Two posts previous I was discussing the TCO of backup, the differences between hard and soft costs, and the qualities of a good business case. The general conclusion? Most business cases depend on hard costs (and don't recognize soft costs). If hard costs show an ROI of less than 18 months, most CIO/CFO types will love it. If the business case relies on soft costs to get there, it will probably be rejected.
Looking at the particular example from the previous post, the business case Tony Pearson used as an example showed that 81% of the savings were due to soft costs. This is really bad. In most business environments, such a business case would be rejected out of hand.
I thought it might be instructive to have a look at a better business case: a business case based almost entirely on hard cost (savings). Two of them actually. One for source deduplication, one for target deduplication. In both cases, they are real environments, with real costs, real savings, the proposals were made with the costs and savings exactly as described, and they were accepted by the customer and the projects were funded on that basis. I have only removed names and specifics to the extent necessary to anonymize the customer and any technical or business characteristics unique to that customer. And, as I wrote the TCO tool itself EMC uses for target deduplication, I am more than happy to answer any questions on the data, the assumptions that drive it, or the calculations and formulas that we used to determine the benefits and cost savings of the solution.
In this post, I am going to deal with target deduplication. The business case for a source deduplication solution will be the subject of a future post.
In the case of target deduplication, we were working with an organization that uses TSM. They had a tape infrastructure, with an off-site copy pool (also tape) for their backup and recovery infrastructure. This particular customer also had infrastructure at 3 sites (all more or less local to a single metro area). The customer wanted to refresh the infrastructure, but was unwilling and unable to throw out TSM entirely (due to some dependencies in the mainframe space).
A couple other relevant factors: the business in question employs 30,000 people, manages 140 TB of data, has annual revenues of nearly $500m (CAD), and has a fairly average mix of email, file and print, and database data with typical growth rates and an average number of servers given the amount of data.
The savings that we were able to demonstrate for target deduplication included (all figures in CAD):
- Media Savings - $5,012,103
- Tape and Library Savings - $2,435,671
- Administrative Costs - $690,285
- Offsite Tape Storage Costs - $283,177
- SAN Port Savings - $251,115
- Improved Tape Reliability - Revenue Impact - $147,890
These benefits can be grouped regarding business impact as:
- $8,672,352 in IT cost reductions
- $147,890 in business strategic advantage benefits (this is a soft cost, but ammounts to less than 2% of the net benefit of the business case)
On the other side of the coin, what were the cost associated with the project?
To implement the proposed project required a 5 year cumulative investment of $4,132,999 including:
- $1,542,000 in initial expenses
- $0 in capital expenditures
- $4,132,999 in operating expenditures (including the initial expense)
Comparing the costs and benefits of the proposed project using discounted cash flow analysis and factoring in a risk-adjusted discount rate of 9.5%, the proposed business case predicts:
- Risk Adjusted Return on Investment (RA ROI) of 87%
- Return on Investment (ROI) of 113%
- Net Present Value (NPV) savings of $2,954,800
- Internal Rate of Return (IRR) of 54%
- Payback period of 15.0 month(s)
In other words, with an EMC solution, relying almost entirely on hard costs, we were able to demonstrate a payback period of just 15 months, and an ROI of 113%, by augmenting TSM with target deduplication.
As a "C" level executive, this is the kind of cost savings that you simply can't ignore. It isn't funny money. It doesn't rely on voodoo math. It doesn't have anything to do with "soft" costs that are hard (impossible) to justify. It is real money, and real savings.
Is TSM an expensive backup solution relative to other backup applications? Yes. But those costs can be effectively mitigated.