Can you really justify capacity management? – 4/5

So far we’ve considered areas where a new capacity management (CM) product or better CM services can save you money, building the benefit side of a return on investment calculation.  It costs you money to make a change however so let’s take a look at the cost side of the equation. 

In my first blog I outlined areas of cost to consider:

·         Costs of CM software, including on-going maintenance

·         CM team resources needed to use that software

·         Initial training for the new software

·         Implementation and on-going services required

·         Other personnel resources that are needed to help with the implementation and in-going usage of the software

Let’s now look at these in more detail.

If you’re looking to buy a software product to improve your CM, there will be software costs and on-going maintenance.  If you’re doing a Return on Investment (ROI) over several years, remember to factor in increases in annual maintenance costs over time and any further purchases you might need to make, for example upgrades or further roll out of the capacity software. 

It’s also worth bearing in mind that your ROI will look more realistic to the CIO if you remember that although software costs are incurred on day one, the benefits and savings identified in the previous three blogs take time before they are enjoyed.  Offset the savings to allow time for implementation, training and usage of the new software and processes before the benefits begin to pay dividends.  Likewise be realistic about factoring in when training and implementation services will take place.  Unless you are paying for everything up front, there could be costs that can be deferred.

Resources from other teams that are necessary to implement new CM software or processes should not be forgotten.  In my early days, the Capacity Manager would install Athene himself.  Nowadays, and for very good reason, we need the support of sys admins, the security team, the network team and more before a CM software solution can be put in place.  These initial costs need to be included. 

Likewise there will be on-going cost for support from these other teams.  As we had ‘soft savings’ these are ‘soft costs’.  The business is paying these peoples’ wages already but if they weren’t supporting the CM team, they could potentially be adding value to the business in other ways.  Typically this is a minor element of overall costs.

You must also allow for staff costs and any physical resources such as servers and databases to support your CM software.  If you have a CM team of four before and after purchase, you could consider staff costs to remain the same but remember the ‘soft savings’ on staff.

Those same four people will be able to do a lot more thanks to the new software and/or processes.  A value could and should be put against this increased efficiency. 

For hardware resources to support the CM team, again remember the cost of upgrades, additional hardware and price increases over time.
In my final blog on Wednesday I’ll be taking a look at return on investment rather than purely cost justification.

Andrew Smith

Chief Sales & Marketing Officer

Can you really justify capacity management? – 3/5

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.

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

Can you really justify capacity management? – 2/5

As a software supplier, my focus is on capacity management (CM)software and justifying that it offers a quick enough return on investment. But many of the points I cover are equally applicable to justifying the discipline itself, irrespective of any software considerations.

So how can capacity management provide savings or cost benefits?

Here are the areas of potential savings I offered last time, with some additional thoughts:

·         Less outage due to capacity issues                                                             

Systems sometimes fail completely due to capacity issues, for example fatal contention caused by very high utilization.  Downtime like this costs organizations money, just consider how much business is lost when a web site selling goods direct to the public is down.  CM can help prevent some of this downtime.  Find out what value your business puts on this downtime and estimate or measure how much CM activity reduces it.  This is often the largest financial saving from CM as the value of downtime to many businesses is so high.                                                                                           

·         Less time when service levels are poor      

An area often overlooked by many people when justifying CM.  It’s easy to see, perhaps even obtain, a figure for downtime.  It’s much harder to get a financial value for the times when a system is still available, just running slower than is desirable, perhaps best called slowtime. For example, the web site might be available, but visitors quit and go to a competitor’s site because response times are poor.   You need to think about slowtime relative to downtime, for example, if downtime costs your business $1m per hour, perhaps slowtime costs 10% of this?                         

·         More productive capacity management staff       

Usually a software related saving, but it could also be the benefit derived from better training or having external expert consulting.  With the right software tools or advice to support them, your CM team can do more work.  This can be hard to put a financial value against: what is the monetary value of the work you are not currently getting round to doing? What value could your labour bring your business if you had more time available?  Usually this gets expressed as savings in salary, for example, by buying a product you need one less person in the CM team.  However, people very rarely lose their job as a result of bringing in a new or better CM product.  Their wages continue to get paid and they do more or different work.                                                                                                        

·         Fewer performance and capacity crises needing fixing    

CM software or better CM processes benefit those outside the CM team as well.  Done well, CM reduces crises caused by capacity issues.  This means fewer ‘war rooms’ are needed, bringing teams together to respond to those crises.  Again, this is not a direct cost saving as typically no one loses their job, they just get more time to do other work that should add value to the business.  The easiest way to put a value on this is to view it as savings in wages equivalent to the percentage of their time saved, as for the CM team above.                                                                                                               

