Consolidation Rationalization and Automation

Properly applied, the principles of consolidation, rationalization, and automation almost invariably reduce IS costs. Conversely, an organization characterized by diseconomies of scale, unnecessary overlaps and duplications of IS resources, and a prevalence of manual operating procedures will experience significantly higher IS costs than one that is efficiently managed.

For example, in many organizations, numerous applications perform more or less the same function. These applications have few users relative to their CPU and storage capacity utilization, as well as to their license fee costs. Proliferation of databases, networks, and other facilities, along with underutilized operating systems and subsystems, also unnecessarily increase IS costs.

Requirements for hardware capacity can also be inflated by software versions that contain aged and inefficiently structured code. System loading will be significantly less if these older versions are reengineered or replaced with more efficient alternatives or if system, database, and application tuning procedures are used. Automation tools can reduce staffing levels, usually by eliminating manual tasks. Properly used, these tools also deliver higher levels of CPU capacity utilization and disk occupancy than would be possible with more labor-intensive scheduling and tuning techniques. A 1993 study commissioned by the U.S. Department of Defense compared key cost items for more efficient best-practice data centers with industry averages. Its results, summarized in Exhibit 3, are consistent with the findings of similar benchmarking studies worldwide.

Exhibit 3. Cost Disparities between Best-Practice Data Centers and Industry Averages

Best Practice

Industry Average

Disparity

Annual Spending per Used MIPS

Hardware

$51,249

$89,701

1.8

Software

$17,802

$71,440

4.0

Personnel

$41,748

$115,454

2.8

Cost per gigabyte of disk storage per month

$109.91

$272.84

2.5

Cost per printed page

$0.0017

$0.0070

4.1

Total staff per used MIPS

0.70

1.93

Source: Defense Information Systems Agency, U.S. Department of Defense, 1993.

It should be emphasized that these figures (which are based on used rather than theoretical capacity) compare best-practice organizations with industry averages. Many organizations have cost structures much higher than the averages cited in this study. Capacity utilization, along with the effects of consolidation, rationalization, and automation, suggest that efficiency is in fact the single most important variable in IS costs. Clearly, the best way to reduce IS costs for any platform is to increase the efficiency with which IS resources are used.

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