David Merrill

An 11-step program to reduce IT unit costs    {Blog Remastered}

Blog Post created by David Merrill Employee on Nov 24, 2016

An 11-Step Program

Originally posted by David Merrill on Sep 28, 2012


I know there is a 12-step program for addiction recovery, but I am not writing about this. Instead, I am writing about a structured, methodical approach to reduce the unit cost of IT. These methods and steps have been proven over the last 10-11 years with storage economics, but I am finding applicability to VM cost reduction, big data, unified computing, etc.  My premise is that there are phases, that have predecessory relationships, and these phases or steps can reduce costs.


Over the past 6-8 weeks, I have personally conducted 20 economic workshops for clients in Asia. Some of these were with recurring-assessment customers, so I can trend their results and correlate their success to other customers that have had great success in reducing costs. I built a composite example of a total cost reduction roadmap from these recent customers, and summarized roughly 11 steps within 4 phases that have produced unit cost reduction of IT. Again, this composite is a storage example, but many of my VM TCO examples are close to this 11-step approach.


In this example we show TCO per TB/year, but this could also be unit costs of a VM, VDI, transaction, etc. Notice the categories of costs. We have 34 costs, but there tends to be popular costs that most organizations are interested in measuring and reducing. These popular costs are depreciation, maintenance, labor, environmental costs, outage risks and migration. In achieving these unit costs in the data center, there are (and have been) 4 phases that organizations tend to pass through along this journey.

Phase 1 – Doing the Basics

  • Consolidation and centralization of data center assets
  • Implement disaster recovery capabilities
  • Tech updates to improve performance and replace aging and expensive assets
  • Moderate unit cost reduction in this phase (10%)

Phase 2 – The Golden Age of Virtualization

  • Virtualization applies to servers, desktops, storage (LUNs, arrays, file systems) and network
  • Now the ability to over-provision or over-subscribe capacity
  • Tiering and policy-based asset re-purposing (v-motion, policy-based management)
  • Improved management with new layer of abstraction
  • De-duplication and compression
  • Significant unit cost reductions (30-40%)

Phase 3 – Behavior Modification

  • Basics of best practices, operational changes
  • Chargeback to pay for what is used
  • Service catalogs and referential architecture to limit variability
  • Rewards and punishment systems to drive economic behavior
  • Self-provisioning
  • Moderate unit cost impact (20%) with these actions, but some of these activities are political and can impact organizations

Phase 4 – Challenging and Changing the Norms of Ownership and Locale

  • Utility computing
  • Scale up and scale down
  • Capacity on demand
  • Private, public and hybrid cloud
  • Remote services and sourcing
  • Cost reductions will depend on many parameters, and some reductions are masked by cost shifting to cloud providers
  • Unit cost impact in the 10-30% range

In the short-term, there are many technical and operational investments to have dramatic impact on storage, VM and data center economics. Over time, technical and operational investments will have to give way to behavioral, consumption and remote options to reduce data center economics. My next few blogs will dive deeper into these 4 phases and the 11-step program to reduce IT costs.