·         Deferring hardware purchase, including things such as accelerating virtualization

This is another area that vies for the title of greatest cost saving due to CM.  Good CM means you can defer buying hardware.  This could be buying fewer servers than anticipated or increasing virtualization density leading to fewer purchases and extends to server, disk, network kit and all aspects of hardware.   Further saving accrues from the value of money over time.  If you delay buying a server for six months, you will get more server power for your money (or the same power for less money) in three months’ time from now.  This will hold true as long as price/performance of hardware keep increasing over time and there is no sign of Moore’s Law stopping yet.  When considering hardware savings, remember to include maintenance, environmental (power,etc) and labour costs (installation and support) that would have been incurred had you bought that extra hardware.                                                                                                                   

·         Consolidating capacity management software products 

CM often starts out being done by project teams when new technology is introduced.  Over time this means many larger organizations have implemented point solutions for CM for mainframe, distributed and virtual servers.  Replacing these with one product can offer significant savings on software licenses and on-going maintenance.

On Friday I’ll consider the above with respect to whether or not they are ‘hard’ or ‘soft’ savings, including defining what I mean by ‘hard’ and ‘soft’!

Andrew Smith

Chief Sales & Marketing Officer

Can you really justify capacity management? – 1/5

As a supplier of capacity management (CM) software and services, we often get asked to help with justifying investment in the area.  Typically this is justifying buying our software.  

In this series I’ll consider this, but the principles apply equally to justifying the discipline itself, even if no software is involved.  I’ll offer my views of how I think CM pays for itself, but I’d be very interested to hear your views so feel free to set me right or offer things I’ve overlooked.

Of course, if you’re looking to work out a proper Return on Investment (ROI), you need to consider the cost side of things as well.  I’ll offer a few thoughts about that side of the equation too – my thoughts on what you should include, software and non-software. 

On my side of the industry, I like to think that the savings will always easily outweigh the costs – our Athene software is always worth the money!

The equation is simple for the CIO:

(Savings from CM software) – (Money spent on CM software) > zero, pretty quickly

If that equation isn’t true, why should he spend the money?

On the justification side, we’re always looking to find ways that we can say that CM saves money.  The ‘zero, pretty quickly’ part of that equation is important.  One of the things I’ve noticed recently is that the payback period that a CIO wants to see from capacity management has dropped from 5 years to 3 years to well under a year over the course of the last twenty years.  A sign of the economic times!

So, to summarize what I’ll cover in my blogs are some areas where CM should pay dividends for your business:

·         Less outage due to capacity issues

·         Less time when service levels are poor

·         More productive CM staff

·         Fewer performance and capacity crises needing fixing

·         Deferring hardware purchase, including things such as accelerating virtualization

·         Consolidating CM software products

Balanced against this the cost areas needing to be included if you are buying a CM product are:

·         Costs of CM software, including on-going maintenance

·         CM team resources needed to use that software

·         Initial training for the new software

·         Implementation and on-going services required

·         Other personnel resources that are needed to help with the implementation and on-going usage of the software

In my next blog on Wednesday I’ll look at the savings side of this equation in a bit more detail.

Andrew Smith

Chief Sales & Marketing Officer

How Capacity Planning has changed

I’d start out with a long-winded "back-in-the-day" story about how we did Capacity Planning back in the mid-1990s (or earlier for many of you), but what's the point?  We're not going backwards.

Virtualization, cloud computing, and other such "fads" are now realities of how we do IT.  So, does that mean Capacity Planning as we knew it is no longer relevant?

Not. At. All.

It's just changed now.  Not always for the better and not always for the worse, either.  It depends on your perspective.

If you are a CIO and have decided to outsource much of your IT to a well-known outsourcer who is expert at running others' IT operations, you've essentially decided to push the Capacity Planning function on to those who are providing your IT.  Yes, you will agree to service level agreements.  Yes, the outsourcer will provide you (possibly) with reports showing how much capacity is available in the environment you're paying for.  But the responsibility to provide adequate capacity at an acceptable cost while still meeting service level agreements is now on the shoulders of the outsourcer.  And, based on my experience in working with a few outsourcing companies, they take this responsibility seriously,.  They take it even more seriously if they are ISO2000 compliant, since Capacity Management is a requirement for that certification.

Consider a light switch in your house.  When you turn on the light switch, you’re not concerned in the least bit about the capacity or the health of the electric grid.  You just want the light to come on -- at the cost you've agreed to pay.  The electricity provider is the one that must be concerned with all the details behind getting the electricity to your house or office.  That utility model is useful when thinking about outsourcing or even when talking about working with cloud providers.  

