You Can Always Get What You Want

Getting what you need from top management for storage projects requires thinking like a Harvard MBA—or a young child around the holidays.

• By Jon William Toigo
• 12/01/2001

Despite these impediments, I know the exact moment each year that the Christmas shopping season begins. Really—I'm not bragging—it's a gift.

It's the first time that one of my five children comes to me with a proposal regarding the ideal Christmas gift.

For example, storage managers could learn a lot from my 14-year-old son Max. He knows how to get what he wants, and says that his dad is like his own private ATM. Here's Max's Method, which might also be used by storage managers to address the problem of justifying a storage-technology acquisition, just as Max uses it to justify the acquisition of the latest motor scooter.

Rules of the Game
Rule 1: Explain how what you are requesting resolves or at least addresses an important business problem.
Give enough detail to make your reason seem compelling, but don't over-explain it. Whether it's $3,000 for a new Vespa motor scooter or $19 million for a multi-array SAN, you probably won't get what you want if you can't explain why you need it. "Because I want it" isn't sufficient reason. That's top management's line.

Rule 2: Describe the hours of research and exhaustive comparative analyses you've done.
Explain that you're proposing a best-of-breed product with a long pedigree and good future prospects that ensure it will serve the company flawlessly for years. At the same time, avoid overt enthusiasm. Balance your zeal for the product with a detached-but-deep concern about the important problem it's intended to solve (see Rule 1).

Rule 3: In business terms, describe the product's operational contribution and how it will pay for itself in short order.
Have figures pulled together so that you can say, with some degree of authority, things like, "Given the cost-of-ownership savings accrued to the acquisition of the product, it will pay for itself in X months or years."

Max's payback analysis of the Vespa Scooter discusses the time and money it would save his parents in transporting him to and from school for band practice and other activities. In a scant 6 to 8 months—he argues—the scooter's cost will be offset by lower gas costs and reduced automobile depreciation. Amortization of the expense will occur even sooner—he astutely notes—if I use the time I would've spent on the road to write this column instead.

In addition to increased productivity and lower costs, risk-reduction value may be derived from the acquisition, Max notes. If Max takes his Vespa to school each day, there would be less risk to the family car of a fender bender and Dad may avoid health problems by being allowed a full night's sleep.

Take a lesson from Max and prepare interesting charts and graphs to illustrate the payback case for the new acquisition. Be aware, however, that top management is probably wise to a few facts, based on previous funding requests you've made for products. They know, for example, that there's always a downside and a risk—an unanticipated expense that's analogous to the cost of scooter insurance for a teenager, which turns out to be more expensive annually than the scooter itself.

In short, use a payback analysis, of which Total Cost of Ownership (TCO) is often a key part, to "endear" yourself and your purchase request to senior management, but don't count on payback analysis alone to sell the strategy. A wise business manager once told me that if he took all of the payback analyses sent to him by IT managers who were proposing technology acquisitions and totaled all of their supposed annual cost savings, his company would be profitable every quarter—and without ever opening its doors!

Rule 4: Define and demonstrate Return on Investment (ROI).
ROI is the heavy lifting of acquisition justification, which is why it remains a holy grail in many IT shops. The objective of ROI is to model the return that management can reasonably expect to realize from its investment in a proposed product acquisition. This return is strictly financial and typically expressed as a percentage of invested dollars over a period of time.

There are good investments and not-so-good investments. The theory behind ROI analysis is that every investment has an associated quantifiable return and that the relative merit of different investment opportunities can be discerned by comparing the ROI of each option.

The Holy Grail of ROI
Arriving at an ROI requires consideration of the entire business-value proposition of the product that you're recommending for acquisition. In deference to the Harvard Business School, which has a penchant for expressing everything in triangles, the business-value proposition for a storage acquisition has three components: cost savings, risk reduction and business enablement. You should have discerned two of these business-value ingredients in your efforts to develop a payback model (see Rule 3). For example, you know what the costs of the new storage technology will be and what associated risks (frequency and expense of downtime for the most part) will be reduced. You'll also need to ferret out the third ingredient: business enablement.

Business enablement is a phrase that leaves a lot of IT people scratching their heads. Storage is, well, just storage. If it has any business-enablement value, it would be only indirect and related to the infrastructure. Or would it?

The truth is that a well-managed storage infrastructure can deliver business-enablement value in a couple of different ways. One is the information that management systems can deliver to enable the delivery of storage as a service within the organization. Properly instrumented, managed storage can provide mechanisms for delivering storage in accordance with service level agreements established between IT and its customers.

Additionally, well-managed storage can serve up information about infrastructure costs to business planners. They can use the information to evaluate the cost of engaging in a certain line of business or to plan and model the cost of a new line of business with similar application and storage requirements. That's definitely a business value.

The trick is to quantify all of the cost-savings, risk-reduction and business-enablement values of the product you are recommending, then to express it as a return on the investment in the new technology. By the end of the analysis, you should be able to say, "This storage product will return to the company X percent for Y number of years." Note that the timeline is finite. Cost of money and other factors tend to erode ROI over time.

Also note that the ROI states that the company will receive some measurable economic gain from the investment over a period of time. Creating an ROI for multiple possible solutions to the same problem allows you to pick and choose whichever one offers the greatest return. It also provides a means to plan when a storage product or other technology should be replaced, because it has ceased (or will soon cease) to provide a good return.

In this respect, ROI is very different from a payback or TCO analysis. ROI strives to demonstrate investment value in terms of full business value. Payback/TCO analysis may help to describe one or two components of business value—cost savings and possibly risk reduction—but it can't describe the third component, business enablement.

The Problem with Payback
Payback/TCO analysis looks only at cost. In the words of one economist, it's a hammer that makes everything look like a nail. TCO doesn't consider value, so taking two TCO "snapshots"—before and after the acquisition of a technology—and comparing them provides an inadequate description of business value.

Of course, developing an ROI is a lot more difficult than developing a TCO, which is why my son Max isn't likely to get his scooter anytime soon. It will take considerable work to quantify all of the cost variables and to assign realistic values to business-enablement value. There are some tools available to help you, but most are fairly dense and difficult to learn. Moreover, the "ROI writers" that are available often force you to work within their model, which may or may not map exactly to your needs.

An alternative is to hire a trusted solution provider or vendor to build the ROI for you. However, be aware that doing so mitigates one advantage of doing it yourself: Once you have perfected a model, you can apply the same model to a variety of technology options and ensure that you are evaluating them on an apples-to-apples basis.

The bottom line is that, while ROI is difficult to calculate, you must do the work. Not only will it please management and possibly obtain the authorization you're seeking, a sound ROI model can also be of assistance in improving storage planning and acquisition processes.

Like Max, you probably won't be handed what you want just because you want it—even if it is during the season of giving. Learn to build an ROI model, however, and apply it to all of your acquisitions, and you shouldn't be surprised if Santa Claus, in the form of the CFO, escorts you personally to see the CEO.