Uncovering the total cost of ownership of storage management.

Traditionally, negotiating an attractive storage acquisition price and anticipating storage needs down the road were the best ways to save money and get a handle on the budget a few years out. Not so anymore. The total cost of ownership (TCO) comprises much more than the obvious capital costs. And while the concept of TCO is not new, management costs alone can outweigh the capital expense of storage by a factor of 7 to 1 (Forrester Research). Less tangible costs resulting from inadequate management tools, disruptive scalability, poor reliability and performance, and compromised efficiency can make the initial cost of purchase seem trivial. Because storage plays an increasingly strategic role in today's business infrastructures, it is essential to understand its TCO and uncover ways to optimize its value. The harsh reality is that storage TCO will continue to increase over time unless costs related to hidden factors are addressed in the design and implementation of the solutions.

How does an organization even begin to get its arms around storage TCO? Does this exercise really result in meaningful and useful information? To answer these questions, we need to start at the basics: the definition of TCO. the key components of a TCO evaluation, the most effective use of TCO information, and the features that will have the greatest impact on the final TCO.

Storage TCO Defined

Storage TCO includes both direct and indirect costs and benefits related to the purchase of a storage component. Unfortunately, there is no magic template to fill in or one approved methodology to follow; the TCO for the same solution varies from organization to organization. Just as each business is unique, so is its cost structure. There are, however, some ubiquitous TCO factors that can be used as part of a general model and, perhaps more importantly, as part of the process for your next storage acquisition.

Components of a HAS TCO Evaluation

Beginning the TCO evaluation is best approached by first defining the scope and granularity. If your organization is not experienced with calculating TCO, a wise approach is to start with a project-specific TCO exercise such as NAS and expand the scope after becoming familiar with the process and effort involved. In terms of granularity, a more general or high-level exercise will prove to be less overwhelming, particularly if the costs of less tangible factors such as diminished performance require a good deal of research. Whether you elect to complete a general analysis or proceed with a more thorough evaluation, make sure your TCO project is well defined in scope and stick to it. Otherwise, it can grow unbounded and produce results that are less meaningful and more controvertible. This article will focus on the fully burdened cost of implementing a NAS solution.

Let's start by defining the five key areas comprising the fully burdened cost of NAS. Product/Acquisition: These costs are the most easily discernible and can be broken down into separate categories for hardware and software. They include direct product costs; procurement costs, such as legal fees: and upgrade and maintenance charges. Other administrative tools and third party software packages also need to be considered.

Personnel/Operations: Determining the price tag for this area is a bit more involved in terms of tracking and calculation. Even if tasks required of two individuals are similar, the cost can vary greatly due to skill level and salary. To get a good sense of the contribution to overall TCO, this difference must be accounted for in necessary areas. One must also include the costs of personnel from other IT areas who are needed occasionally in addition to the NAS-dedicated headcount.

Availability: This area can be one of the most crippling to NAS TCO. Downtime costs thousands of dollars each minute end users are denied access to information necessary to perform their jobs. Whether scheduled or unscheduled, there is almost always a significant cost associated with downtime. With high availability hardware systems, the scheduled downtime for backups and maintenance is becoming an increasingly large percentage of downtime. Outages can result from the failure of any component of the storage solution, but the measure of availability is based on data availability, pure and simple. The costs to consider are both technology and business related.

Performance: The costs in this area are related to performance issues that impede response time. Product architecture, applications, and number of end users can affect response time and ultimately productivity. A slow system response can be perceived as downtime by your customers, resulting in costs similar to downtime costs. The challenge lies in understanding the specific response rates at which various user groups are no longer able to do their jobs (e.g., design engineering vs. customer service).

Backup and Recovery: These costs comprise the expenses of backing up storage and restoring from an outage back to the failure point.

Arriving at the costs for these areas requires a good deal of research. The better the data, the better your TCO estimate. Listed below are some helpful hints to keep in mind when collecting your data and calculating costs for each component area.

Product/Acquisition

* Revisit accounts payable for records on procurement. installation, maintenance, and legal costs associated with NAS.

* Divide the initial product acquisition oust over the anticipated life of the product to arrive at a yearly cost.

* If you are unsure of the product life of your NAS solution, use three (3) years.

* Maintenance and upgrade costs should be included beginning in year two (2).

* If you do not know the cost of floor space, you can use Gartner's estimated median cost of occupancy at $300 per square foot per year for data center space.

Personnel/Operations

Once you have the necessary salary information, make sure to apply your corporate burden rate to include employee-related costs such as benefits, office space, and equipment.

* If you don't know what your corporate burden rate is, use an additional 40 percent to arrive at an estimated cost.

* If you are unable to determine specific salaries, assign an average salary for each skill level to use in your calculations.

* Refer to billings and hourly rates for vendors and consultants.

* Revisit expense reports to include costs for training, conferences, education, and travel associated with NAS.

