In this blog, the fifth and final part of our ROI series on network mapping and DCIM, we’re looking at a return on investment calculation for data center infrastructure management (DCIM) software. In the previous blog, we analyzed which are the potential areas for savings, so If your area of implementation is DCIM, asset management and inventory software, cabling, and other data center related software then this blog and the previous one are for you.
In part 4, we ran an analysis on the return on investment (ROI) associated with the implementation of DCIM software and we identified three main areas: rack space savings, IT utilization savings and downtime, where such a software could yield a measurable returning investment and explained how netterrain specifically is able to help.
In this blog, we’ll perform some actual calculations for our imaginary company “Acme”, using rack space optimization via oversubscription, improved IT visibility, and reduced mean-time-to-repair (MTTR) as the main opportunities for cost savings. Bear in mind that there are other areas where an organization can benefit monetarily when implementing a DCIM software, such as in: improved SLAs, decreased costs in auditing, improved reputation due to better quality of service, decreased documentation costs, etc, but many of those are harder to measure.
For the calculations, we have to make some assumptions:
Assumption 1: Implementation
Just as in our network mapping software calculation blog, the 1st assumption is that the implementation has to be successful. This sounds a little bit too obvious but it does require a certain effort and commitment to get any DCIM software properly implemented and running.
Assumption 2: Company Type
To estimate the return of investment, we also have to make some assumptions about the type of company implementing the system so we are going to use the yearly IT cost as a percentage of company revenue for a mid-sized company with $500 million in revenues with 100 racks as the main input parameters.
Assumption 3: Current Inefficiency
We’ll also assume a certain conservative figure for downtime and IT waste prior to the implementation of the project. With those parameters at hand, let’s go ahead with the ROI calculation and try to estimate a payment as well as the net savings per year.
1. Inefficiency calculation
Below, we’ll figure out the costs of inefficiency (rack space, optimized IT utilization and reduced MTTR) that Acme is incurring each year:
- For this first step in ROI calculations, we’ll assume the company has 100 Racks, which are not completely optimized for space. This means that the device allocation is capped by the power that can be drawn using nominal, or derated, power figures.
- For our IT inefficiency calculation, we’ll use 10% as the figure, which is about half of the average IT inefficiency estimated for large US companies by several analysts and the downtime cost calculations we will assume 40 hours of outages per year (which is less than half of the average for Fortune 500 companies estimated by Gartner a few years ago).
- For the cost per outage, we’ll assume $20000 per hour (which is also half of the estimated North American average according to several studies).
Now, let’s plug in the numbers:
- The yearly IT inefficiency is equal to 10% of the IT assets assigned to those 100 racks in our imaginary company calculation which results in $946,000 wasted dollars per year, using $95,000 as the average cost per rack.
- The downtime cost is 40 hours times $20K which equals $800K.
While these are theoretical numbers for a sample company, bear in mind that we plugged in very conservative figures and the actual cost in inefficiencies and outages is likely far higher.
2. Savings calculation
Below, we’ll figure out the savings that Acme would see each year.
- For our savings, we’ll assign a mere 5% gain in IT utilization for a gain of $47,500, which come to think about it, is easily achievable by identifying a few dozen underutilized servers in what is likely to be well over 1000 network devices and servers.
- For the rack density efficiency gain, we will use a 20% improvement factor thanks to the real time power monitoring for a subtotal of $161K in rack space allocation savings.
- For our downtime, we’ll assume another conservative 20% improvements in Mean time to repair (MTTR) for a subtotal of $160K in savings per year. This is almost comically simple as that 20% can probably be achieved by simply having the proper network diagrams in place prior to troubleshooting, let alone the dynamic circuit layout records, dependency diagrams and so on that a proper network documentation software can provide.
The total savings comes down to $368K per year.
3. Software implementation cost calculation
Below, we’ll figure out the costs of the software.
Because implementing a DCIM software is (obviously) not free, we’ve got to make more assumptions:
- For one, there’s the license cost, which for our sample company we will assume involves a very generous large sized netTerrain DCIM license of 10000 objects and unlimited editors. This license would allow the documentation of far more than 100 racks.
- We’ll also assume $100K of yearly personnel costs to manage the documentation process although this cost can be debated: if anything, usually netTerrain brings that cost down, not up but just to be on the safe side we will assume the organization decides to add another resource to work on the software part-time.
- We’ll also add a generous $15K in additional third-party software and hardware costs for a total of $170K in yearly costs.
Comparing the savings vs. the costs, we can see that the company, using these numbers that are heavily biased towards a conservative estimate, yield $200K in yearly savings using rack space improvements, MTTR , and IT asset optimization and we’ve even assumed an extra resource (that, in reality, is probably not needed.)
To conclude this blog series, we hope that, if you’re looking into implementing a network mapping/documentation tool like netTerrain Logical, or a DCIM tool like netTerrain DCIM, this has helped you untangle some of the nuances of determining just how ROI a software will deliver. If you have questions, we’re here to help: click here to contact us or click here to get a free trial.