by DavidSpratt | Aug 1, 2016 | ICT
We talk to dozens of small and large companies around the country to help them modernise and streamline their ICT needs. We frequently hear about an issue that’s important to managers everywhere: a supposed lack of control over the growth of these as-needed costs. In many cases, the concern isn’t a technical issue, it’s a management one. It is also one that can be modelled and controlled.
You can always spend more money on cloud services, but you shouldn’t be surprised by your monthly bill. In an ICT/cloud infrastructure model there are three basic levers that need to be managed in order to control costs and consumption. Let’s take a look at each of them.
1. Establishing proper authority to buy services
Picture a junior technical person happily sitting at their desk with ideas running freely through their inexperienced but giant brain. “Eureka!” they cry, “I can solve my technical problem by using loads of storage on a huge server”.
Reaching for the department’s username and password, our intrepid techo accesses a public cloud service provider, nails up the required infrastructure and sets to work.
Our junior techo never actually switched off the environment they created; in fact it was so useful that it became the test bed for the whole department. Nor did they even have the delegated financial authority to spend the money.
Two months later a finance person, waving an eye-wateringly large invoice, arrives in the IT manager’s office. The company was committed and the money spent before you could say “breach of process”.
2. Controlling storage and backup growth
For the past 20 years organisations have grown their storage at around 70 per cent each year on average, as shown in the diagram below.
The diagram shows you were able to negotiate a 20 per cent price reduction every year for six years while backing up 70 per cent more data annually. Monthly backup charges have grown from $200 per month to a whopping $930, despite aggressive price reductions.
3. Monitoring the proliferation of server infrastructure
Our intrepid junior techo has moved to an organisation with more “flexible” IT policies (that means no policies, in case you needed clarification). Techo’s new boss has just turned up waving an unexpectedly large invoice and demanding a reduction in the number of servers.
We can’t do that! says our techo, These servers are all essential to the running of the business.
Flummoxed, the IT manager storms off, wondering just how to handle the inevitable conversation with Ms Money, the chief financial officer. Ringing in his ears are the words: “Don’t give me problems – I want solutions”.
How to manage each cost contributor
Authority to buy services
A good thing about most cloud service providers is they offer some form of budget control solution, however, organisations need to understand the spending risk and put in place internal policies around just how and when cloud services are consumed.
Storage and backups
I have yet to find a multinational backup software provider that seeks to reduce the amount of data their users back up – hardly surprising as they charge by the Gigabyte.
To get on top of this problem, measure performance against agreed limits on storage and backups, and ensure technical people apply tools like deduplication (ie, only backing up one cat video shared on email), aging non-critical data, and long term archiving.
Measuring performance requires active monitoring by those in senior positions. I use a tool that reports in real time. and used properly incentivises the IT team to actively manage the challenge, and delivers the satisfaction of real financial results for their efforts.
Server infrastructure
Just as with backup software suppliers, server support providers are hardly incentivised to shut down servers when they charge a fee for every server they manage.
The answer for managing costs is the same as for storage and backups: agree overall targets, and drive to these.
Remember, although some servers are actually mission critical, not all are. Switching off a system just to hit an arbitrary target could be catastrophic, so key stakeholder input is as important when switching them off, as it is when switching them on. Monitoring server utilisation can quickly identify significant savings opportunities, and places the onus on the technical folk to justify why a server can’t be switched off in the low season.
Baseline what you have, analyse the projected and actual costs, and monitor the inevitable ebbs and flows of a dynamic IT cloud infrastructure. The rewards will be huge, the savings real and the risk negligible when you get this right.
If you’d like help modelling your ICT management, get in touch with me using the details below.
by DavidSpratt | Jul 12, 2016 | Case Studies, ICT
The year 2013 was tough for Zespri.
The PSA virus was decimating its growers’ high value, gold kiwifruit crops across New Zealand. As well, a major initiative was underway to help growers replace existing cultivars with a more disease- tolerant variety, Sun Gold.
The hope was that this cultivar’s vigorous fruiting qualities would also lead to strong production, that it would be outstandingly successful with consumers, and help sustain the growth of the industry.
The Zespri board and executive had witnessed the devastation of the Christchurch earthquakes and the Japanese tsunami, and recognised a risk to their offices in Mt Maunganui and backup IT services in Tauranga. Zespri operates a global supply chain, and losing its IT services could leave crops unpicked, left in storage or stuck on wharves anywhere in the world.
To compound the challenge, Zespri’s IT infrastructure was approaching end-of-life, and required a substantial capital investment to upgrade and enhance existing services.
In short, the kiwifruit marketing, grower-owned company faced the following risks:
Financial risk
A substantial capital investment is a challenge to any business. The competition for funds is fierce. In this case of an IT upgrade there would be a multi-year burden on the balance sheet as the items depreciated, whilst uncertainty swirled around the business’ long term viability.
