Now some people might think I was being a bit unfair picking on EMC/Isilon in my previous entry and to be honest I was but in a good cause. I’d picked up on a story which ‘Zilla retweeted a link to and it actually gave me the hook to something that I had been intended to write for some time.
IT Procurement policies need to change to reflect new paradigms and technologies. In the story that I picked apart, the customer bought 1.4 petabytes of Isilon disk up front; the customer only needed 200 terabytes of disk to cope with the first year of growth with an additional 340 terabytes per year there-after.
Isilon’s technolgy would make it easy to simply purchase additional nodes as needed and there was probably no technical reason for this up-front procurement. But I suspect the up-front was a requirement due to the way that the project was financed and budgeted, there was no internal mechanism to procure capacity when needed.
Now I suspect EMC/Isilon would have offered a decent additional discount for the initial up-front purchase but would it have offset the additional maintenance, power-requirements etc that would be accrued by early installation? And would it offset the year-on-year price decline of storage?
I can’t really blame a vendor for taking all the money up front and I certainly would not blame the sales-team for accepting an order which might have blown their targets. (There is a downside to the sale-team tho’; next year’s target might expect that you do another large deal again even though you have just sold a customer three years capacity).
I have read people talking about the possibilities and opportunities for IT to move to a purely Opex model using the Public Cloud; let’s get real for a minute, we are not currently capable of tweaking our Capex models to reflect a reality where money does not need to all spent up front. What are the odds that we can completely change our finance models to an Opex model? In my reality, we are constantly being challenged to reduce our Opex model; we often do this with Capex purchases. I’m not sure suggesting increasing my Opex even with a decreased Capex would meet with an entirely favourable reaction.
If the Capex model was tweaked to allow a more linear and time-based investment; I could have an even more dramatic impact on Opex and also reduce Capex expenditure but I’m a simple IT manager, what do I know?
Cloud and Dynamic IT is technically achievable in large parts today and not at huge disruptive cost but it does require disruptive thinking.
About time someone pointed out that whats good for the Vendor (Nice steady revenue streams from a subscription based model), is in direct opposition to the targets that most IT department have (To drive down Opex costs).
Most cloud solutions I’ve seen aren’t *nearly* compelling enough to justify increasing Opex costs.
Tom,
I think the problem is not OPEX *or* CAPEX, its a lack of IT cost alignments to the business. Most business expenses increase linearly with revenue (with some notable exceptions). IT has, for the most part, lacked this correlation. I can’t tell you how many times (as both a customer and vendor) I’ve heard “well we better get everything we think we need for the next 4 years right now. I don’t want to have to go back to the well to ask for more.”
This is the totally wrong approach, but it’s reality. The idea of the cloud model from a cost perspective is that your IT costs grow (and shrink!) with your business. Right now, customers are making big steps in infrastructure and overbuying to cover long term growth.
I’ve had this discussion about thin provisioning with IT folks. They think it sounds great and then still buy a ton of extra storage ‘for growth.’ In a real thin model, you would have standing POs that could be executed as soon as your storage hits x% remaining capacity, a real ‘just-in-time’ model. Sadly, only service providers seem to have this figured out because they are reselling the infrastructure and every dollar they spend buying/maintaining gear that is not utilized, cuts into their margins.
Getting to an OPEX model – that would be nice, and I know of perhaps one or two providers who have pulled it off very well – meaning that customers are getting more value than they expected, and the provider is very profitable.
But it is really hard to to. Ask Mozy. A storage company was caught utterly unaware of the magnitude of the data explosion. It happens.
How to get to that nirvana requires rather ruthless execution and the ability to think very differently about how to provide cloud services. A lot of pieces have to come together correctly, with an eye on extreme simplification on all portions of the stack. Storage is but one part of it, and mishandled, will break it all.
I think you’ve touched on an interesting discussion. As with everything, there will be many ways to skin the cat, but as I am fond of saying, I don’t care how the skinning occurred, as long as the two have effectively parted company.
VMTyler,
From a techie’s point of view buying excess capacity up front my be “wrong” (and its certainly inelegant), but if it is well aligned with a companies financial circumstances and processes then it can still be the right thing to do. ie If its the way to get things done in a given organisation, then go with what works.
In the real world its far easier to control costs as a service expands with a traditional solution where the majority of the costs have been paid for upfront, and then upgrades are purchased as required. Rather than a solution that doesn’t have boundaries, but invoices you as you grow.
Clearly if you’re primary aim isn’t controlling costs then Opex based subscription models can potentially allow for far easier/faster growth without upfront costs.
I guess what I’m saying is its a judgement call, not a solution that will work for all situations.
In many ways I am repeating what others have already said, procurement policies in regards to IT are inconsistent, and most IT departments try to get whatever they can in the belief (mostly accurate belief) that their funding will be cut later. I label this as a failure of leadership at customers, that do not place a proper value on IT and give monies out in unreliable chunks, or to cover a project. Simply put, IT decision makers have no faith that in your example, when they run out of space, that the company will fork over another $10,000 or whatever it is for the extra storage.
On another note, I forget the article you cited but I think it was for something astronomical in nature. Meaning it was probably funded by a one time grant. In those situations, they usually buy what they need for the entire project because their grant is a one time infusion of funds, no going back later.