Significantly more information and value can be derived from business data, owing to large volumes of data available and better data processing. But the performance and repayment period of any information technology systems are key factors governing adoption, says information technology company Hitachi Data Systems presales director Tony Reid.

Companies are requiring increased performance from their information technology (IT) systems in a context where most companies have slashed their IT budgets and seek a return on investment from new IT systems within six months to a year.

“Companies must begin to measure the unit costs of their IT systems to enable control over costs and efficacy of the systems. Instead of focusing on the technical performance of IT systems, companies should rather measure IT systems and the performance of IT managers based on the costs and use of these systems,” says Hitachi Data Systems chief economist David Merrill.

Using money as a metric is a good way of enabling companies to shape their IT strategy in line with their corporate strategy, he explains.

“One can determine the number of teraflops 10^₁₂ floating operations a second) that a processor can perform. However, if money is used as the metric and, for example, it is determined that the processor is being used only 30% of the time and it is not generating profit, the executive and corporate board can impose corrective measures on the IT department,” he says.

However, Merrill warns that price is not the same as costs over time. Companies must, therefore, measure the performance of IT systems in terms of unit costs and must demand accurate descriptions of total cost of ownership and operational expenditure details from vendors and suppliers.

“How much does a single mailbox cost the company? The findings of such metrics may be discouraging to most companies and it is uncommon to measure such unit costs, but they can help make IT costs and benefits transparent.”

Companies can take several steps to ensure that they do not overpay on IT equipment, including having good IT practices in place, retiring assets when their lease depreciation has expired, implementing good configuration and control, as well as having controlling and tracking systems. This will also help companies determine unit costs.

A further step is to use virtual machines and virtual servers to ensure all available IT equipment is used before buying new equipment. This can also improve the renewal of IT equipment, as there will be fewer systems to replace.

“The final step is to change user behaviour to improve use and reduce costs.”

A good corporate IT strategy, based on a granular view of IT equipment, performance and value, is the main way to reduce IT costs to companies and companies should hold their vendors to account, based on the monetary value they derive from IT equipment and systems, says Merrill.

“It is important for companies not to plan more than three to five years ahead, as the pace of development can result in plans longer than three years being outdated when new developments arrive.

“Companies should, thus, have a rotating plan to renew about 15% of IT equipment on a yearly basis and allow for new developments and systems that may change IT strategies entirely,” concludes Hitachi Data Systems CTO Bob Plumridge.

Story highlights:

* More value and reduced costs can be gained from IT systems when unit costs are determined and control exerted.
* The pace of development can result in plans longer than three years being outdated when new developments arrive and companies should renew about 15% of IT equipment each year.