Scale risk
If the crop yield grew as hoped, then there was a need to quickly scale up to markets new and existing. If the crop yield fell then the IT investment would be oversized compared to the need going forward, with the burden sitting on the balance sheet. Either way, replicating the current IT environment was not the answer.
Natural disaster risk
Christchurch’s earthquakes and Japan’s tsunami had changed the risk equation for Zespri’s business forever. Natural disasters were now a very real threat to continued IT service in a 24/7/365 global enterprise. Were data centres, even if distributed across the North Island, really a robust answer?
Global reach risk
Offices across the globe required access to IT services, many of which were operated out of Mt Maunganui. These services were delivered via complex, secure VPNs (Virtual Private Networks). Technically this approach worked, but it placed all the business’ eggs in one basket. With a real business need for application access via mobile phones, tablets and roaming devices, VPNs seemed a very complex way to access services. The question came from above:
I get easy access to Facebook and LinkedIn when I am travelling. Why not my business information?
Support risk
How does a New Zealand company deliver acceptable levels of support to cities across the world? What if the network connection goes down in Tokyo during the peak season? Who do you send? What service guarantees are there? Who gets priority in a major crisis?
The solution options
- Keep things as they are: unacceptable.
After the earthquakes and the tsunami, having two data centres within the same region was now seen as just too plain risky.
- Moving to new, geographically separate hosting facilities: marginal.
- Moving equipment and services into a hosted environment didn’t solve the problem of scaling up and down, or offer a financially sensible option. Commercially, Zespri would have to upgrade the IT equipment to have it hosted, or sign up for a fixed term to have a supplier own and operate it on their behalf.
- Shove it all up into the cloud: scary.
But that is exactly what they did.
Growth enabled
Now three years later Zespri is in growth mode. The gold crop is producing record numbers and is in demand across the planet.
The IT systems scale up and down as seasonal and market demands require, consuming services as needed and switching them off when not required.
Costs are no longer tied to capital investment. The IT financial model is consumption-based with close monitoring and management of expenses using a combination of financial analysis, real time online analytics provided by Total Utilities and constant reappraisal of the business’ requirements based on the insights delivered.
Access is via a stable and secure data network, delivered by a world class provider. The supply chain resides in multiple Microsoft Azure data centres globally, ensuring business continuity.
This managed, outsourced Azure environment delivers critical supply chain services globally. Coupled with Office 365, Skype for Business and SharePoint, Zespri is competing for market share on the world stage. It is able to scale with speed, delivering a robust and repeatable IT environment as new offices open and new services emerge and evolve, and all this at a lower cost per tray of kiwifruit than was previously thought possible.
No innovation comes without a new set of risks and challenges though. As with international roaming mobile data services, bill shock can be an issue.
In my next post, I will address managing and monitoring consumption-based IT services locally and in the public cloud.
David Spratt is director of ICT at Total Utilities. Email [email protected]
by DavidSpratt | Jun 30, 2016 | ICT
Complexity, cost, and increasing competitive inertia create big problems for business IT departments, as we saw in part one of this series. In today’s post, David Spratt addresses what to do about it.
So where did we leave off, last post?
- Competitive advantage through Information Technology seems a thing of the past.
- Your business is loaded with technical debt – spending money on systems that add less and less value while costs continue to soar while nimble, more agile competitors grab your market share
- The IT department is full of people focussed on boxes that go ping and red flashing lights.
- A finance team that can’t see why the latest request for more investment in more fancy boxes makes any sense – and you agree with them!
What to do about technical debt and IT?
Let’s start with another story.
I recently met with members of New Zealand Cricket’s leadership at the completion of a strategic IT Review that I had been asked to conduct.
As we ran through the findings I raised the great Black Cap performances I had been privileged to watch recently. As we shared our obvious pleasure at the progress NZ Cricket has made in the last three or four years I naughtily asked,
“Does New Zealand Cricket design, manufacture and sell cricket bats?”
“Of course not,” came the reply. “It is not our core business. We are aiming to be a world class sporting organisation not a bat manufacturer.”
“So why then would you choose to own and operate your own IT”?
My point?
No matter what business you are in you should be actively questioning why you should own or operate IT services.
Should you own your IT Systems?
Let’s start with a simple question?
“What will I spend on IT over the next three years?”
No I am not asking you for a budget. Dig deep – check the balance sheet for depreciating IT assets – (add a new capital spend if they are approaching zero value). Find the actual time and materials charges from suppliers for the last two years. Check your licencing costs. Check maintenance and service charges from your top IT suppliers.
Ask yourself “Is this spend adding strategic value to my business?”
