Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.
 

The ROI Analysis

The right consolidation decision takes careful analysis of current TCO, proposed consolidation options and architectures, required investments, and potential savings. Because the analysis is complex, internal IT teams should consult with independent analysts and performance benchmarking sites (such as www.spec.org) and put vendors to task (with requisite scrutiny), to help propose and analyze current opportunities and various consolidation options.

Comparing the solutions' TCO and service levels head-to-head with a TCO analysis tool can provide the team with visibility into potential savings, and provide justification needed to empower the business to make the right decision.

source : Alinean

Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.
 

The ROI Analysis

The right consolidation decision takes careful analysis of current TCO, proposed consolidation options and architectures, required investments, and potential savings. Because the analysis is complex, internal IT teams should consult with independent analysts and performance benchmarking sites (such as www.spec.org) and put vendors to task (with requisite scrutiny), to help propose and analyze current opportunities and various consolidation options.

Comparing the solutions' TCO and service levels head-to-head with a TCO analysis tool can provide the team with visibility into potential savings, and provide justification needed to empower the business to make the right decision.

source : Alinean

Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.
 

The ROI Analysis

The right consolidation decision takes careful analysis of current TCO, proposed consolidation options and architectures, required investments, and potential savings. Because the analysis is complex, internal IT teams should consult with independent analysts and performance benchmarking sites (such as www.spec.org) and put vendors to task (with requisite scrutiny), to help propose and analyze current opportunities and various consolidation options.

Comparing the solutions' TCO and service levels head-to-head with a TCO analysis tool can provide the team with visibility into potential savings, and provide justification needed to empower the business to make the right decision.

source : Alinean

Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.
 

The ROI Analysis

The right consolidation decision takes careful analysis of current TCO, proposed consolidation options and architectures, required investments, and potential savings. Because the analysis is complex, internal IT teams should consult with independent analysts and performance benchmarking sites (such as www.spec.org) and put vendors to task (with requisite scrutiny), to help propose and analyze current opportunities and various consolidation options.

Comparing the solutions' TCO and service levels head-to-head with a TCO analysis tool can provide the team with visibility into potential savings, and provide justification needed to empower the business to make the right decision.

source : Alinean

Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.
 

The ROI Analysis

The right consolidation decision takes careful analysis of current TCO, proposed consolidation options and architectures, required investments, and potential savings. Because the analysis is complex, internal IT teams should consult with independent analysts and performance benchmarking sites (such as www.spec.org) and put vendors to task (with requisite scrutiny), to help propose and analyze current opportunities and various consolidation options.

Comparing the solutions' TCO and service levels head-to-head with a TCO analysis tool can provide the team with visibility into potential savings, and provide justification needed to empower the business to make the right decision.

source : Alinean

Why IT Value Management (ITVM) Matters

Business leaders understand that performance measurement is a critical component of effective management. Identifying key performance indicators to improve predictability, for example, has propelled organizations such as Wal-Mart and GE to market leadership status.

Similarly, IT performance metrics clearly demonstrate operating efficiency. In responding to the need to do "more with less" over the last few years, many CIOs reduced their Total Cost of Ownership (TCO) in every possible way. "Doing things right" meant running the most efficient operation based on cost, service level and project performance metrics as measures of success. Yet for countless organizations, successfully lowering TCO failed to drive maximum IT value.

In fact, Alinean research shows that more than 90 percent of companies recognize that historical performance metrics are inadequate, and more than half are debating how to better measure business value effectiveness rather than standalone IT efficiency. More importantly, as cost cutting gives way to increased spending and innovative investments, CIOs' responsibilities will shift to derive maximum effectiveness: driving growth and proving business returns on IT investment beyond mere cost savings.

Alinean has developed an index that compares companies Economic Value Add (EVA, an overall measure of corporate financial performance) relative to IT dollars spent. This Return on IT (ROITT) index measures IT efficiency and effectiveness, rewarding companies with higher profitability and lower spending with the highest rankings. (The current top companies, the SearchCIO 200, are available at http://searchcio.techtarget.com/cio200/0,294738,sid19,00.html.)

Recent measures show that the top 10 percent of performing U.S. companies with more than $1 billion in revenue (noted as "Great" in Figure 1) have a 95 percent correlation between IT spending and EVA, with an average ROIT that is more than three times the average profitable company's (noted as "Good" in Figure 1). In other words, these top performers produce three times more shareholder value per IT dollar spent.

Research from 2004 indicates that ROIT leaders have begun to invest in IT at more than double 2003's spending levels, and preliminary research shows this trend is continuing and expanding in 2005. Reversing the cutbacks of 2001 through 2003, where superior performers cut spending more than their peers, today's agile leaders are expanding investments more than others in recognition of growing business opportunities and the need to proactively invest to catch the next wave of economic success.

