The 90s: Motivation to Decentralize

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The 90s Motivation to Decentralize

• Application development logjam in IT
• Unreliable response
• Control of critical business systems
• High cost of central IT

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The 90s Economies of Scale

• Duplication of effort
• Low utilization
• Hidden costs
• systems support
• outside services
• Absence of standards and procedures
• Inability to negotiate volume discounts
• Administrative chaos

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The 00s Cost Does Matter

• Downsizing organizations
• Driving to efficiency
• Lowering growth of IT budgets
• Moving to centralization

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The Shift to Centralization
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Consolidation As New Technology

• Better, faster, cheaper networks
• Central support
• Rapid application development

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Consolidation The Utility Model

• Plug on the wall
• Always available
• Always responsive
• Commoditization of IT Services
• Demand management
• Measure of success
• The Venture Partner Model

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Consolidation Opportunities

• Physical co-location
• Server sharing
• Centrally managed networks
• Storage networking

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Consolidation Systems Management down on the
Server Farm

• Quality assurance
• Change control
• Security and fraud detection
• Backup and disaster recovery
• Chargeback

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Consolidation Why do Chargeback ?

• An expensive shared resource
• Its unavoidable
• Provide management information
• cost of production
• cost of doing business
• Control the demand for services
• IT financials for scorecards

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Consolidation The Cost Accounting Challenge

• Asset cost transfer
• Need for a standard costing model
• Usage Based Billing (UBB)
• Activity Based Costing (ABC)

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Consolidation The Technical Challenge

• Spanning the number of server and and network
  technologies
• Identifying business owners
• Standardizing units of measures in a diverse
  world
• Mixing dedicated and shared servers

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Consolidation Costing
Shared n-way
Dedicated n-way
Billable Units C x n x N
Billable Units S (Un x N)
User1
C Effective Capacity n Number of
Processors N Normalization Factor
Un Measured Usage Per User N Normalization
Factor
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Yankee Group Report Oct. 2002

• The most important chargeback qualification for
  a vendor solution is that it conforms and adapts
  to the IT cost structure to properly distribute
  the financial aspect of service usage. Without an
  appropriate understanding of the cost structure,
  the ultimate goals of chargeback (allocating
  costs to users) will be lost.

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