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The disruption of TCO

What will the term Total Cost of Ownership (TCO) mean in five years’ time? Particularly if you’ve migrated to the cloud or a Digital Centre?

There’ll be no more traditional licensing, installation or infrastructure. On-premises and hardware costs will be reduced; infrastructure is managed by a third party. And if the third party has thousands of customers, this leads to substantial economies of scale in terms of TCO.

So no more capacity planning that has to factor in (and pay for) occasional spikes in demand. For example, an e-commerce operation at Christmas. So far, so good.

But maybe in five years’ time you’re planning to be operating in a private cloud. In that case you’ll be building your own infrastructure. Which means there’s the CapEx – such as storage and networking – to consider. In Computerworld’s annual forecast survey of IT executives, almost 43% of respondents expect their budgets to increase. So if spending in the future is going to increase, it’s time for the IT industry to review the entire concept of TCO.

Here are four ways to start:

Contracts

Monthly contracts, pay as you go pricing, SLAs. All are terms that don’t fit into the traditional idea of TCO, where investment in hardware is calculated in terms of years.

That may mean more freedom… or does it? One of the main barriers to cloud adoption often quoted is the risk of being tied in to a vendor. Any move to the cloud or a Digital Centre needs to balance these considerations.

You’ll need to make sure you choose the right partners. Here’s where a cloud partner can help, in an advisory role.

Hardware

How long does your hardware last? Of course, there’s no easy answer to that.

But if you’re looking to the future, now’s the time to look at what’s included in your current hardware refresh cycle. If you’re already virtualising parts of your infrastructure, it’s likely you’re already extending the natural life of existing infrastructure. Which will affect your budgets.

Yes, if you want to boost server performance now, a new server is the obvious option. In five years’ time you may get the same result by just upgrading the server. Or by moving to a Digital Centre.

Applications

Reduced TCO will mean you can be deploying, testing and releasing quicker.

And if you’ve moved to the cloud, you’ll be able to scale quicker. Which mean any five-year plan can focus on business growth, without worrying about having to invest in the necessary infrastructure.

However, scalability needs to be matched by interoperability. After all, you don’t want to risk launching an application on a platform if partner service APIs aren’t talking to each other.

Do you have the in-house expertise to create special networking protocols that will overcome any barriers? Consider in-house connectivity, bypassing the internet, to accelerate your output even more.

Data

The Internet of Things is a prime example of the challenge facing IT infrastructure.

Data pouring in from connected devices “has become a powerful force for business transformation, and its disruptive impact will be felt across all industries and all areas of society”, according to Gartner. The information technology and research and advisory company predicts 25 billion “things” will be connected by 2020. You’ll need to equip your team to manage, process and crunch the data. Which means reviewing your TCO in regards to storage capabilities, now and in the future.

How much do you plan to spend over the next five years? And can you base your plans on predictions, when the IoT is still in its infancy?

As Abraham Lincoln said: “The best way to predict the future is to create it”. Creating a next-generation data centre – a Digital Centre – is one way to create the future.

What’s next?

The industry is moving to a model of renting infrastructure, platforms, and services. Just like in the consumer market. Look at how people no longer feel the need to “own” music (think Spotify), cars (think ZipCar) or films (think NetFlix).

And in the IT industry? Perhaps it’s time to remove the Ownership aspect of TCO. Does that sound extreme? Maybe now. But as with everything in the Digital Centre, it’s about how things will be in the future.

What do you think? How do you see the concept of ownership developing in terms of TCO?

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