ROI’s ROI

In the mid-1990s I managed PCs and networks for a mid-sized enterprise. We managed maybe 10 gigabytes of networked storage (I’m working from my personal carbon-based memory, which isn’t all that reliable), which in round numbers might have cost us $10,000.

That’s when I participated in a Computer Associates focus group. CA was trying to sell the participants … sorry, it was trying to gain insights from the participants … about how to market its new LAN storage management solution.

The solution in question would supposedly give me the same capabilities my mainframe counterparts had – when a processing job ran low on storage it would spin off some jobs to tape backup in order to free up storage so the job could complete.

Privately, I was embarrassed – we weren’t running any batch processes on our network that might run out of storage, but I didn’t want to admit we were so unsophisticated. So I asked how much this marvelous technology might cost us. $50,000, the CA representative proudly told me.

Then I asked why spending $50K to manage 10 GB of storage made more sense than spending it to quintuple our storage so it would never run low in the first place.

And, as Arlo Guthrie said in a different situation, they all moved away from me on the Group W bench.

In 2006, Amazon launched AWS’s predecessor, the Amazon Elastic Compute Cloud. If there was a magic moment when cloud became a thing, that was it.

In rough, round numbers, between then and now, the cost of IT processing plummeted, from about $10/GFLOP to $0.1/GFLOP, a hundredfold decline.

The cost of storage experienced similar declines. In 2006, across all kinds of memory, IT spent about $10/GB. Today the number is $0.1 per GB, a remarkably similar decrease.

In 2006, cloud economics seemed to make sense to the various IT punditries who pundited about such things. But between then and now the cost of computing infrastructure has, it appears, declined by two orders of magnitude.

In case you’re wondering, yes, I did try to track down cloud pricing trends between 2006 and the present but wasn’t successful. At a guess, reductions in cloud computing costs have probably been commensurate with those of the underlying processing and storage they provide. And anyway, for this week’s purposes, I’m not sure it matters.

We’re not exactly revisiting FinOps and last week’s question of whether it’s important or just one more case of solving a five buck problem with a fifty buck solution.

The point: As the underlying costs of computing infrastructure continue to shrink, the value of carefully managing them shrinks in proportion.

Which gets us to this week’s more general question: Do the costs of governance, controls, and oversight of all kinds deliver enough value to warrant their cost?

It’s like this: Boards of directors aren’t free. Directors are compensated for their time, much of which consists of reviewing reports written for their consumption, which production also isn’t free.

The process of producing, reviewing, negotiating, and producing budgets takes immense amounts of management time and effort, not to mention the time and effort involved in comparing actual spending to spending budgets. Budgeting isn’t free either.

Stripped down to their essence, what governance and controls should be about is encouraging good decision-making (governance) and effective business action (controls).

For example, an IT Steering Committee will generally decide which of all possible projects IT will actually undertake (governance) and, when IT undertakes them, that the projects are properly managed so they deliver their intended results (controls).

What governance and controls too often become are stifling, choking bureaucracies whose primary purpose is to put managers on the defensive.

No, wait, that’s their secondary purpose. Their primary purpose is, as is the case with all bureaucracies, self-perpetuation.

So this week’s advice is simple and straightforward: Hold all governance and controls bodies to the same standards they hold everyone else to: They must be as efficient as possible and only solve problems that are important enough to be worth solving.

Bob’s last word: Researching this week’s column, surely, I said to myself, someone must have researched the very simple and basic question of whether organizations benefit from a positive return on their investments in governance and controls.

Maybe someone has, but if so I was unsuccessful in tracking down anything relevant.

Makes you wonder, doesn’t it?

Bob’s sales pitch: I’m widening the net. If you’re aware of any research along these lines, pass it along and you’ll get credit, plaudits, and kudos from the KJR community for your act of public service.