TCO and ROI: A Cadillac Perspective

This summer I traded in my beloved Toyota 4 runner for a Cadillac CTS V Black Diamond edition.  There was no issue with the 4 Runner and I owed nothing on it.  I was not in need of an extra payment, I just wanted the V.  Maybe it was a mid-life crisis, maybe it was something else.  In reality it was the car itself, something about a Corvette super car engine in iconic Cadillac luxury.  Something about a sports car that can take a stock Porsche off the line in a brand that most assume comes standard with a walker and a turn-signal that never turns off.  Something about sitting comfortably in an American made car that could dust the top German luxury sport cars at 20K less in price.  I love my decision.

When making my decision I went through a thought process very similar to assessing data center infrastructure (ok that’s a total lie it was a spur of the moment decision that went from thought to purchase in less then a week, but it could have gone something like the following.)

Step 1: The Requirements

My requirements for a new vehicle were:

  • Sports car or SUV based on personal taste.  (I want vendor X, or I don’t want vendor Y)
  • Creature Comforts: leather, heated seats, navigation.
    • Cooled seats, OnStar type service, Satellite radio preferred but optional.
  • Aesthetics, something that fit my tastes from a looks perspective.
    • Preferably something that not everyone on the road would be driving.
  • Reasonable maintenance costs/reliability.
  • Adequate trunk space, interior space. (this was going to be my primary vehicle.)
    • 4 Doors preferred for convenience.
  • New vehicle (no refurbished equipment)

Non factors (things that factor in to an average car purchase but were not important to me):

  • Gas-mileage
  • Safety rating
  • Brand / country of origin
  • etc.

Step 2: Narrowing the Playing Field

I narrowed down the vehicles I would be happy with to the following:

  • Jeep Grand Cherokee
  • BMW M5
  • Toyota 4 Runner
  • Land Rover Range Rover
  • Cadillac Escalade
  • Cadillac CTS-V sedan
  • Tesla Roadster

Step 3: ROI and TCO calculations

Next came reality, I had my options that met my requirements to varying degrees, now I had to look at costs.  Starting with initial price I placed the vehicles in order low to high.

  • Toyota 4 Runner
  • Jeep Grand Cherokee
  • Cadillac Escalade
  • Cadillac CTS-V sedan
  • BMW M5
  • Land Rover Range Rover 120K
  • Tesla Roadster 118K

Now in true solution assessment fashion I dropped the top and bottom price options from the running (Tesla and 4-Runner), leaving me with 5 options.  Next it was time to look at TCO.  TCO on a vehicle would include things like gas-mileage, fuel type, maintenance costs, reliability, etc.  Of my remaining options the Grand Cherokee and Escalade looked the best for reliability and maintenance.  I dropped the Range Rover at this point after hearing some horror stories on repair cost and frequency (I did not validate these claims as I don’t care to invest the time so I’m not saying they actually have these problems, hearing they did was enough to drop them with this many great options.)

Down to four options, two in the SUV category and 2 in the sports sedan category it was time to decide what type of vehicle was I most interested in.  Both types met my requirements but I’d been in an SUV for the last 4 years and was ready for a change.  The decision was down to two: CTS-V or the M5.

Between the two the Cadillac had the better maintenance plan, greater stock feature set (amazing what BMW considers extra on an M5) and was solidly the faster vehicle.  Additionally the Black Diamond special edition was exactly to my tastes for style, and would be much more unique on the road than an M5.  I ultimately settled on the Cadillac and have been very happy with the decision.  It wasn’t the lowest TCO of all of the options fitting my requirements, but it most closely fit my total requirements and optional features at an acceptable TCO.

Summary:

When making IT purchase decisions remember that cost isn’t everything.  All too often I work with people that are so wrapped up in TCO conversations they forget to assess what the business objectives of the infrastructure are.  Cheaper solutions that can’t properly deliver the services required by the business, or scale with growth are not better solutions.  Starr the process with the business, defining requirements and assessing possible solutions.  Leave cost to the end.

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Business Drivers for Cloud Infrastructures

There are several business challenges that drive the cloud discussion and cloud infrastructure market.  These business challenges are very different from the technical challenges that are more commonly discussed along with cloud.  It’s key to differentiate between the two because typically only one or the other is relevant to any given audience.  If you’re talking to an engineer something like hardware redundancy is quite relevant, but that same concept isn’t relevant to an end-user or CxO.

For this discussion we’ll focus on Business drivers for cloud and save technical demands for a later time.  While thinking about business demands you’ll want to put the data center as a whole in perspective from a business standpoint.  Put on a CxO hat for a minute and decide what data center means to you.  If you’re thinking like many CxO’s you’re thinking of the data center as a cost center, not much different from the cost of paying the lease on a building, or paying taxes.  It’s a necessary expense of doing business.

Recently this has been very true, for instance the business needs a way to communicate more quickly than the typed memo so they invest in an email system, the email system is a cost no different from the paper and ink required for the memos.  This wasn’t always the case, originally Information Technology (IT) was a competitive advantage, remember way back when not everybody had a data center infrastructure?  Back then building a server or network for a business application gave you an edge, lately it’s more of a keeping up with the Jones’s, who by the way are very hard to keep up with.  That brings us to our first business driver for cloud:

Competitive Advantage: The ability to do something, better, faster, or at lower cost than the competition.

Applying that to the cloud: If my competition is thinking/building their IT infrastructure in the traditional methods and paying the price for it what can I do to improve on that?

Now let’s look for some other business drivers, and lets grab the easy ones (‘low hanging fruit.’)  Nearly every business on earth has one common goal, ‘grow the business.’  There are few if any businesses that hit a certain size and say ‘This is just right, let’s stop right here!.’  That only works for Goldilocks.  So then to put this in simple terms let’s assume all businesses want the ability to ‘scale.’  Now that seems easy enough but let’s take that idea one step further: in a good economy I may want to scale out (grow), in a bad economy I may want to scale in (focus on core competencies.)  With that in mind let’s move on to our next business objective:

Ability to scale the business (out and in):  Being able to deploy business applications on demand and retire them when needs change.

Applying that to the cloud: I need to bring new business initiatives online quickly and decommission non-profitable initiatives on-demand.

So now we have two business drivers, and while there are many we don’t have time for a comprehensive list.  Let’s look for one more that is another nearly ubiquitous driver.  In most companies globally, private or publicly traded, there is one major focus and that is profit.  Profit is what can be applied to the owner’s pocket or increase the share value.  Profit is what’s left over after all of the business costs.  What’s an easy way to increase profit?  Reduce cost.

Reduce Costs:  Reducing the amount spent to run the business.  If the goal is increasing profits then costs must be reduced without sacrificing revenue (total amount of money received by a company for goods or services sold.)

Applying that to the cloud: I need to reduce IT overhead without sacrificing business revenue.

So three of the major business drivers that push the various cloud initiatives are: Competitive Advantage, Ability to scale, and Reduction in cost.  These are the real reasons people are looking to cloud architectures of all shapes and sizes in order to redesign the way IT is done.

The most important concept is that cloud is retooling the way we think of IT.  If you think in terms of ‘How can I improve upon the way I run IT now’ you’ll miss the mark.  In order to gain the maximum benefits from cloud infrastructures you need to think ‘What am I trying to do and what’s the best way to do that.’

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