IT is under growing pressure to do more with less. But this is not just because upper management has a relentless appetite for great operational efficiency. It's also because IT has not done a great job of quantifying its financial performance -- or communicating that performance in business terms.
One particular issue that highlights this problem is energy. IT requires a lot of energy for both powering its equipment and cooling the data center. Yet relatively few IT organizations invest much effort into tracking the cost of that energy, figuring out ways to reduce that cost, or documenting any savings they achieve.
Nor do IT organizations typically map energy costs to specific applications and services. I don't know how anyone could claim to know what it costs to deliver a given application or service without knowing its associated energy costs, but apparently IT organizations do.
Of course, I've heard all kinds of objections about factoring energy costs into application TCO. One of the most common ones is that energy costs are trivial in comparison to licensing and HR costs.
But this is precisely the wrong comparison. When it comes to cost control, the question is not the size of an expense relative to overall budget. If that were the case, manufacturing managers wouldn't be trying to squeeze every last bit of economy out of their logistics partners and sales managers wouldn't worry about expense reports.
The real question is how much you have to spend in order to achieve a given amount of savings. In other words, if it only costs you $4,000 to save $44,000, you should do it, even if that's only 0.1% of your budget, because your ROI is 1100%.
There's another reason IT organizations need to get more conscientious about energy. Private companies and government agencies alike are all looking at sustainability as an organizational imperative. So, by becoming more energy-conscious, IT can demonstrate leadership within the organization in addition to saving money.
A more important issue is how the failure to maintain visibility into and diligently manage energy costs is representative of IT's broader disinclination to fully embrace complete and accurate P&L accounting. After all, if we can't produce numbers with the same completeness and accuracy as sales and manufacturing, how can we expect our budgets to be looked at with less suspicion?
IT delivers tremendous value to the business. In fact, in today's hyper-connected digital economy, effective IT may be the single most important competitive advantage any company can have. But the credibility of that position is continually eroded by inadequate visibility, weak accounting, and insufficiently granular mapping of costs. So, while we forge ahead with our cloud, mobile and Big Data initiatives, let's not forget that business is business, and that it takes hard numbers to get taken seriously in the boardroom.
How do you manage your energy costs? Have you been able to achieve and document substantial savings? Or do you still see energy costs as trivial? Weigh in with your point of view below!
Chris O'Malley is CEO of Nimsoft. He has devoted 25 years to innovation in the IT industry -- most recently growing businesses in cloud and IT Management as a Service solutions. Contact Chris via the comments below or via Twitter at @chris_t_omalley.