NIL Cost of IT 3
25.4.2016

Thank you, patient reader. You have made it to the last part of the “Costs in IT” series of articles. This one also deals with eye-opening facts as it covers the operating expenditure (OPEX) view of IT solutions. Let's have a look at the costs that incur during the lifetime of an IT solution/ecosystem. Be warned – there are a lot of them that you haven't thought of at all.

The OPEX part of the costs equation consists of costs that are created or generated by running an IT solution/ecosystem. They can be put into two general categories: people and all other hidden costs. Let’s start with the hidden costs first. These are the costs that an organization has to cover in order to have its IT solutions up and running. Most companies don’t even think of these as IT-related costs. For example, electricity – a thousand PCs and two thousand mobile devices will consume a great deal of electricity. And this is noticeable on the monthly bill. What can you do about it? By consolidating the desktop PC side and the use of virtualization (you can virtualize just about anything – servers, desktops, networking, storage, software …), thin clients etc. some savings can be made. A thin client can bring average power consumption down from 200 W (typical desktop PC) to only 10 W. Still, looking at the big picture, electricity is a relatively minor part of OPEX and TCO. However, in a well-managed scenario, electricity costs can be reduced by up to a third.

In a data center, power costs go almost hand in hand with cooling costs. This is not the same in office environments, but still – having fewer computers and less other IT equipment that heats up the environment, the lower the cooling costs will be.

Then you have several other IT-related OPEX costs that you usually don’t even think about: access control and security (servers need safe rooms), firefighting solutions/services, etc. Maintenance and after-sales services also fit in the OPEX category of IT costs. Since organizations usually outsource third-level support, this can represent a significant cost associated to IT solution(s).

People and dollar bills

In a previous article, I already said that people represent by far the biggest cost in IT. Around half of all the money an organization spends on its IT solutions goes to people involved in making sure these solutions run smoothly. This is likely never going to change. It actually can’t. Organizations have tried it. They have tried managing IT locally, they have tried to centralize it, they have tried to outsource it – in all scenarios, IT staff comes out on top of the costs equation (only the CAPEX vs. OPEX shares change a bit). Yes, you heard it right. Even when companies decide they don’t need an internal IT department and start using cloud solutions and IT-services from different providers the integration and maintenance part, performed by an external provider, makes up for most the costs (and eats up your savings).

IT experts cost money. Expert knowledge and services don’t come cheap. They can’t. And the more complex IT solutions get, the more costly they are. Keep this in mind.

There is something you can do

When the CEO is presented with such facts, he/she usually calls up the CFO and the head of HR. If IT staff is the most expensive part of IT, it is only logical that you try to do something about it, right? So, what can you do? An organization can actually decrease the number of IT support staff but usually not by much. Today IT staff is overloaded with support activities as it has to deal with legacy systems, increasing employee requests, and managing IT security in the best way possible. And there is another factor that won’t let companies save money on IT. Technological advances don’t seem to be slowing down anytime soon, so organizations need to constantly invest in new technologies and people to make them work.

One way to create some savings is to lower the burden of IT staff. This can be done by optimizing and automating repetitive tasks, simplifying IT environments (legacy systems have to end up in history books eventually), and standardizing IT solutions and services. Having solutions “handmade” or “built to order” is becoming increasingly hard to justify (cost and otherwise). “Bring your own agenda” approach just doesn’t cut it in IT anymore – companies and their employees cannot just toy with ideas on how their devices and software should work as this creates a great deal of trouble with IT and other support personnel. This also means a lot of extra cost. It is the job of the CIO to tell the CEO that IT can do a way better and cost-effective job if it can just focus on the big picture and the tasks at hand and not be told to make employees’ dreams come true.