By managing IT assets effectively, CIOs can ascertain the cost of delivering IT services. IT departments may have run an inventory check on servers, desktops and storage and an annual software licence audit.
But IT asset management will need to be more granular in the future, especially as more services are virtualised.
The whole industry appears to be pushing cloud computing as the best thing that has ever happed to IT. Certainly it seems an attractive approach to running certain services on the public cloud using infrastructure on demand, such as Amazon EC2. But not everything can be put on the public cloud.
This is why CIOs are keen to use IT infrastructure built on a private cloud. In practice, mirroring the efficiencies of the public cloud in a private datacentre is not easy.
Apart from the challenges of building an on-demand internal infrastructure with features such as self-provisioning, IT must also mirror a pay-per-use model of charging for services, as used by software-as-a-service (SaaS) providers. This requires an understanding of all the assets comprising an IT system.
IT needs to figure out what services are offered, their cost and what the business actually gets”
Mahipal Lunia, VMware
Forrester analyst Stephen Mann says IT asset management not only reduces costs, but can also improve the way IT is run. According to Mann, having a better understanding of what assets are used, where and for what purpose (especially if service-aligned) can dramatically improve an IT department’s ability to operate a number of Information Technology infrastructure library (ITIL)-espoused IT service management processes such as incident, problem and change management. Knowing more about the IT estate can also help with configuration and capacity management.
Virtualisation complicates IT asset management, according to Clive Longbottom, founder of analyst Quocirca. The problem is that virtual machines (VMs) are just too easy to use. In the past, if a user wanted to install a copy of an application, the first thing to do was to order a server. Then, the user had to wait for a while until it arrived and then get it up and running, installing all the patches to the operating system the supplier had neglected to put in place. Then, all the required support software has to be installed, followed finally by the actual application.
This was generally a long-winded process. By contrast, spinning up a VM is far easier and, once it is running, it is far too easy to forget about it. This leads to VM sprawl and avoidable licensing fees for software used in isolation.
“Up until 2008 our storage costs were $600,000 per month for email at US insurer Nationwide Insurance. The propagation of data was too much,” says William Miller, IT controller at Nationwide Insurance. Rather than set an email limit, which would put a fixed minimum cost for email storage, Miller said Nationwide Insurance put in place a policy to delete emails older than 90 days. This saved the company archiving costs.
Mainframe efficiency was another example Miller presented at VMworld Europe 2012. Nationwide Insurance spent $2m buying a zIIP (integrated information processor) engine for its zSeries IBM mainframe. This allowed it to offload certain mainframe workloads, which reduced its mainframe software licensing by $250 per hour.
Licence audit What is the cost of providing a single email box? How much is the business spending on Microsoft Office licensing? Does everyone need Adobe Professional? A licence audit can reap huge savings, especially if the business can ascertain what IT each employee in the company requires. In the report, Optimize your Software Licence Optimization Program, Forrester analyst Duncan Jones recommends IT departments run software discovery tools to collect a complete inventory on software use or deployment, in line with the publisher’s rules.
These products can run as software on a central server that interrogates every other device on the network, looking for executable programs on hard disks and registry entries, or other evidence of installation, activation or use of a software product. An alternative approach is to install agents on every server and client to track what they are doing and send data back to a central database. An audit will clearly ascertain whether all the software being used is licensed.
But it can also help the CIO identify areas of waste, where licences are not needed. Some organisations have used licensing audits to reel in unnecessary spending on desktop software, allowing them to renegotiate their Microsoft Enterprise Agreement or even switch from a site-wide licence to one more aligned to how the Microsoft products are used.
Accurately predicting IT capacity in terms of processing power, storage and network capacity enables IT to estimate future requirements. This allows IT infrastructure managers to buy only what the business needs, rather than paying upfront for expensive processing, storage or network bandwidth that may lay dormant.
Mainframe systems are charged on a MIPS (millions of instructions per second) usage per month, so on the modern zSeries mainframe, operators can determine the cost of the system on a monthly basis, and estimate how this will change over time.
IT can predict when capacity will be low and how much to buy for the future. But any calculation – whether it be storage, networking, CPU power or other elements of IT infrastructure – requires a strong grasp of the business and what it wants to do in coming years. De Vere Group CIO Jo Stanford predicted future IT capacity of the business, based on her understanding of the IT requirements of a hotel.
As she explains: “Running 65 hotels will require a certain amount of IT.” As De Vere Group’s business expanded, she could work out how much extra IT capacity she would need. This helped her negotiate a flexible hosting contract with IT services supplier ANS Group, which provides the company’s datacentre.
Stanford says the request for proposals (RFP) process took about nine months. It was critical to share not only the current capacity in the datacentre, but also the company’s strategy and potential growth in property.
“Given our growth forecasts, we can grow our usage in the datacentre,” she adds.
As companies move towards consolidated IT infrastructure and virtual servers, networks and storage, businesses are changing the way they pay for IT systems. Rather than buy a physical server, storage and network capacity to run business applications, departments are now being charged to use the IT service.
Chargeback requires an understanding of more than just software and hardware costs, to include all the component costs of delivering a particular IT system. Charging costs this way required IT to change how it is run, to understand the cost of individual services. IT needed to become a business service. This is how US insurer Nationwide Insurance repositioned its IT department and the services it offers.
The company knows the cost of every IT service. Departments, business units and users can pick from a service catalogue to decide which services they need. Pricing is important and IT services need to be comparably priced against industry averages.
IT controller William Miller at Nationwide Insurance said the process of switching to chargeback involved IT financial management to align IT costs with IT drivers. The process allows the IT team to assess the value of any IT service and technology investment. Speaking at VMworld Europe 2012 in October, Miller said the IT department had established a $1.2bn chargeback mechanism, with a shared service providing IT-related services throughout. Nationwide Insurance’s entire IT budget is accounted for through a general ledger. “We recover 100% of IT expenses through internal chargeback,” Miller says. The IT department provides Nationwide Insurance with 220 service offerings and 500,000 transactions per month.
Analyst Gartner helped Nationwide Insurance’s IT department develop a methodology to put a cost against every IT service and map these services against business functions. This has allowed Nationwide Insurance to address common IT issues, such as the growth in email storage and address mainframe costs.
Nationwide Insurance used VMware’s ITBM tool to support the chargeback mechanism. The product helps IT to effectively become a service broker, sourcing and providing services in a systematic way.
ITBM is VMware’s product to help IT departments manage cost, according to Mahipal Lunia, group product manager at VMware. “IT needs to figure out what services are offered, the cost of these services and what the business actually gets in terms of quality,” said Lunia.
This was first published in November 2012