Tip

Calculating storage system payback

By Joel Leider

Below is a simple worksheet that helps you determine the payback from a disk system investment. Use your own numbers and be as conservative as you like.

For salaries and benefits, a ballpark figure is fine. Benefits typically are 15% to 20% of a salary. Any investment that gives you payback in 12 months or less is automatically a "buy" signal for financial managers.

In this example, it takes less than a one percent improvement in productivity to justify the investment. Payback is measured in days and weeks instead of years. Make the following calculations to determine what kind of payback to expect from your new storage system:

(1) Number of storage users:

(2) Average salary and benefits cost for each user:

(3) Estimated annual cost of the new high-speed storage system:

(4) Estimated annual cost of your existing storage system:

(5) Calculate the net cost of upgrading to higher-speed storage: (3)-(4)

(6) Determine how much faster the new system would be:

(7) Calculate the net cost of the higher-speed system per user: (5)x(1)/100%:

(8) Percent time savings required to pay back investment in one year: (7)/(2)x100%: ______%

(9) Average percent of time spent performing computer tasks:

(10) Minimum speed improvement required for one year payback: (8)/(9)x100%:

11) Estimated improvement better than minimum improvement? (6)>(10):

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YES/NO If the answer is yes, the investment is a good one.

Leider is the chief executive officer at Winchester Systems Inc. in Woburn, Mass.


This was first published in June 2000

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