Availability

Cost of downtime relative to productivity requires data on the percentage of users unable to perform their job functions when access to data is denied, as well as their average salaries. Once you have this information, make sure you pay attention to your units as shown in the formula below.

(% of users affected) x (average salary in minutes (can be calculated by -> yearly salary/124,800 minutes/ year)) x (burden rate) x (total minutes of downtime for the year) = cost in minutes of lost personnel productivity

Calculating the cost of customer dissatisfaction is based more on probabilities. You need to allocate an estimated percentage of lost business due to outages (e.g., an outage of 0-2 hours = 2 percent lost business, 2-4 hours = 3 percent, etc.). Use these figures to calculate loss of future business due to customer dissatisfaction.

You can also calculate the cost of downtime by using industry figures if you are unable to gather the data needed to determine a more 'company-specific' figure. Or use $80,000/hour averaged over all industries (Table 1).

Performance

To arrive at a decent estimate for the impact of poor performance, it is necessary to group employees according to their tolerance for various response times. Indicate in a chart when they cease to be productive, as in Table 2.

Map these tolerances against your performance records to determine the amount of time each month that response times impacted the various groups and calculate a total for the year.

At times, performance can become so poor that an application is perceived to be unavailable. For these instances, calculate the cost as you did in the previous section.

Backup and Recovery

For this area, you will need to decide how often you believe a disaster will occur each year. For example, if you believe the likelihood of disaster striking in your area is once every four years, simply multiply the cost of recovery by .25.

How to Effectively Use TCO Information

According to Gartner, Inc., installed storage capacity will scale tenfold in three years or less. This presents a real challenge and a real opportunity. As you perform your NAS TCO, ask yourself what changes can be made to address the hidden costs you are unearthing.

As you collect the data required for these areas, create a chart similar to the one shown in Table 3 that will assist you in identifying opportunities for reducing TCO. The chart will allow you to pinpoint the savings a particular feature can yield by calculating the specific cost it addresses. For instance, how much could be saved if scheduled downtime for an upgrade in capacity could be significantly reduced or even eliminated by a NAS solution with nondisruptive scalability?

There will be, in fact, many opportunities for savings that were not obvious during the procurement process. These range from differences in cost due to ease of installation to productivity savings attributed to performance. Each organization's savings potential will differ based upon current NAS solutions, implementation, and operational considerations. There are, however, several NAS feature areas that are important to mention as they represent significant potential for savings for all.

Nondisruptive Capacity Expansion. Your next NAS purchase should provide the ability to nondisruptively increase the capacity of a user's Share or Exported Name Space, even beyond the capacity of a single server. This will enable virtually unlimited growth of a user's data space while eliminating the need for downtime during normal administrative functions and their monumental associated costs.

Global Storage Pools. A NAS server that offers clustering capabilities can lead to major financial benefits as well. Imagine the management savings your organization could realize by administering all NAS storage at all locations as a single pool from a single location. Savings from reducing headcount, administrative tasks, and management effort will grow considerably over the lifetime of the solution.

Data Anywhere. With the clustering capabilities of the NAS server as mentioned above, data can be placed anywhere within a cluster and accessed transparently by any user. No longer must the data reside within a small geographically limited area. This reduces the overall amount of data stored by eliminating duplications and using available capacity wherever it resides. This efficiency provides big pays-offs resulting from decreased spending on additional capacity.

As you can see, the information gathered during a TCO analysis can not only help you tighten your TCO belt now, but can be invaluable when evaluating future NAS solutions. When faced with the fact that the cost of taking a server offline to add capacity could be upwards of $100,000 per minute, the extra money spent initially to procure a solution with nondisruptive scalability features becomes inconsequential. And that's just the tip of the iceberg. Once all of the areas are addressed, the insights gained will enable you to make wiser economic decisions concerning your organization's storage strategy that will certainly pay off in the long run.

Table 1

Business             Hourly Cost of Downtime

Brokerage Firm       6,500,000
Telephone sales         69,900
Home Shopping          199,500
Credit card sales    2,600,000
Catalog sales           90,000
Airlines                89,500

* Information from Contigency Planning Research

Table 2

User Group                          Response Time at Which
                                    Productivity Ceases

Sales, data entry, accounting            5 minutes
Engineering, Tech support, Creative     20 seconds
Warehouse personnel, manufacturing      N/A

Table 3

Type of Downtime                  Date of     Length of     Cost per
                                  Outage      Outage        minute
                                                            this type
                                                            of Outage

Scheduled maintenance
Scheduled upgrade
Scheduled D/R activities
Unscheduled due to outage
outside of operation's control
Unscheduled due to outage
caused by IT issues
Unscheduled due to other
Perceived downtime due
to poor response time

Mark Buezynski is the senior marketing manager at Spinnaker Networks (Pittsburgh, PA).

For a detailed guide on how to calculate TCO, please refer to the white paper "Total Cost of Ownership of Managing Storage" on Spinnaker's Website at: www.spinnakernet.com