Last time I considered various areas around which one could associate cost savings that will be derived from buying capacity management (CM) software or implementing better capacity processes. Some of those savings offer more direct financial benefits than others. Your CIO might question some of your claims if you are trying to justify expenditure, so I thought I would expand on some of those savings a little more, to try to help you handle the questions.
One can often make a case that introducing a product like Metron’s Athene means one person can do twice as much work. We notionally put a saving against Athene of one person’s salary. Unless that person is let go, which never happens, then that saving doesn’t happen in cash terms.
Imagine a web site that responds slowly when someone goes on to inquire, even though it is up and running. Your visitor may get frustrated and type in the URL of a competitor. It’s impossible to gauge if they would have bought had they stayed, and how much they would have spent. Thus slowtime tends to need the business to estimate its value. This is often most readily done by valuing it as a percentage of downtime. For example, making an assessment that for every $1 of downtime we are likely to experience, a further 10 cents are lost due to slowtime.
Enjoy your weekend.
Andrew Smith
Chief Sales & Marketing Officer
The areas of savings we considered were:
1. Less outage due to capacity issues
2. Less times when service levels are poor
3. More productive CM staff
4. Fewer performance and capacity crises needing fixing
5. Deferring hardware purchase, including things such as accelerating virtualization
6. Consolidating CM software products
I divide these into two categories: hard and soft.
Hard savings are where there is direct money savings that the business will see. Soft savings are where there are notional savings, but hard cash isn’t necessarily how the value of the saving is derived.
In most cases, I find our Athene CM software is readily justified on the basis of hard savings alone. Hard Savings
I see ‘less outage due to capacity issues’ and ‘deferring hardware purchase' including things such as accelerating virtualization’ as hard savings. Downtime costs the business money – lost sales to a business if their web site that sells direct to the public is down. Most financial businesses put a huge value against lost business due to downtime, hence the drive over the years to 99.999 or ‘five nines’ availability.
Not buying hardware until later saves real money from your hardware budget. It has a monetary value, it has an ‘opportunity cost’ value as well – that money can be used to create value elsewhere. However you view it, it has a value for the business. There is further hidden value as well. Due to effects such as Moore’s law, which states that the price performance of computing power doubles every eighteen months, every $1 not spent now will either buy more power or the same power for less than $1 in the future. The longer the delayed spending, the greater the saving becomes. Ask any accountant – the value of money can be significant, even in these times of very low interest rates.
Consolidating CM software products is a clear hard saving. If you can consolidate several CM tools and replace them with one tool, such as Athene, the maintenance costs of those products are a direct saving. Over time such savings can be very large.Soft Savings
Sometimes people talk about areas of saving as if they were actual cash savings, but in fact they aren’t. Examples are ‘more productive CM staff’ and ‘fewer performance and capacity crises needing fixing’.One can often make a case that introducing a product like Metron’s Athene means one person can do twice as much work. We notionally put a saving against Athene of one person’s salary. Unless that person is let go, which never happens, then that saving doesn’t happen in cash terms.
What is true however is that the person ‘saved’ by the product is free to do other work. Assuming that whatever else they do adds value to the business, this is a genuine benefit to your organization. Expressing their salary as a cost saving, even though that salary continues to be paid, is usually the best way of expressing this benefit financially. The same holds true of time saved for non-CM team members who benefit from better capacity management, e.g. sys admins who spend less time fire fighting problems.
Less occasions when service levels are poor is a harder nut to crack. It should be a hard saving like downtime. Unfortunately it’s harder to get the business to put a value on times when service levels are poor, as distinct from when they are non-existent. If the system is running slowly, business could be lost. Imagine a web site that responds slowly when someone goes on to inquire, even though it is up and running. Your visitor may get frustrated and type in the URL of a competitor. It’s impossible to gauge if they would have bought had they stayed, and how much they would have spent. Thus slowtime tends to need the business to estimate its value. This is often most readily done by valuing it as a percentage of downtime. For example, making an assessment that for every $1 of downtime we are likely to experience, a further 10 cents are lost due to slowtime.
CIO’s love to ask you for a return on investment calculation and then savage you if you include soft savings. Of course, in my opinion, it is those closest to the business, such as the CIO, who should be able to put a value on those soft areas most easily. Ah well, they’re the boss.
On Monday I’ll consider the other side of the equation; what costs for doing better CM you need to allow for, that reduce the value of the savings we have considered to date.Enjoy your weekend.
Andrew Smith
Chief Sales & Marketing Officer
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