAPEX makes your life easier

There are many constants in IT environments. I have learned from experience with several projects that putting more money on the CAPEX side actually saves you time and money on the managing part – and I already mentioned in the “Part 1” of this series of articles that people are by far the most costly part of IT. Overdoing it with savings can turn into a nightmare as IT experts that fix things don't come cheap. You alone have to decide what works best for you. And another advice – delaying action(s) for future time doesn't really work in IT. Happy CAPEX budgeting