Smart Refresh: Rx for Shrinking IT Budgets

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Global economic challenges are unquestionably putting increased pressure on corporate revenues – and that includes IT budgets. Analysts from Gartner, Forrester and IDC are predicting anywhere from a 2% to 4% average decline in those budgets, and economic reality may bring far deeper cuts. If you’re running an IT organization, you’re in for some tough decisions. Faced with budget challenges, do you cut uniformly across the board, or make more strategic choices?

Since the fundamental function of IT is to support the business, most CIOs will protect their “run the business” spend first. This means keeping the lights on and funding those programs that are most critical to the business. Typically, that’s the maintenance of existing applications.

But the money to protect those programs has to come from somewhere else – and the usual victims of a declining IT budget are innovation spend and infrastructure refresh. That’s because businesses are more tolerant of giving up planned features and functions than they are of losing current ones, and deferring new or refreshed infrastructure until later – often much later. The result? Dangerous stagnation in your IT capability, not just in terms of business functionality, but also in terms of IT efficiency and raw compute capacity.

Dell believes there is a better way: Simplify and save with a “smart refresh” of your infrastructure. Rather than sacrificing innovation and the latest technology in favor of short-term budget relief, you can make smart investments in your IT infrastructure that can quickly free as much as 8X your initial capital investment. For example, if your data center is currently on a five-year refresh cycle (pretty typical in the industry), then accelerating to a two-year refresh cycle generates some pretty surprising benefits. After two years, you'll see raw performance per watt across the data center that's 1,200% higher than you have today – allowing you to reduce physical servers through virtualization and consolidation by more than 80%. And 80% fewer servers means you'll save at least 80% (and probably more) on power and cooling costs in your data center. The net result? A complete refresh of your data center that literally pays for itself.

And if you're wondering if this strategy works in the real world, just ask Dell's internal IT organization. Just a couple of years ago, Dell itself was on the cusp of investing hundreds of millions of dollars in new data centers around the globe because we had maxed out our capacity. But by making strategic investments in the latest servers and storage – instead of in buildings – we were able to significantly reduce the physical footprint of our infrastructure while still adding capacity. And we continue to grow without having to add a single new data center.

Actually, the potential savings go far beyond the data center. By taking advantage of the latest client technologies, coupled with Dell’s unique managed-services capabilities, you can take as much as 90% out of the lifetime TCO of each client system you own. Done properly, you might even see an ROI period as short as 12-18 months, meaning that you’ll accrue savings that will actually exceed the depreciation stream on your capital investment.

The bottom line, quite literally, is that taking the “obvious” strategy of protecting your application space at the expense of infrastructure is probably not the best choice. In fact, if you protect your infrastructure investments and spend those dollars smartly to simplify your IT and drive real savings, you can free up all the dollars you need to maintain your current investment in business functionality – and it’s likely that you’ll have money left over to deliver true innovation for your business.

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