Posts tagged with ROI

Recently, our competitor claimed an amazing Return on Investment (ROI) statistic – replace 9 older single core servers with 1 new multi-core one and repay that investment in less than a year.  “The cost savings from energy alone will pay for new servers in about eight months[1].”

Having been around IT planning teams for the past 15 years, hearing any ROI statistic always sets my radar off.  This is no exception.  To me, this claim feels very unusual and there are only 2 explanations that I can think of; Either they are trying to oversimplify a very complex calculation by only looking at one factor (power); or they simply don’t understand the complexity of enterprise applications.  Either way they risk doing a major disservice to customers.

The argument that a company can pay off the investment in a new multi-core server by retiring 9 older single core ones is akin to buying a new hybrid car and raving about how much money you are saving every time you fill the tank, ignoring that you had to purchase a car in the process. Return on investment should encompass all of the costs of a solution; otherwise it risks overstating the return.

Let’s take a look at retiring 9 single core servers by consolidating them down to one multi-core server. Simplistically you are going to incur the following costs:

·         Consolidation prep – you have to actually do all of the planning and prototyping of the system, mapping data, etc., this is not a simple “copy and paste” exercise. Let’s not forget the data center planning piece of this exercise.  You are going to have to remove all of the systems and install a new one.

·         Migration of the data – this includes the actual movement of the data.  Maybe you get lucky because all 9 servers magically had the exact same data structures and can all coexist happily with each other.  Or not.  I’m going to bet on “not”, I’ve seen enough of these projects.

·         Security – You had 9 separate servers with 9 separate ACLs or security profiles set up to manage who could – and more importantly – could not access the data.  Whenever you start consolidation of systems, it is important to make sure that the Marketing Department can’t see the Payroll Department’s files.

·         Testing – once you have the new servers in the rack, you don’t actually just flip a switch. You are going to have to touch all the applications that touch that server.  Including middleware, backup, security, and network infrastructure.  One incorrect MAC address can result in a bunch of troubleshooting if you can’t quickly diagnose the problem.

·         Unplanned consequences – Did you ever add a new user and find another suddenly can’t print?  Most project managers I’ve worked with include some measure of “overage” to the project to help compensate for having to track down the “stragglers” of any project.

·         Licensing changes – Well, 9 servers running 9 copies of the old program might be a sunk cost in ROI, but I am betting that as you consolidate these servers you may end up needing to upgrade to the newest version of the software in order to handle the complexity of the new environment.

·         Disposal – you will need to get rid of the old systems, let’s not forget that you can’t just leave them in the dumpster (don’t forget to take the time to truly destroy the hard drives…)

And this is all just the tip of the iceberg, I’m sure that each one of you can provide your own list of hidden costs in trying to do a project. There is a human cost, and with the typical cost of ~$65/hour (the fully burdened cost estimate from the last project I worked on a few years ago) the human costs will likely dwarf the hardware purchase. If you don’t comprehend these costs, you can’t accurately assess ROI.

I’m not naïve in thinking that projects like this happen every day.  But it is a bit naïve to think that power costs alone can determine ROI.

Looking at the typical server deployment, you can rest assured that the hardware is the lowest cost of the project by far.  So if you want to do yourself a favor, don’t let your company fall for the “pays for itself in 8 months” hype that’s out there – do your own research and get the full story with all the costs revealed.  Otherwise you’ll be the one explaining things to the CFO.

John Fruehe is the Director of Business Development for Server/Workstation products at AMD. His postings are his own opinions and may not represent AMD’s positions, strategies or opinions. Links to third party sites are provided for convenience and unless explicitly stated, AMD is not responsible for the contents of such linked sites and no endorsement is implied.