Friday, November 4, 2016

Computing, ROI and Performance - Value Chain

The surprising thing about Information Technology is the willingness to purchase equipment, service, licensing and managed services in step functions.

A combination of business and technology enhancements have made it possible to eke out additional value over time, but the greatest value almost always comes from a transformation technology change.  The Transformational Technology change almost always changes the SIZE of the step function and who has to cover the GAP between ROI and PERFORMANCE.

Figure 1.  The ROI and Performance GAP of the Step Function of acquisition 
When purchasing ABOVE the curve, the ROI is in constant jeopardy until it meets the optimal units per cost line.

When purchasing BELOW the curve, the PERFORMANCE is in constant jeopardy until it meets the optimal units per cost line.  Even then, it is almost always in jeopardy from business budgets and the fundamentals of running a business.

What is really interesting is how technology plays a particular role in changing the size of the step function.  Where the depiction in Figure 2 is extremely idealized, the transformational impact is not.

Figure 2.  Evolution of Computing Value Chain
Ascribing a single evolution event to the changes (and yes, there are more than one, but this is an idealized view), the changes in the industry have "almost always" lead to a transformation event.  Each evolution change has, almost certainly, lead to a change in the units per cost step function, either explicitly a part of the acquisition cost or as part of an underlying cost associated directly with the mechanism of the step function.

As an example:  Mainframe services moving toward Minicomputers was a size evolution.  It had a direct impact on cost of acquisition and therefore reduced the step size.  One didn't have to purchase an entire mainframe, one only had to purchase a Minicomputer.

BTW, Mainframe is still a very good business to be in, but the question needs to be asked, do you want your business in Mainframes?

Another example:  Server to Virtualization was an asset optimization.  It directly impacted the cost of managing workloads on servers as well as the capital to workload ratio.  This affected the step function by increasing the utilization of computing assets and increasing the overall ratio of administrators to workloads.

Above MicroServices, the roadmap and view starts to get a little hazy.  It looks like application functions will be decoupled and tied together with some type of API (Application to Platform) Chaining (or "Application Chaining"), sort of like the methods considered for Service Chaining in the Telecom industry for MANO.

While there may be some problems implementing that type of approach, ultimately it has become less and less about the hardware and more and more about the software running on the hardware.

It is expected that this trend will continue for the foreseeable future.

In the mean time, consider this:  Purchasing a capability or service in the Utility area of a Value Chain, like Public Cloud is right now, will be overall less asset intensive and tied more readily to the unit of execution than building a computing infrastructure from the floor up.  When the next transformational event hits, don't re-invent it, consider how to consume it as close to Utility as possible.

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