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Four myths about corporate IT: What managers believe versus reality

When we look at managers and the world of IT, we often hear about the disconnect between the two. But let’s start with something they have in common – there are few other functions in a company that would be subject to so much cursing and gossiping by employees than managers and IT staff. However, there are many other reasons that make them ideal allies. Paradoxically, the most important reason is company development and competitiveness.

The following article is intended for managers who do not understand their IT staff – be it their own employees or an external provider taking care of hardware, software, data, and applications. Few companies can afford not to have such people. Indeed, for more and more companies, the interplay between their IT department and top management decides whether they survive and enjoy success or get technologically outperformed by their competitors. Together with consultants from Soitron, we have prepared the following list of myths about corporate IT.

1. IT investments do not return

“Managers often complain that there is a mismatch between IT investments and their actual benefits for the company,” says Zbyszek Lugsch, who helps companies improve their technological base. “This is often because companies are unable to quantify their dependence on IT, and this is despite the fact that their core business often depends on it. Today, for many companies, their IT essentially generates revenue.”

According to Lugsch, this misconception has historical roots. In the past, IT staff were perceived more like maintenance workers. Today – when even technologically conservative industries such as manufacturing, engineering, and heavy industry are undergoing the process of digitalization – the role of IT specialists is different. “Our added value is not that we would take and configure something but rather that we come to a company and think about how it operates and how it could work more efficiently without IT being a barrier.”

IT is no longer a competitive advantage only for software development companies or digital service providers. It can also bring an increasingly strong competitive edge for companies in the traditionally conservative heavy industry sector.

Lugsch believes that cloud solutions have made cost efficiency calculations easier, because in a few clicks a company can easily choose storage, servers, and other services – such as a warehouse database or a mail server. However, Lugsch says that such a simplified calculation of the price of partial services distorts the total long-term costs. In this respect, the cloud can actually turn out to be more expensive.

2. The cloud can fully replace a company’s own servers

“Let’s take the example of a local manufacturing plant that produces parts for car manufacturers using a ‘just in sequence’ system [i.e. parts arrive at the assembly line exactly at the moment they are needed]. They have their information system in a data centre in Germany. Can you imagine what would happen if they lost connectivity to Germany? Their production would stop. In their case, this would mean fines that they have no chance of paying,” Lugsch says in describing a typical example. The company solved the issue by creating a local “mini-data” centre with a copy of their central information system. According to Lugsch, there are many such cases. Most companies need at least one application critical to their business, and they certainly need data availability.

“It is important to realize that what data centres usually guarantee as part of their basic package is 99.9% service availability rather than data availability,” says Lugsch’s colleague Štefan Pater. “Services include things like email. It will run with 99 per cent availability – i.e. the mail server may be down for only a few hours a year. However, the availability of company data, such as the data you have stored in your SharePoint, is something entirely different. Information about data availability is often hidden somewhere deep in the small print. If you manage to find it, you realize how much it would cost you to ensure the 99 per cent availability of your files. As a result, you need to either create some backup scenarios so that you can restore the data, or you need to buy another service. And suddenly the price is in a totally different ballpark.”

3. Owning servers is expensive

In the past, a company’s IT infrastructure consisted of three separate parts – data storage, servers providing computing power, and networking. Such hardware, which was physically located and connected somewhere in the corporate server room, is referred to as the “traditional architecture”. Building such an architecture was certainly an intensive investment, and because of this many companies decided to move their servers and data to the cloud. But then they started to experience problems with application speed, data availability, and often also with price. A hyperconverged infrastructure emerged in the meantime as a new innovation. This is often cheaper, although paradoxically it is an on-premises IT solution. The original three parts of the IT infrastructure remain, but now they are integrated into a single “box” with unified and automated management.

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“Hyperconverged solutions have brought the price of on-premises solutions down so much that when I compare the cost of the same computing power, servers, storage, and so on in the cloud, and I also include management costs, I realize that having my own on-premises infrastructure would be actually less expensive. In other words, a company could benefit from more power than in a cloud for the same money.”

