A Catch-22, Some Financial Pointers, Questions About IBM's Numbers and More ...

Readers comment on past issues.

• 10/01/2002

But one can't avoid some slippery slopes in his first rule: "Quantify Everything." During the initial proposal phase, a manager may not have time or authority to quantify all the numbers. A manager also may not have all the facts ready, but may only have a good idea or vision about how a project will help reduce the costs or increase the revenue. At the same time, senior management may not be interested in the idea—only in concrete cost savings.

This is a Catch-22 situation. How does one go about circumventing such situations, and persuading senior management to allow the manager to carry out some more research on the project?

Many times, good proposals originate from the IT department to improve business processes by using technology effectively. But the business users are either bossy or fearful and reject the new solutions outright due to lack of true partnership between the business and IT staff. One can remove the fear by proper dialogue and training, but how can one correct the bossy attitude toward a true partnership attitude?

—Hemant Patel
Web/E-Business Architect
MidAmerican Energy Company
Urbandale, Iowa
htpatel@midamerican.com

You're right—you can get caught in a Catch-22. I suggest that rather than making a full project proposal, you make an exploratory offer. Explain the potential savings (a range is always best), the scope of your investigation (cost, duration) and make clear there are no guarantees—that you may find there are no savings to be had.

I think you'll find management appreciates the opportunity to invest a small amount of money to collect and analyze information, rather than commit large sums when no firm facts are at hand.

As to the bossy attitude, such behavior indicates there's a lack of trust. I suggest you involve the user in small but increasingly important projects, where savings and/or benefits are the result of your collaboration. It takes time to build that trust. Be patient.

—James E. Powell

Financial Expertise, Please
I studied James Powell's article, "Fund Your Project with Financial Measures." I found it very interesting, showing a positive and very effective approach to get our projects approved. I would go a little further and say that these measures aren't confined to only projects in the organization, but they can be applied in a generic manner wherever we have to give a competitive edge to our proposals (for example, to our customers, in our own personal investment decisions, and so forth).

Please expand on the comments: "Invest the time calculating an ROI that most accurately reflects the time value of money; payments later in the project (rather than up-front) will raise your ROI (or lower your IRR). Your ROI will also improve if you can show intermediate benefits."

Why will payments later in the project (rather than up-front) raise ROI (lower IRR)?

—Bipin Kumar

Consider this example: I need to fund a $1,000 project that will create a benefit of $1,100 in one year. I can spend $1,000 on the project today, in which case I'll earn a $100 return on my investment in 12 months, but I've tied up my capital for that entire year. If I can spend $600 on the project today (to get it started), and pay the other $400 in six months, I can invest that $400 in a CD for those six months. In a year, I've earned the $100 return (from the project itself) plus interest on that $400 CD.

—James E. Powell

IBM's Numbers
Re: The article by Chris McConnell in the Enterprise Strategies newsletter on July 18, "IBM Cites Mainframe Growth in Quarterly Report." Does IBM count "Capacity-on-Demand" (COD) as current shipments?

COD is installed, inactive, non-chargeable hardware, which doesn't represent current income. It's activated later, subject to customer payment at time of activation. Current values may not be meaningful, as prices change.

—Name Withheld by Request

It's my understanding that when IBM talks about MIPS, they mean active, billable MIPS. In a number of conversations with them, I've been told that customers can use COD processors, and "pay for those MIPS," so idle processors would not be counted for the quarter. IBM tends to take its reputation very seriously, and I doubt they would deliberately misrepresent sales to customers, analysts or investors, unlike some of the other players in the technology sector.

As I noted in the article you cite, I suspect that mainframe revenue growth was basically flat for the quarter, in spite of an increase of MIPS shipped. However, direct revenue from MIPS is only a fraction of the revenue IBM sees from the mainframe. The bulk of it comes from software licensing, support contracts and consulting. IBM may mention the growth in MIPS as an indicator that mainframe revenue from these other sources may grow in future quarters, since its installed base is growing.

—Chris McConnell

Security Satisfaction
I came across Mat Schwartz's security column on "Wireless Insecurity" in the August 2002 issue. Just thought I'd drop a line and tell you the information proves most beneficial to me. If there is any way to be alerted to other articles he writes, please let me know.

—Fred Shea
Technology Coordinator
Academy of the Sacred Heart
Grand Coteau, La.
fshea@ashcoteau.org

Mat writes about security each month. You can subscribe to our e-mail newsletters and receive a monthly notification when our print issue is posted online. To subscribe, go to esj.com and click on Newsletters.

Single Point of Failure?
Regarding Jon Togio's commendation of the ZHA solution [in the Aug. 8 edition of his "Storage Strategies" newsletter], doesn't this present a single point of failure? How do you implement such a solution and still ensure high availability?

—Barnaby Arnott
UNISYS Product Support Engineering
Mission Viejo, Calif.

To best address your concern, I went straight to the source, Zerowait, for comment. Here's what they said:

"The ZHA NAS/SAN Hybrid can be run in Active-Active mode with two head units, thus increasing the fault tolerance of the storage solution. Plus, each ZHA head can be configured in HA mode with dual power, dual fan, dual mirrored OS drives, even dual controllers for multi-pathing. If that is not enough, the ZHA supports mirroring and replication for data protection in addition to the hardware fault tolerance mentioned above."

In short, Zerowait, a company that cut its teeth in high-availability network engineering, has applied the same principles to network storage. I have a great deal of confidence that a properly configured solution would avoid any single point of failure problems.

—Jon William Toigo