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IT Consolidation is top of the agenda

October 11, 2009 Leave a comment Go to comments

It is time for a fresh look at IT consolidation. While many CIOs have already spent years reducing costs in technology operations, procurement and outside services, their CEOs and CFOs are nevertheless itching to squeeze budgets still further.

After all, IT represents a significant area of corporate spending – 5% or more of annual revenues in some industries – at a time when executives need to keep a tight grip on the bottom line.

But finding substantial savings won’t be easy for cash-strapped IT departments, warns McKinsey & Company in IT Architecture: Cutting Costs and Complexity. The venerable management consultant warns that unless IT departments take a broader look at the way they manage the IT architecture as a whole. “The key to these economies is bringing business and IT leaders together in a combined effort to rationalize not only business applications and processes, but also the core IT infrastructure and operations,” they say.

It’s a daunting mandate, but a necessary one, according to Rob Hodgkinson, Head of Business Operations, Orange Business Services. “No company can claim to have the perfect cost base and most IT infrastructures could do with some streamlining. IT consolidation and centralization are all about making the infrastructure more flexible and agile – it’s about eliminating redundancy, so that you’re running only what you really need, where you need to run it,” he says.

start with the data centre

A good first step is data centre consolidation, according to Rakesh Kumar, an analyst at IT market research company Gartner. “Most organizations still have multiple data centers for their IT operations, ranging from large complex installations to small machine rooms,” he points out. Consolidating these multiple sites into a smaller number of larger sites will often result in financial savings – not just in real estate, but also by ridding organizations of redundant IT assets, software, maintenance and support costs and disaster recovery contracts, he says.

Fewer servers in the remaining data centers will also make a big difference to IT costs in several ways. First, it will help with asset and inventory management and provide a clear picture of the boxes that are being used effectively and those that are not. Second, server rationalization should yield lower maintenance and support charges. Third, it will lower energy costs, typically by more than $400 per server, per year. And finally, hardware rationalization projects typically yield savings of 5-10% of overall hardware costs, when measured post-project, Kumar claims.

The best way to achieve that rationalization, meanwhile, is by consolidating servers using virtualization technologies. In this scenario, a smaller number of larger, but more efficient, machines can replace a large number of smaller, under-utilized servers.

This results in a smaller hardware estate, which in turn, means lower operating costs and less-expensive maintenance and support, and one that consumes less energy and thus reduces the organization’s carbon footprint.

don’t forget branch offices

Branch offices and regional outposts are another good place to put consolidation into practice, according to Chris Silva, an analyst with Forrester Research. In a recent report, he estimates that these can account for around 20% of a company’s IT infrastructure.

“The branch office is a latent pain point in the battle to streamline IT,” he says. “While the data center has likely reaped the benefits of power, cooling, physical space and operating expense gains from the adoption of technologies such as virtualization, consolidation of storage and server infrastructure, and increased use of software as a service (SAAS), branch offices have largely been ignored.”

networks are enablers

Today’s advanced corporate networks can do much to remove the headaches involved in consolidation and centralization projects, says Orange’s Hodgkinson. “Once the infrastructure’s in shape, high-speed enterprise networks and WAN optimization techniques mean that it doesn’t matter to users where a centralized data centre is located. That gives organizations the option to situate it wherever the resources and skills needed can be sourced most cost-effectively,” he says.

Research commissioned earlier this year by Orange Business Services found that, among Fortune 1,000 companies, around half (53%) so far have a fully centralized IT and telecoms function. “In the most advanced IT and telecoms centralization, CIOs are able to provide, deliver and operate, through their department or dedicated business unit, a catalogue of products applications and services to internal company units and users – whether that means additional fixed phone lines, IT developments, utilization of servers, change in application services levels or application user rights, anywhere in the world,” say the report’s authors.

Most, however, are still some way off that vision. But in the race to reduce cost and complexity, it’s one they should, in most cases, be hoping to achieve as quickly as possible.

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