Six Easy Pieces: How to Do Cost of Ownership Analysis Better
The proper approach to cost of ownership analysis can significantly help IT organizations understand their needs, leverage their strengths, and position for future growth. These six techniques should be added to any CIOs portfolio of methods to serve the needs of the business.
Tue, January 26, 2010
CIO —
If cost of ownership analysis is a painful exercise for IT organizations, why has almost every company done it (and continued to do it) multiple times? Simply because management requires an accurate understanding of current IT costs and strengths so they can better assess new ideas and technologies. In this article, we will identify six key elements to effective cost of ownership analysis, which you can use these to improve the accuracy and eliminate the frustration associated with this necessary step in your IT evolution.
1) Analyze Platforms, Not Servers
First evaluate the current "platforms" within your environment, including all servers of all types in order to simplify the process. One of the most difficult things to "get right" in an analysis of this type is an exact match between a given technology and the associated costs. The easiest way to do this is not to limit the technology scope to a few machines or a single new application but to expand it to match all the technology in the IT budget. Limiting the scope makes cost of acquisition simple to determine but it makes every other cost almost impossible to quantify without controversy.
A platform approach will result in development of a new "view" of the IT budget that is platform based. The advantage to this approach is that the total in this view should match the total in the budget. This gives the study team tremendous leverage if discussions should wander to "I think this amount is too high for platform A." So if the amount is reduced for platform A, it must be raised for platform B. What does B think of that? This places the entire cost discussion on solid footing — the IT budget — and allows the process to be managed dispassionately, a key to later acceptance of the results.
2) Focus on a Representative Application and Include All the Pieces
Next, let's consider a new business critical application or workload that requires platform selection. Once again, the key to success is to not limit the view to a subset of components. By definition, a critical application will require careful design, careful sizing, careful maintenance, operation, support, and disaster recoverability. It may also require a new or dedicated infrastructure, but at a minimum, it will tax existing infrastructure. Each of these components and their associated costs, should be included in any cost of ownership comparison. The "view" developed in the previous step should facilitate this type of analysis.
