By: Michael Dickson
Spending on technology continues climbing to new heights, now approaching $8 trillion annually. By all accounts, it’s one of the largest and most significant investments businesses make, accounting for up to 30% of an individual company’s annual operating expenses. That’s huge and growing! Given the increasingly critical role technology plays in businesses and our increasingly digital society, this should come as no surprise. These facts reinforce how imperative it is for organizations to continue ensuring that they’re getting the best business “bang” for their technology investment “buck.”
Do certain technology spend patterns lead to better business performance? Dr. Howard Rubin, a leading business analyst specializing in the area of technology economics, looked at precisely this question. His conclusion? You bet they do!
Dr. Rubin studied the IT spending habits of some 2,400 companies in more than 20 different industries. The result is a new economics model he calls Technology Asset Class Optimization. Over the years, Dr. Rubin has found that some companies’ IT investments may not be serving them as well as they could. It’s not uncommon for businesses to feel pressure to invest in a popular platform or technology simply because it’s newer and a hotter topic of conversation. In contrast, however, Dr. Rubin’s newest research shows clearly that today’s leading companies all invest more heavily in technologies with strengths that yield demonstrably greater payback to the business, regardless of whether it’s considered to be part of a popular trend.
The Technology Asset Class Optimization model evaluates technology investment strategies with the same logic and framework as financial portfolios to improve business performance. Think about how you invest in a diversified portfolio of financial assets, like cash, stocks, and bonds, to deliver certain strategic benefits that help you reach your retirement goals. As the name suggests, the Technology Asset Class Optimization model views IT environments as a mix of technology asset classes, including cloud, mainframe, and distributed. With this model as his guide, Dr. Rubin produced a report that reveals a clear distinction between the investment profiles of top business performers and their more average-performing counterparts across industries.
Here are some of the biggest findings from the study:
- Hybrid dominates. The reality across all industry sectors is that businesses use a hybrid mix of technologies, including cloud, mainframe, and distributed platforms. Based on business performance, best-in-class organizations use nearly twice as much mainframe compute capacity than cloud. The winning mix among these top performers includes, on average, 31.2 percent mainframe and 18.3 percent cloud. Distributed comes in at 50.5 percent.
- Cloud and Mainframe are both growing. Compared to their more average-performing counterparts, top business performers across industries use approximately 10 percent more cloud compute and ten percent more mainframe in their hybrid environment. By contrast, they use 20 percent less distributed than their peers. So, while there is a steadily growing use of both cloud and mainframe among industry leaders, distributed is losing some ground.
- Innovating in place beats “lift and shift.” For many mainframe users, moving transactional workloads to the cloud could cost 2x or more in total cost of ownership (TCO). And for the largest organizations, moving or trading equivalent mainframe compute to cloud could result in more than a 5x increase in TCO. That major cost differential is a compelling reason to think hard before assuming that “lift and shift” is the way to go. The scale tips even more strongly against such a move when you factor in that doing so would result in a loss of the mainframe’s unique qualities of service.
- Nothing scales like mainframe investment. As technology scales to support the business, nothing beats mainframe for cost efficiency! Growing your Mainframe footprint by 2x will drop unit cost by 60 percent. Doing the same with distributed, meanwhile, will only net you a 10 percent drop in unit cost, or you can achieve a 20 percent drop with cloud. Still, Mainframe remains the clear champ since doubling its capacity will cut per unit cost by more than half.
These points should loom large while organizations are making decisions about their strategic technology investments. As Dr. Rubin puts it, technology investments shouldn’t be treated as fashion statements. Granted, it’s easy to get caught up in the allure of the latest technologies, those grabbing the headlines. After all, if a technology, like cloud, is capturing a lot of buzz, there’s probably a good reason. But while the “latest and greatest” may have compelling benefits, it may not be the best or only answer to your organization’s specific needs.
Adopting a technology economy mindset when considering technology choice will help you to evaluate and plan your tech investments with the same discipline and balance you apply to your financial portfolio.
When it comes to your technology investments, neither following the crowd nor adopting a one-size-fits-all approach is likely to serve you well. If you really want to make a business statement with your technology choices, do it with your financial performance. After all, making money in business has never gone out of style. Now, as for those business casual flare jeans and flip-flops … that’s on you.
Access the newly released study by Dr. Howard Rubin to learn more about the economic model that can optimize your IT investments.