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Building A Business Case For Converged Infrastructure

Building A Business Case For Converged Infrastructure
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Converged infrastructure solutions offer a pre-configured bundle of compute, storage and networking in a single chassis, typically under a common management interface. Here's how you can build a business case a CI appliance.

Not since NAS has a new technology been so clearly tailored for the small- to medium-business market as converged infrastructure (CI). So it's great to be able to construct a business case using dollar figures comprehensible to the human brain.

CI is the confluence of compute, storage and network assets, often with the added ingredients of infrastructure management and automation software. You might have heard it called "unified computing" or "integrated systems," but we're going with converged infrastructure.

Converged Infrastructure Decision Drivers

As with many technologies, there are two sets of reasons why you might consider CI. The hard, quantifiable benefits include:

  • Reduced downtime;
  • Faster rollout of new services;
  • Lower risk associated with rollouts.

The soft benefits, which would be difficult to capture with a spreadsheet but still merit a textual description, include:

  • Improved market share resulting from faster rollout;
  • Spinoff benefits up the software stack;
  • Enablement of innovations not yet considered.

MORE: The Building Blocks of Converged & Hyper-Converged Infrastructure
MORE: Converged vs. Hyper-Converged Infrastructure Solutions

But let's concentrate on the stuff we can count. To document the cost of downtime we have to know what the current cost per hour of downtime is. That will, of course, depend on what particular applications are being disrupted.

Speed of rollout is an often under-appreciated factor in crafting business cases. Many people who find themselves in the financial analyst role rely on the "magic wand function" of assuming that all costs are incurred at Year 0 and all benefits accrue as of Year 1. Sometimes that's all you need to justify a project. But if you're putting together a business case for converged infrastructure, time to full implementation is a key ingredient.

That leaves one more thing to quantify: risk. You don't even have to, but you can. It's as straightforward as adjusting the discount rate on the underlying projects.

But don't think for a moment that you can ignore risk. The IT architect who lives in your project management office will probably urge you to consider the reference architecture (RA) she designed herself, which will no doubt be more robust; ignore her at your own peril. So underlying all other assumptions is that the CI solution is at least as technically feasible as any RA currently under discussion in your enterprise.

Converged Infrastructure Costs And Benefits

Let's assume that there are two affinity groups of apps: Group 1 is customer-facing, so it's 99.9 percent up and costs the company $1,000/hour in lost net profit. Group 2 is mainly development, so it's 99 percent up and there's a loss of $500/hour in idle time of contractors who have to be paid whether or not they have access to the environment they're supposed to be working in.

These assumptions are predicated on three others:

  1. The cost and quantity of downtime hours have already been reliably documented;
  2. Other apps have no substantive, long-term outage costs;
  3. Downtime is downtime -- an outage at 11 am costs the same as an outage at 11 pm.

The last of these is the most problematic because it's clearly ridiculous. Even so, it's OK for an order-of-magnitude exercise. Just make sure you document it. All that being said, CI vendors project that downtime can be reduced by as much as 90 percent. So let's agree that half of that is baloney and come in with 45 percent to be sage.

Here's the current state of the relevant operating costs:

Figure 1: Current cost of outage

Let's further assume that you will demonstrate CI's ability to improve the profiles of three distinct projects, each of which has already been greenlighted:

  • Project A would, in the absence of CI, take five years to fully realize value and is considered so risky it needs to clear a d=14 percent hurdle; in a CI-enabled infrastructure, though, it would take only three years and the risk would only merit an 11 percent discount rate.
  • Project B would take four years and is considered moderately risky, say d=9 percent. With CI, it would take two years and the discount rate would fall to 7 percent.
  • Project C would take three years and is considered a low-risk 7 percent. CI would fast-track it to one year to full implementation, but it would not lower the risk level at all, considering the risk level for the CI transformation is itself 7 percent.

For consistency's sake, each of these projects have $100,000 in one-time costs and will, when the target state is completely attained, save $300,000/year in operating costs. Their differing net present values are strictly factors of differing time horizons and discount rates.

Here's what the relevant investment analyses are for the projects. You can see that they all merited green lights even before CI was considered:

Figure 2: Current projects' investment analyses without CI

Next, let's put together the shopping list for the transition. Your architect tells you that you'll need blade servers, a blade center to serve as back pane, 48 TB of storage in an array with a controller, system management software with a control console, a LAN/SAN switch and an orchestration software layer to make sure it all plays nice together.

One of the advantages of CI, though, is that all of this comes gift-wrapped together in a bundle that's been quoted to your enterprise for a total sticker price of $400,000. Still, you have to figure the gift wrapping itself -- that is, the design and implementation services -- will cost another $400,000.

Making The Case For Converged Infrastructure

This is going to be a different kind of business case than we've seen so far in this series. It won't be purely a current state/target state comparison, although there will be that element. Let's start with the familiar, though. We know that the reduction in outage time follows the familiar pattern and can be represented this way:

Figure 3: Target cost of outage

But, by increasing the speed to target and reducing risk, CI is also improving the case for three in-flight projects:

Figure 4: Current projects' investment analyses with CI

A simple matter of subtraction then defines how much of the improvement is entirely attributable to adopting CI:

Figure 5: CI's contribution to current projects' improved investment analyses

Closing The Case

So, should you go with CI?If you're looking at just the improved uptime then no, in this hypothetical case, CI won't pay for itself.

Figure 6: Investment analysis, downtime only

But remember how much CI improved the projects' cases? When we sum up CI's contribution to those projects' desirability, we get:

Figure 7: Sum of CI's contribution to current projects' improved investment analyses

If you noticed that the NPV is very high compared with the five-year total, that's because the benefit comes from accelerating the pace of target state attainment. You don't have to wait as long for savings to kick in, and a Year 2 dollar is worth a lot more than a Year 5 dollar.

When we tally it all up, a deeply negative business case suddenly becomes a mildly positive one:

Figure 8: Investment analysis, downtime plus project improvement

Confused yet? I guarantee your boss is. I suggest you zero in on the bottom-left block of the preceding figure and push everything else to the back.

"CI is like putting more than $150,000 in the bank today," is what you need to communicate. In fact, it's a better investment than the bank, unless the bank is paying more than 11 percent interest. And it pays for itself in less than two-and-a-half years.

If she's on the fence, remind her that these are just the start of the benefits, and there are many more to be found up the software stack and in the future.

Business Case Resources:

To help you get your business case for converged infrastructure off the ground, download this Excel calculator and PowerPoint template, which you can customize to your needs.

The Excel calculator will help you determine your current state, project costs, and target state. It includes all of the inputs you'll need so you can present the final analysis. The PowerPoint template will walk you through adding the analysis from the Excel calculator so you can present the information to your stakeholders in a logical way.

  >> Download Excel Calculator
  >> Download PowerPoint Template

To get a better understanding of the key metrics and math used in these resources, take a look at How to Build a Successful Business Case for an IT Project.


More Business Case Resources:

More Business Cases