Calculating ROI around cost reductions
Most of us have experienced the effects of unplanned system downtime, perhaps more appropriately referred to as "dead time." Diagnostic and repair costs are relatively easy to quantify by adding up actual bills from vendors and hourly salaries of IT staff and calculating the time required to pinpoint problems and make the necessary fixes. Then too, there are productivity costs, measured by calculating the average revenue generated per employee per hour against total annual hours of downtime.
On the strategic side, costs are trickier to quantify but still important. These include lost revenue through customer transactions that have failed or a compromised reputation that may lead to customer churn and reduction in profits from the loss of repeat business. When you work with service and support or other customer-facing teams to determine average revenue loss per customer per hour of downtime, the concrete value of excellence in network monitoring becomes apparent.
The business value of early warning
Effective NMS software creates business value by warning system operators and IT staff of potential outages, performance problems, and system capacity issues. It continuously monitors threshold settings, measures end user response time, receives SNMP traps, and alerts IT staff to critical log file messages. A NMS also enables organizations to proactively plan for expanding or repairing systems -- before problems escalate into downtime.
Consider this scenario: As a growing IT organization, you decide to add more email accounts to your server. Unfortunately, administrators fail to notice the effect on the server's hard drives. As the drives approach capacity, the email server crashes. Network monitoring would have identified the potential problem days or weeks earlier, giving IT time to schedule a maintenance window during off-hours to add more storage to the email server.
In addition, a good NMS should accelerate incident turnaround and mean time to repair. Suppose again, that a failed hard drive causes your mail server to crash. Without a NMS, you must diagnose the network, check the server's health, and investigate the email application. With a NMS, you could pinpoint the problem in minutes without disrupting e-mail and the network administrator's workflow.
You become more proactive when your system is able to leverage historical and real-time monitoring, an institutional knowledge base, and even an online database of technical publications. Plus, your ROI calculations shift to include such metrics as yearly reduction in number of trouble tickets, mean time to repair, and associated savings.
Calculating ROI around revenue generation
To the extent that an IT organization can reduce downtime and mean time to repair it can also increase revenue, because time and resources saved through system monitoring can be reallocated to activities that deliver greater business value. By balancing your total IT budget against percentage measures of non-optimal spending and your ability to increase revenues through more effective operations, you should gain a clear picture of the revenue benefits provided by a NMS. In addition, leveraging the system-wide visibility provided by a NMS will enable you to develop an informed strategy around meeting your business objectives.
Network monitoring enables you to get in front of your schedule rather than be controlled by unplanned network events. And because it provides real metrics, you can more easily align IT with business goals. Rather than operating on gut instinct or the squeaky wheel principle, you can link IT assets to business functions through a business process view of your network. For example, suppose you are considering replacing two slow-running servers. Your executive dashboard maps your first server to Order Entry and your second server to QA. QA performs fewer critical functions than Order Entry; and the QA server, while slow, has not adversely impacted customer satisfaction levels. This visual linkage of devices to business processes helps you decide to replace the high-value Order Entry server first.
Your NMS implementation: Calculating projected ROI
To calculate the cost savings, cost avoidance, revenue generation -- and ultimately ROI -- that support a NMS project, you need to analyze data in three key areas: downtime and performance degradation, network incidents and help desk tickets, and ability to perform metrics-based decision making. There are ROI calculators on Citto's Website that will enable you to explore your current costs and costs savings in all these areas. These calculators will also help in prioritizing a NMS implementation among other IT projects and will demonstrate how the right NMS solution will positively impact ROI.
This was first published in November 2006