This white paper highlights the costs of IT asset proliferation and the advan-tages of the IBM view of IT optimization as a strategic, ongoing process. It describes the holistic and practical IBM approach and shows how it is helping organizations realize greater initial savings and higher returns going forward.
The high cost of IT asset proliferation
Driving the consternation among CFOs and CIOs is the growth in the number of servers and amount of storage. As IT assets increase, so does IT infrastruc-ture complexity, creating significant management problems for an already overburdened IT administrative staff. In addition, data center energy con-sumption is skyrocketing at the same time that energy prices are on the rise.
Increasing operational overhead
IBM estimates that between now and 2010 the installed base of servers is forecast to continue growing at approximately 14 percent annually. External storage will explode at an even faster rate, with unprecedented growth expected between 2008 and 2010.2
The addition of each new server or storage device requires thinly stretched staff to spend time ensuring that the operating systems are current, security patches are administered on time and unauthorized changes are eliminated. In the interconnected data center of today, where one change can affect every other system and resource, these management challenges can increase expo-nentially. It’s therefore not surprising that employment of network analysts and system administrators has grown by 14 percent and 8 percent, respectively, as more and more people are needed to simply administer a typical company’s IT environment (see figure 1).
Higher energy costs
Besides consuming administrative resources, asset proliferation consumes energy. In the United States, IT power and cooling costs for a typical company have been going up 15 percent per year over the last five years. Each dollar of new serv-ers costs US$0.52 to power and cool, and this expense is forecast to increase to US$0.71 in the next four years.
Decreasing investment in development
Organizations have had to decrease investment in application development and business expansion to maintain and support an increasingly complicated envi-ronment. United States Department of Labor statistics show, for example, that spiraling operational costs have led to reductions of nearly 20 percent in business analysts—the very employees who ensure that IT investments align with business needs. In addition, there has been a decrease of some 8 percent in the ranks of programmers—the employees actually developing business applications.5
CIOs who are unable to align with business needs? CIOs who have to cut back on application development? Recognizing the danger, most organizations have already embarked on initiatives to optimize their IT infrastructures. Those achieving success are taking a strategic approach—consolidating resources, strengthening and streamlining management practices, and deploying proven conservation techniques.
Case study: reduced cost structure aligned with business value
To realize its vision of a tightly interconnected health system, the University of Pittsburgh Medical Center (UPMC) needed a supporting IT infrastructure that was better integrated and more flexible, robust and secure. The center contracted with IBM to help ensure availability of patient information across the UPMC network. As part of this agreement, UPMC is reengineering its infrastructure to eliminate unde-rutilized assets. It expects to reduce the number of operating systems from 9 to 4, servers from 931 to 319, and storage arrays from 40 to just 2—while increas-ing functional capacity. Virtualization technologies will further improve system capacity, utilization and performance. And, to man-age the infrastructure more efficiently, UPMC will employ a common tool set across platforms. At project completion, the center expects an overall IT cost savings of up to 20 percent.
Building sustainable advantage through strategic IT optimization
For IBM, IT optimization isn’t just about IT cost savings. IBM views IT optimi-zation as the process of creating a highly efficient and dynamic infrastructure to derive maximum business value from IT investments. The key word is process. Effective IT optimization continually mines the infrastructure for opportunities to improve responsiveness and return on investment. It is an ongoing process that can result in lower asset costs and reduced operational expenses.
In this sense, IT optimization is a vast shifting and acceleration of economies of scale, allowing companies to reduce costs now and continue to decrease marginal costs going forward.