Now go to IT and ask for something that you would like to happen. A simple thing will suffice – like accessing your key systems from any location using a mobile device and an internet connection.
If the answer is “Tut, tut, hmmm, that depends – it’s not in the budget” then you KNOW you are in a technical debt trap and that the business has a real problem with competitive advantage or the lack of it.
So what to do? What to do?
Down the rabbit hole…
I could say:
- Find a new provider
- Appoint a new IT manager
- Automate your IT delivery systems
- Move everything to the cloud
The trouble is that none of these in themselves answer the simple question:
“How do I derive value from technology – especially IT systems?”
So let’s start there.
Identifying the solution to stagnant IT returns
Identify two categories of IT:
Category A.
Those that are legacy and are “table stakes” to doing business. Think email, calendars, Microsoft Office, HR systems and finance systems.
Category B.
Those that really add value to the business. Think systems that drive productivity on the shop floor, improve sales effectiveness, unique systems that are distinctive to your business and strike fear into the heart of your competitors.
Analyse category A. Legacy and Table Stakes systems
What are they costing you to own and maintain? Are they cost effective, efficiently run and securely delivered? How would you know if they were?
It’s time to outsource all this dross to the “best cost” provider. That usually means Software as a Service simply because owning the equipment and software that supports legacy services is neither core business nor an efficient use of your limited resources.
Office 365 and Xero are great examples of world class systems available at a much lower cost than doing it yourself. (Note – I don’t sell this stuff so this opinion is based on experience not vested interest.)
Analyse Category B. Systems that add unique business value and competitive advantage.
This is the gold and needs to be mined.
Ask yourself – Are these systems easily available to those that need them? For example, via a mobile phone or from home via an internet connection and a browser. To my important clients?
Are we maximising the value we could extract from them? Is the current system world class or at least Best of Breed?
It’s time to focus on investing where the business will benefit most.
But here is the catch.
Even Category B systems may not be creating enough value to set your business apart.
In the world today Industry IT Systems that you spent years developing are increasingly being made available over the internet via Software as a Service (The New Guard).
These emerging services are genuinely world class in terms of quality, security and availability. The issue is ANYONE can use them with only a few weeks, sometime even a few days, effort. These systems are also being used to do away with entire industries that once relied on them. This is called Continuous Disruption. For examples see below:
Where does this leave you? It leaves you with the day after yesterday.
If you currently own and operate IT today from both a legacy and strategic perspective, you should be regularly re-evaluating just where the value is and where it might will lie in the future.
If, when looking at your IT systems today, you can’t find the value then it simply does not exist!
With these two questions the journey begins.
What am I currently spending my money on in terms of IT?
Where is this creating value for my business?
For a real world example see next month for a case study in IT transformation at one of New Zealand’s most prominent export companies.
Now, let’s see if we can drop our technical debt and get those IT folks back to the Christmas party this year…
Missed part one? Discover the crux of the issue here.
by chris | Jun 14, 2016 | Energy
The 2016 Energy Management Association of New Zealand conference was recently held in Auckland. This was attended by myself and Pushkar Kulkarni from Total Utilities along with Dr Paul Bannister from Energy Action. Paul was presenting as part of the speaker programme. His presentation can be found here along with his review of the event here.
Productivity and partnerships
The program consisted of 30 speakers over two days. Overwhelmingly this year’s theme was on productivity and partnerships, the New Zealand productivity commission gave energy management a pass mark but added comments of “must try harder”.
In a small but dynamic market like New Zealand, partnerships are definitely key to making business successful. To be effective we can’t do everything ourselves. If we do, we run the risk of being the old cliché, a jack of all trades and a master of none.
Working with companies that hold specialist expertise can assist in writing business cases that are technologically and financially robust. Having a solid business case allows the business to move forward and instigate change. The right provider can be relied upon as a trusted adviser in their specialist field.
Strategic Energy Management
With energy management, a compelling story will provide qualified evidence, measurement and assurance. This evidence can be used as a strategic tool by company executives. It is important to consider and answer questions under the following categories:
• Strategic
• Economic
• Commercial
• Financial
• Management
Energy management and optimisation must create outcomes that lead to strategic value. All work must consider the wider business strategy and take into account other business cases and projects that are being run in parallel. It should not be used as a mechanism by the engineering department to merely justify the purchase of new gadgets, widgets and kit. This view is echoed by my colleague David Spratt when companies review their IT asset bases.
Total Utilities, as fully independent consultants, are able to give unbiased advice to optimise energy consumption ensuring businesses maximise the value of their energy using assets. We have specialist, qualified staff who are experts in energy efficiency and can assist in building a comprehensive business case.
