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| Tech Update
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Defending infrastructure TCO
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By Kevin McIsaac
February 7, 2002
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Tightening IT budgets have forced organizations to review how capital is allocated to IT infrastructure. In the heyday of the dot-com boom, most organizations focused on quickly improving infrastructure to enable new abilities, leading to extravagant IT infrastructure expenditures (for example, storage networks, wireless spectrum, and data center capacity) that are now difficult to justify.
Through 2003/4, leading IT organizations (ITOs) will adopt a services paradigm for infrastructure, viewing (and delivering) it as a set of shared, reusable services with well-defined service-level agreements (SLAs), in the same way that networking and telecommunications infrastructure is viewed as a service (for example, storage delivered as a service). Through 2005/06, best-in-class organizations (15 percent) will optimize these services to align IT infrastructure with the business's strategic intent (such as lowest cost, rapid time to market, and customer service) and provide a portfolio of infrastructure services with a range of cost/risk profiles.
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Business value of infrastructure
The shift to a services paradigm will be driven by the need to demonstrate the business value of infrastructure, which now accounts for approximately 50 percent of all IT spending and continues to expand. When infrastructure is presented as just a collection of hardware and middleware, it is difficult to demonstrate the value to the business. However, when aggregated into a service (such as a database service, a Web service, or a storage service) that is defined by an SLA and expressed in business terms (for example, response time, transaction rate, and hours of availability), the business can more easily place a value on the infrastructure. These services can be measured and charged for, and the costs monitored and controlled. The business unit can validate the infrastructure cost by going to the market for these services to determine a fair price.
The service paradigm puts consumers in charge, enabling them to choose the appropriate service level (hence unit price) and the quantity of that service consumed (hence total price) to control both costs and risk. It reduces the risk for the provider by clearly defining the service it is responsible for and the agreed-on price.
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