4. By having things in the cloud, I do not need as many IT managers

“No one wants to spend more money on IT than is necessary. And even if they wanted to, there is a lack of skilled people in the market. In large companies, the teams are larger but they are not growing either. The shortage of people with necessary skills impacts them even more,” says Marianna Richtáriková, an IT network expert at Soitron.

“Finding capable IT people is a real problem these days,” says Lugsch. However, claims of “the end of IT departments” in magazine headlines at the peak of the cloud craze have proved to be overoptimistic. “Over time, it proved to be total nonsense. Paradoxically, this was all the more apparent with smaller companies.”

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An IT specialist: Myths about expensive corporate IT are partly the fault of IT experts

Who should be in charge of quantifying how much corporate IT costs and how much it earns? Until recently, this was mainly the responsibility of IT staff. However, according to Soitron’s specialist Zbyszek Lugsch, this has often caused more harm than good. Rather than realistically quantifying actual costs, many companies have chosen to move to the cloud. At first glance, this seems easier and more cost-effective. But is the cloud really always less expensive? And how can one find out what is best for their company?

In this interview, you will learn:

  • why companies should not consider IT only in terms of costs but also in terms of revenue
  • what the deployment and testing of new online services and applications in companies looks like
  • how some IT departments cut corners when discussing IT investments
  • why some companies pay too much for IT, even when they do not have to
  • how to enjoy the benefits of the cloud in your company without having to move everything to an external data centre

What are the most common myths you encounter when talking to managers about their corporate IT?

They often complain that there is a mismatch between IT investments and the actual benefits for the company.

Is it a myth?

I personally think that, in many cases, this is the fault of IT managers who have an inability to provide valid arguments and show the added value and importance of the IT environment they create for the company.

But it is unreasonable to expect that IT administrators are able to sell their accomplishments. Their role is to understand those systems. 

This is also because companies are unable to quantify their dependence on IT. And this is despite the fact that their core business often depends on it. Nevertheless, IT is often viewed solely as a cost item.

How should it be viewed?

For many companies, their IT is essentially a revenue item. In other words, their core business would never work without IT.

But it was not always like that.

They have already reached this point. However, one of the frequent objections is that the costs associated with running IT are disproportionate to its benefits.

What is the problem? Are we unable to quantify it?

The problem is not so much quantifying the initial investment as how much the operation of individual parts of the infrastructure costs.

Business people want more and more systems. But they have no idea about what it takes to make it all work. This is often because their legacy systems – that were built in the past – are ineffective.

To get a better idea of what you are talking about, could you give us a simple example?

Let’s say that a company has a CRM (Customer Relationship Management) system. It costs a certain amount to buy, deploy, set up, and operate. If the company was more interested in the costs of each aspect, their second step would be: “OK, now let’s achieve some savings.” And so they turn off the CRM system, because they do not use it much, it costs them a lot of money, and they can actually do without it or get something simpler and less expensive. And that is exactly how much money they want to save.

So is the problem that we shouldn’t look at every bit of the system in this way?

Well, we know how to do it, but most companies still do not do it – even with traditional systems. This prevents them from switching to newer systems – such as hyperconverged infrastructure – which could reduce their costs. If they do not even know how much their IT is costing them today, they are unable to calculate any savings. To make matters worse, the traditional IT infrastructure that used to be built in companies is fragmented. It comprises many different systems from various vendors, with each of them having a different management tool. This makes any calculation all the more difficult.

IT staff have transferred the responsibility for cost calculation to cloud providers.

There are probably some cases where it has worked out. How do these companies differ in their philosophy concerning IT?

They look at it as a service. They are no longer viewing it as just a pile of hardware but rather as a price that includes operation, maintenance, upgrades, and so on.

Isn’t this what I get as a company when I switch to the cloud?

Yes, that is exactly what is so sexy about the cloud. I buy a clearly defined capacity and then it is easy for me to calculate that if I were to add a CRM to my system, it would cost me this much. In fact, the cloud has made it much easier for IT staff to provide relevant arguments about the costs. This is much clearer for CFOs, unlike in the past – when IT departments would say that, in addition to CRM systems, they also needed to buy additional data storage, add servers, increase computing power, and so on.