For more information on how we might assist your business in driving more value from your energy consumption please contact myself on 021 650 336, [email protected] or Pushkar Kulkarni – Sales Manager | Energy Efficiency on 021 273 4337, [email protected]
by Paul Bannister | Jun 13, 2016 | Energy
As the New Zealand agents for Energy Action we are able extend our vast market knowledge, expertise and business and financial analytics to Trans-Tasman customers.
The following is a guest post written by Dr Paul Bannister from Energy Action regarding the recent Energy Management Association of New Zealand conference that he recently attended along with Total Utilities.
I spent most of last week in NZ attending the Energy Management Association of New Zealand conference, and was once more reminded of how well the Kiwis do some things.
For starters, there was the conference itself. Two days of excellent speakers – enough to keep my attention for probably 75% of the time, which is well above average for a conference. Over 100 in attendance including practitioners, clients, suppliers, etc. Easily a match for many of its peers in Australia, in my humble opinion.
Then there was the EECA Awards night. This is energy-efficiency-in-New-Zealand’s “night of nights”, with 11 industry sponsored awards covering all aspects of energy efficiency, showcasing many excellent projects. As an event, this is way beyond anything we have in Oz, with a comedic MC (and indeed a fairly comedic Chairman of the Energy Efficiency and Conservation Authority), big production values, etc etc. Minor grumbles about food aside (they starved us until 8:30pm and then served us canapes…), it was an excellent evening and an insight into many project types you don’t see in Australia, particularly in the industrial and institutional sectors. Most obviously, the Kiwis are well ahead of us when it comes to biofuels, prompted particularly by the lack of reticulated gas in the South Island. In general I’m of the opinion that NZ has a greater focus on industrial energy efficiency than I’ve seen in Australia; while their commercial sector work has some catching up to do.
Of course there is also a paradigm difference in NZ: their electricity is already mainly hydro so they have the march on Australia in terms of greenhouse intensity, even allowing for the sheep. So whereas we seem to think of gas as being clean, for them it’s actually more emissions intensive than electricity.
And then there was the forceful reminders of how much smarter their electricity market seems to be than ours. Before I rant on, just consider this: the purpose of a market is to enable buyers and sellers to meet and determine a natural price. So if you have too much generation relative to demand, electricity is cheap, while if there’s too much demand and not enough generation electricity becomes expensive. The ultimate reflection of this dynamic is the spot market, which is the price that electricity sells at on a 15 minute basis. Of course, normally we don’t see this because electricity retailers on-sell electricity to us at essentially fixed prices; if the spot market goes crazy, they take the hit on our behalf. But that makes no sense because as users of electricity we can respond to a spot price signal, so we need to have the ability to access that signal. In NZ, it is normal practice for large energy users to have some direct spot market exposure and indeed it is possible to buy electricity at a spot market linked price at a residential level. This sort of transparency is missing in Australia, and indeed we are a long way off from getting near to it. But in a generation market with increasing exposure to the variability of renewable generation, it’s increasingly important that we catch up with the Kiwis and join the 21st century.
Overall, I’m inclined to make an observation: Kiwi ingenuity has been driven by the necessities of working in a country with a hydro-dependent electricity system that goes into crisis around once a decade; that doesn’t have the population or gas reserves to support gas infrastructure across the South Island; and that has comparatively limited coal reserves. Economically, when the world catches the sniffles, NZ tends to catch double pneumonia because it the economy lacks the inertia provided by a large mining sector. Necessity is the mother invention and the Kiwis have responded by being smart and adaptable.
It’s hard not to contrast this to the situation in Australia where we have rich fossil fuel reserves, an electricity network that is stable to the point of stagnation and of course a mining industry that has been propping up our lifestyle for a half a century. So whereas the Kiwis have had to be nimble, it’s hard not to look at Australia and think we are just a little too secure and comfortable for our own good. Now I’m not knocking that security but at times I think we need to ask ourselves whether we have become complacent. Australia has many great minds, many great innovators and many great opportunities but a bit of a track record of forcing them overseas because the local policy and economic environment isn’t as supportive as that of our trading partners. We need to learn from the Kiwis and embrace a little bit of the frisson of excitement that change and instability can give so that we can be leaders of positive change rather than the ballast of resistance and intransigence.
by DavidSpratt | Apr 11, 2016 | ICT
I had lunch with an old friend last week and he raised the issue of technical debt with me: the notion that complexity breeds complexity until a business’ IT systems are a burden rather than a benefit.
The realisation came, like a bolt from the blue, that this was the reason my beloved IT industry had moved from being a creative, savvy business industry to being seen as a dull cost centre, distrusted and feared by many businesses and their management.
Harsh perhaps, but why else then have we seen the CIO, a key executive team member in the 90s, relegated to the IT Manager, reporting instead to finance?
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