Step 3: The financials
This step requires corralling some of the basic financials behind many of the previously described factors. It's critical to have a handle on your existing asset base, both hardware and software. For your hardware asset base, the most critical components are likely lease expiration dates and/or current and projected maintenance costs. Without a plan to elegantly transition from an end of lease, significant penalties and costs can be incurred. Maintenance costs creep up, sometimes so precipitously that moving to new hardware is justified.
Having a detailed asset base along with data such as acquisition dates and cost, maintenance costs and planned obsolescence dates is critical to understanding the complexities of your budget. Develop and track a TCO model for your hardware; every six months or so, plug in and model the impact of replacement hardware.
At a tier-one service level, the decision to replace hardware will probably be driven more by service or performance requirements than by cost savings, particularly when you and your management look at the value at risk. The purchase of tier-three equipment will likely be focused more on cost savings. For most organizations, tier-two purchases fall somewhere in between. The issue is how to develop your chargeable cost model. If a new purchase of tier-one hardware results in better, faster, cheaper and thus a lower cost per gigabyte or terabyte, there could be a stampede from the now more expensive tier two or three. Therefore, chargeable costs may need to reflect the value of the tier, rather than the actual cost of the tier.
Finally there's the humdrum financial stuff--personnel costs, depreciation, etc.--that's a standard component of every budget. Don't overlook the need to develop a training budget based on a skills matrix that shows each employee's skill level compared to the technologies required to support the environment. Any prudent organization will have at least one backup--preferably two--for each primary skill set. The skills matrix can concisely illustrate training requirements.
Step 4: The fears
In this phase of the budgeting process, it's useful to list the risks that might be mitigated by various projects and, even more important, to add risk-based factors to some of the fact-based budget data. For example, shorter retention periods might save on tape costs, but increase exposure to data loss. Dropping the line item for data encryption can expose a company to great risk if its customer data backup tapes are lost or stolen. Longer recovery point objective and recovery time objective metrics might jeopardize business-continuance requirements. It's important to identify options where a lower level of service might be possible at an identified risk (see "Risk assessment," this page).
The budget proposal
Once you've mastered the facts-financials-fear approach, consider presenting your storage budget as a proposal that's the basis of discussion, rather than a final submission. If you develop your budget proposal along the lines we've discussed for each service catalog offering, you should have a defined business plan with risk/reward identified, as well as a series of projects with each phase as a business plan with its own risk/reward.
The key is to be aware that there are options to each proposed budget business plan/segment, and that it's your responsibility to offer those options along with empirical data related to each risk/reward. You should also formally prioritize your recommendations for budget inclusion.
The proposal format allows you to lead the CFO through a fact-based "with/without" analysis. This "sensitivity analysis," based on the risk/reward options you've identified and founded on recommended priorities, lets the CFO intelligently invest the organization's resources in a familiar business plan-based approach.
Developing a winning storage budget is simpler and more likely to succeed if you segment your operation into components, develop options and risk/reward metrics, prioritize items and then present the budget in the format of a business plan. Adopting this budget-process approach will better align your budgeting efforts with those of your organization's senior management and position you as a trusted advisor.
This was first published in May 2005