Why is enterprise infrastructure so costly and inflexible while warehouse-scale computing is cost-effective and flexible? Is it:
a) Enterprise infrastructure is too capital intensive?
b) Warehouse-scale people are smarter?
c) High-scale systems can’t be reduced to enterprise-scale cost effectively?
Lucky for you, this is an open-blog exam. Read on.
People, machines and scale
Greg Ferro wrote a provocative piece on his blog Ethereal Mind titled Human Infrastructure Poverty & Over-Capitalisation In The Enterprise. He argues that enterprises have been conned into spending too much on product and too little on people.
The purchase promise offered by existing IT vendors is that increasing Capex will reduce the cost of ownership through faster performance, better features, better software and usability. Yet the public cloud uses conventionally ‘over staffed’ IT teams creating automation and orchestration that reduces capital spend up to 70%. Modest investments in human infrastructure instead of physical or software has built an entire product category that is growing in excess of 40% per annum.
A fair critique. But why are enterprises unable to follow the IaaS industry’s lead?
Money, money and money
Data center budgets are 60-70% salaries, while Google-scale computing cost is 3-5% salaries. Yet Google, Amazon or Microsoft can afford a lot more PhDs than any enterprise because OpEx isn’t the crucial metric.
OpEx is the wrong measure for the big players. The real investment is in R&D budgets, not OpEx.
One data point: Google spent $7.95 billion on R&D in 2013; Goldman Sachs spent less than 1/10th that – $776 million – on communications and technology, most of which was OpEx, not R&D. How many IT shops even have an R&D budget?
Goldman’s IT folks are rumored to be among the best paid and brightest in the industry. But they don’t build their own infrastructure either.
The StorageMojo take
A number of companies make Google-style, scale-out infrastructure. Buy software only or integrated hardware and software.
But adoption is a problem. In the short run these are new systems that incur new system startup costs. But the savings are – mostly – in the long run.
CIOs have been playing the OpEx savings card for so long that CFOs don’t believe them. Given IT’s dismal record for new projects, who can blame them?
Mr. Ferro contends that adding intelligence to IT rather than trusting vendor R&D is a Good Thing. He’s no doubt correct.
But how will its ROI be validated? Where will this intelligence come from? Most vital: how will CFOs and CEOs be convinced?
Because of their scale Amazon, Google, Azure and Facebook can afford to put PhDs on problems that no enterprise would see a return for. The right answer for enterprises is to implement resilient scale-out architectures from committed vendors, rather than attempt to reinvent a warehouse-sized wheel. Focus scarce resources on evaluating best-of-breed solutions and the cultural changes required to best implement them.
Courteous comments welcome, of course. Where do you think the biggest payback from greater IT intelligence would come from?