The Cost of Change

The total cost of ownership of storage is a complicated thing to figure. The TCO includes a wide variety of factors, from purchase price to operational considerations to power usage to failure rate and much more. David Merrill, who was named chief storage economist at Hitachi Data Systems (HDS) last year, has come up with 33 costs that go into the TCO of storage. How many do you use when making a buying decision? And how do you factor in the cost of not making a change?

Most storage managers know that the purchase price of storage is a small piece of the overall TCO, but often that is the main consideration at many companies. And when the cost per terabyte keeps falling, it can look as if the IT department is saving money as it buys more capacity. Yet cutting the overall TCO is much more difficult. There are opportunities for cost reductions in each of the many factors that go into the overall cost of buying and operating storage systems. Merrill argues that storage managers serious about reducing overall costs need to define and measure current costs and then develop a strategic plan to reduce those costs.

Most storage vendors have TCO tools that are supposed to help customers or potential customers make buying decisions, but for the most part they are really tools for the sales department. Merrill acknowledges he developed his list of TCO factors to help HDS salespeople "not panic when they are losing on price. I teach them to tell potential customers that we may not have the cheapest system to buy, but they are cheaper to own."

He argues that purchase price is only about 20 percent of TCO and that the other 80 percent includes costs like maintenance, power and cooling, space, cost of disaster recovery, and many other factors. "I help them to make the argument that with Hitachi, your labor costs will be lower, your cost of waste will be lower, we will reduce your migration costs, the cost of copies, and more."

Those are the arguments you have to make when you can't win on price, competitors will say. And there is some truth to that. But Merrill makes a valid point that a lot of factors need to be considered when making purchase decisions. In addition to the obvious hardware, software, labor, and maintenance costs, his list includes virtually everything that an IT manager does with a storage system (provisioning, backup, encryption) and everything a storage system touches (floor space, power, and cooling) and other things like the cost of hazardous waste and litigation and discovery risk.