Q

Talking TCO/ROI

Following up on your response about TCO cost for storage, you cite figures of 3 to 12 cents per MB. Do you mean these figures ($0.03 to $0.12/mb) to be the Total Cost of Ownership for storage (including backup, management, administration, floor space)?

I have seen these kind of numbers cited for acquisition cost (even lower for NAS) but not for TCO.

The study from Merrill Lynch/McKinsey (from 2001), one of the most widely cited reports, pegs TCO at between $0.36 and $0.84 and Gartner says that storage TCO is (roughly) five times acquisition cost.


I will not dispute the numbers sited by the report you are referencing.

Enterprise level customers have been paying a premium for storage solutions that provide business benefits that offset the initial cost. If you factor in the flexibility a SAN can bring for time to market for new initiatives, then payback periods can be anywhere from 12 to 18 months or less in most cases. If you also factor in the costs of downtime, data recovery times due to outages, storage utilization inefficiencies and other costs to stay "status quo" then you will find that total cost of ownership of not using a SAN is more expensive than buying one over the long run.

The actual purchase price of a storage subsystem has some effect on total cost of ownership but is usually the least expensive aspect of the complete solution. Host bus adapters, cables, switches, professional service costs and people costs all add up in the end. That's the bad news. The good news is that these costs are offset by the benefits of SAN.

I did a study with one of my customers, and we found the payback time for a complete solution to be less than six months. Ongoing savings after that produced great savings in the long term for this customer. In the study you refer to, very large companies were studied. They may show higher initial costs due to overhead for outsourcing, and the massive amount of purchases they make due to their heavy needs. Those costs can go way down as the costs to build the initial infrastructure is no longer a factor. If you use scalable solutions, then going forward you are just adding disks, which are getting cheaper every day. If you have good management software, then fewer people can manage MUCH more. Automated processes also help.

Chris

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This was first published in August 2002

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