Does this mean that companies’ desire to innovate their IT is still best answered by the cloud?

It depends on what kind of company we are talking about. For many of them, it will be more beneficial to move to a hyperconverged infrastructure combining the benefits of the cloud and having an on-premises system of their own. This means that they do not need to run any critical applications in an external environment.

Let’s look at another example. Let’s say I have an e-shop and, in addition to conventional online sales, I also sell goods using a mobile application.

The first thing I would probably consider is how often the company makes changes to their systems. Many companies struggle with the fact that they often need to upgrade their environment. For instance, e-shops are essentially dependent on it. Something new comes along, and they need to do a quick upgrade and refresh the platform which their online shop runs on. They need to fine-tune the user experience and temporarily limit users or customers while the company upgrades its platform to a newer version. In practice, this is done by having multiple test environments for the existing e-shop for development purposes.

You mentioned a hyperconverged infrastructure. How would you describe what that is to non-IT people?

Hyperconvergence basically means that the three parts of the IT infrastructure in any organization – data storage, server computing power, and networking – are integrated into a single solution. To put it very simply: it is all in one box.

What is the advantage of this?

Extreme flexibility. I no longer need to worry about how each of the three parts works and how to set it up. It is largely automated and controlled with a single management tool rather than three separate tools. The environment in which the software runs seems to be less dependent on the hardware settings. In IT jargon, we can say that it is “virtualized”.

I am not sure if it is apparent how companies can benefit from that.

We have mentioned companies that often make some changes to their software and applications. In the case of a hyperconverged IT infrastructure, software is much less tied to hardware. There is no need to constantly reconfigure, physically reconnect, or buy anything if you want to change something in your software.

In addition, something like this can be implemented extremely quickly. In another words, you can quickly make it work in your existing IT infrastructure and start reaping the full benefits of hyperconvergence.

There are situations when owning your own IT is less expensive than the cloud.

When software is independent of hardware, isn’t it potentially less stable?

Real-life experience does not suggest that. Another benefit is that it reduces the number of hardware manufacturers, because ideally a hyperconverged infrastructure is a single-vendor solution. This is the case with HyperFlex by Cisco.

Isn’t it a disadvantage for companies to narrow down their choices and reduce their ability to use hardware from multiple vendors?

Not necessarily, because it can still be combined with the existing infrastructure and the cloud. The only question is how cost-effective it is. And we are back to square one, because if companies really knew the cost of each part of their IT – including the costs of administration, management, and dealing with availability issues – they would find that buying the cheapest products from various vendors is actually not the most economical solution.

But this does not explain why you should not buy it all inexpensively in the cloud.

The reason for that is that the cloud appears to be cheaper simply because you pay for it in monthly instalments rather than up front in one large investment. Many companies have found that cloud services are not a universal solution. In many cases, the cloud is more expensive than building an on-premises environment.

What makes it more expensive?

From a certain size – and I do not mean the company size, but rather the size of the IT environment that the company needs, and also depending on other factors – the cloud can be much less cost-effective. Hyperconverged solutions bring the price of on-premises solutions down so much that when I compare the cost of the same computing power, servers, storage and so on in the cloud, and I also include management costs, I realize that having my own on-premises infrastructure would be actually less expensive. In other words, for the same money, a company could benefit from more power than in the cloud.

Despite that, many companies have moved to the cloud.

The reason managers find it so appealing is that they do not have to make any initial investment. They buy everything in the cloud. But when they calculate their expenses over five years, they may find that they would have paid much less if they had bought it themselves.

But from a managerial point of view, it makes sense. Companies rarely have a pile of money lying around that they can afford to spend on IT.

This is the wrong way of looking at it, because if it is only a question of money then the initial investment can be financed.

It is rather about changing the attitudes of people – both managers and IT staff. It is important to educate them so that they realize that there are more cost-effective solutions out there than buying everything in the cloud.