Those who expand current performance measurement systems for IT to better measure and manage IT spending effectiveness - rather than just efficiency - will enjoy similar benefits. Those who remain focused on antiquated metrics will lag behind competitors in two ways: the amount of money invested in IT and the leaders' commitment to "doing the right things right." In short, CIOs must measure the bottom-line business value IT has for the entire organization, to ensure competitive advantage.

The development of IT value management competency is a rapidly evolving journey, not an event. The good news is that there are entry points for all organizations. Those that learn and adapt quickly can dive in and establish a formal IT value management office with a vision for fully-integrated post-deployment value measurement. Others can derive significant value through a more conservative approach using value measurement training, engaging independent value experts for tough decisions, or running proof of concept pilots for validation.

As companies' budget priorities and accounting has become more scrutinized, IT executives' mandates have shifted. Companies are in the middle of a wholesale shift from a cost-based to a value-based approach, requiring new thinking and measurement metrics. Those quickest to adapt will be the quickest to profit, and laggards risk the competition surpassing them.

The ROI of Server Consolidation

There's a huge opportunity for IT budget savings by reducing IT labor requirements - primarily administration and support. In fact, more than 70 percent of the total cost of ownership (TCO) for typical data centers is for labor or equivalents (outsourced services). The high cost of labor, particularly performing mundane administrative and support tasks, is one of the key reasons why little of the IT budget is left for innovative projects that can help deliver competitive value.

Server consolidation is one of the most effective ways to lower TCO of a company's data center. Typically performed via one of four strategies, these server consolidation methods can be applied independently or simultaneously.

Physical consolidation - Collecting servers distributed across multiple remote/branch offices and business units into a central data center.

Pros: The team can improve configuration control by restricting server access, and strengthening business resilience through the superior data center infrastructure and security. It can also eliminate the cost of moves, adds, and changes (MACs), as well as break-fix maintenance and support by eliminating travel time and expenses.

Physical consolidation can help the team reduce complexity and more easily standardize purchases, configurations and management best practices. Costs to implement physical consolidation are low, consisting of network enhancements to support the centralization, data center build-out to support the consolidation, and physically moving the servers. Ultimately, IT labor savings can reach 10 percent.

Cons: The risks are performance degradations due to poor network planning and business resilience risks by having all of the server assets in "one basket," particularly if the data center does not have adequate recovery plans.

Re-hosting - Porting from older legacy platforms and operating systems to newer solutions often results in consolidation, as fewer new high-performance systems are typically needed to support the workload.

Pros: Depending on the legacy system's age, older and often expensive support and maintenance contracts can be eliminated. Since the number of administrators and support labor is usually correlated to the number of individual servers, having fewer servers generates proportional administration and support labor savings.

Migrating the operating system to a newer version enhances availability, security, management features and performance, and provides better upgrade options - improving potential business value and adaptability of the server infrastructure.

Cons: If the proposed system for re-hosting is not compatible with the prior systems, the application may require porting to another platform, custom code rewrites, procedures and data migration. Porting costs are often underestimated and can be expensive.

Logical consolidation - When deployed, individual servers are often configured into individual server "islands" with 40 percent or more headroom to allow for changes in workload and growth. Using logical consolidation, on a single server or pool of clustered servers, hard partitions can be established for the operating system, application, processors and memory requirements so that these individual server "islands" are pooled onto a single server or cluster. Using this method, fewer servers are needed because headroom is reduced and the applications are hosted on a single cluster. As needs change, the team can change the partitions to allocate more resources as needed for workload demand changes, and upgrade a single cluster to support overall workload demands as opposed to managing moves, adds and changes physically on multiple "islands" of individual servers.

Pros: Logical consolidation on a shared server can save 40 percent or more of overhead headroom, and a proportional decrease in server assets. This can lead to a similar reduction in administration and support. Additional benefits include fewer server software licensing requirements, lowered maintenance and support contract costs, and facilities expenses.

Cons: Logical consolidation requires manually managing the hard partitions, made difficult in a dynamic environment where workloads change frequently. This process can be difficult and can introduce management burden and complexity.

Many business units will not support logical consolidation where they must share servers, and will need to be "sold" on the business merits of consolidation and assured that service levels will hold steady or increase. Having more eggs in one basket increases the importance on availability and business resilience in planning and best practices.

Workload optimization - The server operating system (such as with HP-UX11i's virtualization features) or third party utilities (such as EMC's VMWare) can be configured to intelligently manage server resource allocation based on workload demands. Partitions can be established based on demand and schedule rules, and the system takes care of the rest, allocating computing power to automatically meet needs.

Pros: Fewer CPUs, and in turn, fewer servers are needed to support multi-application workloads. For multi-application portfolios, this approach maximizes asset utilization and consolidation, reducing software licensing requirements, facilities costs and labor - saving 40 percent or more based on the application profiles. Typically, fewer smaller applications with peaks at different times drive the highest consolidation. Because the system manages workloads and partitions, administration and support are minimized.

Cons: Establishing workload optimization configuration and rules will take some time and can be complex, requiring professional services assistance. As with logical consolidation, business unit apprehensions and business resilience best practices apply.