Going back to the example in the previous blog: If you spent the last 20 years worrying about whether looping processes existed on your Unix box, it can be unnerving to say, "That's not my problem. I don't care." But in this new model, the only details the business should be concerned with are the following:

(1) How much does it cost and are we happy paying that cost?

(2) Is the provider meeting our service level agreements?

Of course, not everyone is completely outsourced, nor has everything been pushed to cloud providers.  So next time, we'll look at the role of the Capacity Manager today and then look at why we need to spend more time on the transaction in order to be able to develop better service level agreements and create better business/IT alignment.

Rich Fronheiser

VP, Strategic marketing

The changing face of Capacity Management

Recently, I spent an evening talking about the current and future view of Capacity Management with an old friend over a few pints of beer.  I know, I know, normal people talk about sports and their kids, but we got down this train of discussion and there was no turning back, at least until the pint needed refilling.  Before we get to the conversation in a future installment, let's set some background....

What we used to call Capacity Management just five years ago isn't quite the same today, at least not from the perspective of many of our clients and prospects.  While hosting a training session this morning, I noticed that about half the attendees mentioned that their companies are considering or have already implemented a cloud strategy.  And, to me, the cloud changes the game for Capacity Management entirely.

Back in *my* old days (about 15 years ago) when I first got involved in what we called "Capacity Planning and Performance Analysis" we simply captured data from systems and made sure that we had enough CPU and memory headroom and that the disks were performing as expected and that we weren't going to run out of disk space.

Then came client-server computing....

Then came complex suites of applications and middleware...

Then came the advent of virtualization followed by the mainstreaming and proliferation of virtualization....  

The world of the capacity manager became more complex, but we still were able to look at all of the resource level data and we were still able to manage the infrastructure in order to provide the right amount of capacity at the right time.

The cloud is the game changer, in my opinion.  Recently, I was speaking to someone who I respect greatly who lamented that we need to be able to see anomalies on systems that are running in "the cloud" in order to do our jobs.  And it was at that moment that I realized that the old-school mind set of capturing resource utilization data was simply not enough (or in some cases not even possible) and that our ways of thinking must change.  

So, what does that epiphany do for the capacity manager and the vendors who are trying to sell Capacity Management products and services?

I'll cover this in more depth in future blogs -- looking at Capacity Planning, Performance Management, the role of today's Capacity Manager, and how the traditional view of Resource/Component Capacity Management fits with today's necessary focus on the transaction and on the End User Experience. 

Rich Fronheiser

VP, Strategic Marketing

Place your bets – what’s the next big thing for Capacity Management?

VMworld is in Las Vegas at the end of August and everyone is gearing up to attend one of the largest industry conferences of the year.  With it being in Las Vegas, we’ll see how the attendance fares with the economy.  Vegas is a big draw for conferences, but also a venue that a manager pushed for budget might just consider too much fun for his people.

One item I look forward to seeing is what may be new from the industry.  In 2010 it was “The Cloud” and 2011 may be the same as this space begins to mature.  Not strictly something ‘new’ but lots of new content around the topic as it matures.  It will be interesting to talk to delegates and see how many have ventured out past the Private Cloud in their enterprises.  Public cloud gets the headlines but my feel is that Private Cloud will be by far the more common implementation. 

With capacity management one of the concerns with Cloud infrastructures according to leading analysts, it will be useful to see how many vendors are focused in this area and how many startup companies attend.  One area to view in the vendor arena is Business Transaction Monitoring.   With any form of Cloud it’s hard to know where the business transaction is processed.  The need to determine the end to end response time becomes critical as you might not have sight of all the components as has traditionally been the case with in-house IT infrastructure.  We have always heard of this need for and promise of “End to End” transaction monitoring for years, but it’s never been effectively delivered.  I’ll be looking forward to seeing who is going to step forward with a new and innovative solution.

The VMworld party is always one part of the conference I always look forward to during the week.  VMware always put on something spectacular.  My favorite was the Las Vegas Speedway, since I drove race cars, legally, in my younger days.  Seeing Danica Patrick didn’t hurt the situation either. 

Aside from the party I’ll also be seeing what swag I can carry off from the vendor booths.  Last year my daughter helped out at VMWorld.  I had to buy her an extra suitcase to take all her freebies home.  All in a good cause however as she works in a kids’ daycare center and they loved it when she took the stuff in for them.

So, you know where I’m placing my money in answer to the question I kicked off with: Business Transaction Management to help manage your Cloud applications.  Where’s your money going?

Charles Johnson

Principal Consultant