Storage Economics: The Changing Paradigm

For the IT department of any organization, cutting costs in storage is a
critical area. CTOs need to understand that reducing short-term capital expenses
does not yield economically beneficial outputs always. Looking at ways to reduce
the operational expenses instead is more prudent.

In the current economic scenario, organizations must find ways to
incrementally increase their profits, reduce costs and improve operational
efficiencies. IT continues to be a target for reducing costs. The proliferation
of storage needs and the consequent ballooning of storage budgets has led IT
organizations to do a rethink on the traditional 'economics' involved in a
typical storage infrastructure.

Storage economics is being increasingly seen as an overall reduction in long
term. It will balance the operational expenses (OPEX) and yield better Return on
Investment (ROI), rather than merely reducing short-term capital expense (CAPEX).

A trend is now being observed wherein purchasing cheaper disk solutions to
reduce CAPEX can produce a negative long-term impact on OPEX. The correct
approach for storage economics decision-making is to take a strategic view of
storage architectures and determine the best solutions, based on TCO and OPEX
minimization.

TCO and ROI

A proper examination of storage economics requires consideration of two
perspectives: total cost of operational ownership (TCO) and return on investment
(ROI). The perspectives of TCO and ROI are similar in computation and
development, but fundamentally different in the types of decisions for which
they should be used.

First, ROI is an effective method to use when proposing a new set of actions
or activities to replace existing practices or technology. Basic ROI results
have to answer the three questions: How much is the investment, how fast is its
payback, and how much is the total or net savings on this investment.

ROI is crucial for demonstrating to the management that even with enough
incremental disk capacity to meet the basic company needs, the change to a new
architecture or storage solution can provide positive ROI due to the OPEX
reduction in many cost sensitive areas.

In case of planned storage growth or expansion, TCO can be effective for
calculating total lifecycle costs of competitive or comparative solutions. TCO
is exactly what the name implies-the total operating and purchase cost of an
asset.

OPEX Potential is Meaningful

It is worthwhile to determine how much storage OPEX potential exists, and
efforts required to discover, harvest and reduce the actual storage costs.
According to Hitachi Data Systems (HDS), on an average, for every 12TB of usable
disk capacity within the storage infrastructure, there is a $1M net OPEX
potential.

Many situations generate $1M of OPEX savings with five or six terabytes of
total storage, while some environments generate smaller savings. The $1M-to-12TB
ratio is conservative. It generates savings over a three-year term. This $1M is
a net savings that impacts the department's bottom line.

Charaaterizing Storage Opex Costs

Through many ROI exercises and case studies, the following OPEX cost
conditions have provided the most defendable and believable cost saving examples
in moving to advanced storage architectures. They are:

1. Storage Administration Effectiveness: With pooled storage
architecture, the number of terabytes per person being managed increases with
an effectual central administration function. Systems management
effectiveness, enabled by an advanced storage architecture/strategy, is the
key to managing more with less.

2. Improved Data Availability: Enterprise-class storage, added with
highly available storage network topologies, can reduce the risk of
unscheduled downtime. Higher data-path availability means less exposure to
opportunity loss or cost as a result of an outage. SANs and newer-generation
storage provide higher data storage uptime.

3. Environmental Costs: New generations of storage systems take up
less floor space and lower electric bills and A/C costs due to a lower kVA and
BTU per gigabyte of storage capacity. The smaller footprint and reduced
electrical costs generate real savings to the IT department.

4. Hardware Maintenance Costs: Aggregated storage hardware costs for
maintenance can be lowered since maintenance is paid only on capacity that is
needed and used (as opposed to paying maintenance on unused capacity).

5. Software Maintenance Costs: Many times, software licenses are
based on the total capacity or total number of storage frames (controllers).
If this number can be reduced through consolidation, additional software
savings from license fees and maintenance can be realized.

6. Scheduled Downtime Costs: With direct-attached storage, upgrades
to microcode or capacity additions often require scheduled downtime, along
with labor-intensive planning and installation. New storage architectures
allow storage provisioning and upgrades to be completed nondisruptively.

7. Asset Utilization Improvement: Storage utilization
increases as storage is aggregated and shared among a larger population of
servers. Improved storage utilization reduces future storage procurements, and
can provide just-in-time storage provisioning. Improvements from 25% to 60%
total disk capacity utilization are not uncommon. 

8. Backup Improvement: Storage networks can provide the
necessary infrastructure (backup servers, media servers, fiber channel,
high-speed connections) to improve backup windows, reduce the backup workload
on servers, and generally improve recovery times (RTO) and recovery points (RPO).

9. Disaster Recovery/ Business Continuity Provisioning: The
separation of storage from servers provides an opportunity to manage data and
processing separately, and to also plan for recovery with better optimization
of data. Data replication can be applied to storage to create multiple copies
of critical data for other parts of the SAN.

10. Tape Reduction: Architecting a central storage solution allows
for fewer, larger tape libraries or virtual tape archival systems to be
implemented for the benefit of the storage community.

Options to Reduce OPEX 

The OPEX reduction strategy can be seen under three broad levels. The first
level includes the OPEX cost-reduction activities that are most easily
accomplished with proven results and demonstrable savings. Some activities
include storage consolidation; a major benefit of networked storage is its
potential to reduce storage costs; common backup, hierarchical storage
management (HSM) and storage management automation.

The second or middle level includes projects and initiatives that go beyond
basic infrastructure investment-activities that work to optimize processes,
procedures and organizational alignment. Activities in this level include change
control, version control, capacity plans, storage chargeback, storage resource
management (SRM), centralized storage management team, multi-tiered storage
options and building and managing with storage architectures.  

The third level includes actions that are more distant in the future. These
actions may require a fundamental change in business methods or business/IT
roles in order to implement. Activities in this level include storage utility,
virtualization and storage provisioning.

The author is Consulting Director at Hitachi Data Systems. He can be
contacted at srikant.chakrapani@hds.com