Even amidst the enforced frugality of a recession,

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1 REFRESHING SERVER HARDWARE DELIVERS REFRESHING ROI Even amidst the enforced frugality of a recession, some expenditures are worthwhile. For the cost-conscious IT departments of small and midsize businesses (SMBs), refreshing server hardware is one of those things. Deploying up-to-date server hardware delivers benefits that far outweigh the total cost of ownership. Yet as SMBs plan their upgrade path, they must also prepare for the budgetary and technical issues that may arise in order to maximize their return on investment. A recent survey of 116 IT decision makers in SMBs by IDG Research Services taken in January 2010 examines these issues and suggests ways to address them in anticipation of a slow economic recovery. NEXT >> Custom publishing from

2 WHY NEW SERVERS? WHY NOW? The economic downturn has clearly forced many survey respondents to delay needed software and hardware upgrades longer than usual. Indeed, 77 percent of respondents report skipping refresh cycles at least occasionally. Three key statistics from the IDG survey hint at the level of pent-up need for new servers: More than eight of 10 survey respondents say money is their main barrier to doing a needed refresh. Fewer than a third of respondents expect their discretionary IT budgets to increase in the next year, while one in five actually expect budget cuts. Nonetheless, two out of three respondents plan to refresh their server hardware and/or server software/ applications in the next 12 to 24 months. Taken together, these statistics imply that after doing careful cost analysis the leading factor in how respondents determine their optimal refresh cycle many SMBs are deciding that replacing legacy systems is a more responsible fiscal approach than continuing to maintain them. Genesis Group, a land planning and design consultancy in Tampa, Fla., is typical of these respondents. The company has delayed a necessary server hardware refresh until the economy and its bottom line both show sustained signs of improvement, says CIO Craig Anderson. When it does replace older out-of-maintenance hardware at high risk of failure with faster, easier-to-manage servers, Genesis Group expects both the production staff and the IT team will be more productive. This will offset the up-front investment, in part by allowing the company to delay further hiring, Anderson says. More than half of survey respondents expect that upgrading their servers will lead to savings and ROI in the form of increased operational efficiency and new technology features. Other leading motivators include increasing storage capacity (41 percent), improving server utilization (40 percent), and controlling costs (39 percent). This last category reveals the hidden expenses of legacy << 2 OF 8 >>

3 systems. Fully 69 percent of respondents expect new server hardware and/or server applications/software will help them reduce maintenance and repair costs. To a lesser extent, respondents also expect to reduce the costs of management administration (47 percent), storage space and facilities (39 percent), and power and cooling (35 percent). While these expectations may seem optimistic, they fall in line with respondents past experiences. Most report that server hardware or application/software refresh has improved their operational efficiency moderately (69 percent) to significantly (22 percent). In addition, many report reaping the benefits of improved technology features such as security or functionality (50 percent), increasing productivity (43 percent), and lowering power costs (25 percent). In short, respondents have good reason to believe that investing in server refresh even if their IT budgets are frozen or shrinking is a wise move in the coming year or two. Given the continuing trend (well-known as Moore s Law) for hardware technology to double in power every two years, companies can reasonably expect that they ll pay approximately the same amount they spent two years ago on a legacy product for an upgrade that delivers twice the benefits. TWO APPROACHES TO Almost two-thirds of survey respondents (61 percent) report no relationship between server hardware and server application/software refresh cycles. However, the rest typically choose to use a planned or scheduled refresh of one as an opportunity to refresh the other at the same time: 21 percent replace server hardware whenever they upgrade or replace the associated software, and 16 percent refresh software whenever they change the server hardware to which it s tied. << 3 OF 8 >>

4 SMBs that want to refresh both server hardware and the associated software can choose between two approaches: By doing a piecemeal refresh, companies typically move old applications to a new server, then upgrade or replace the applications at a later time. This can be a risky approach, since with legacy hardware and applications approaching the end of their support contracts, companies risk downtime if they find they can t do an in-place upgrade of their business-critical applications. On the other hand, a piecemeal upgrade minimizes the initial investment and makes it possible to spread the expense of the refresh across several budget periods a significant consideration for the 82 percent of survey respondents who cite financial MAJOR FACTORS DRIVING SERVER AND SERVER APPLICATION REFRESH PLANS Desire to increase overall operational efficiency Availability of new technology features Strain on storage capacity Desire to improve server utilization Increasing maintenance/repair costs for legacy systems Warranty expiration Internal end user demand for newer/faster technology Need to reduce management costs Compliance requirements Pressure to reduce the company s carbon footprint Pressure from management Other 5% 4% 6% 18% 24% 59% 52% 41% 40% 39% 33% 32% Base: 116 qualified respondents << 4 OF 8 >>

5 barriers to refresh. Economics will most likely require a piecemeal approach, though the other choice would be a better option if finances allow, says Chip Treen, technology director of North Branch Schools of North Branch, Minn. That other choice is the comprehensive approach: refreshing servers and software at the same time, possibly upgrading or replacing other network hardware as well. This obviously involves greater up-front costs; however, completing the task in a single migration effort results in rapid ROI and minimizes the risk that a legacy system will fail. For example, Hand Arendall LLC, a law firm in Mobile, Ala., plans to complete all scheduled software updates while its servers are offline in order to take advantage of new features that don t work on the firm s current hardware, says IT Director Melvin L. Evans. CREATING A REFRESH PLAN As previously noted, survey respondents overwhelmingly (82 percent) cite finances as the greatest barrier to performing a needed server refresh. It almost goes without saying that SMBs need to take up-front expenses and budgetary constraints into account as they plan a server refresh. To address this concern, SMBs should choose a vendor that offers them financial flexibility through financing How applications are handled Benefits Risks Piecemeal refresh Old applications moved to a new server, then upgraded or replaced at a later time Smaller initial investment Spreads full expense across several budget periods Greater chance of downtime if legacy system fails Possibility that legacy applications can t be upgraded in place Comprehensive refresh Servers and software upgraded or replaced simultaneously Faster ROI Reduced risk of legacy system failure Larger initial investment << 5 OF 8 >>

6 plans, hosted or managed services, and/or leasing. These options will allow them to move ahead with the project in anticipation of the projected ROI. Survey respondents mention other barriers as well. More than one in four cite software and hardware compatibility concerns. Not at all coincidentally, 89 percent say compatibility with existing software and AREAS OF GREATER COST CONTROL AS A RESULT OF SERVER HARDWARE OR SERVER APPLICATION/SOFTWARE REFRESH Maintenance/repair Management administration Storage space/facilities Power/cooling Other None Don t know 3% 3% 12% 35% 39 % 47% 69% Base: 116 qualified respondents systems is their top priority when selecting replacement server hardware. Working with a hardware vendor that also has expertise in server-based software can mitigate this issue. CONCLUSION Although more than three-quarters of survey respondents indicate that their organization frequently (27 percent) or sometimes (50 percent) skips refresh cycles, that doesn t mean they re cavalier about the risks of doing so. Almost all (90 percent) acknowledge the risks of delaying a needed server refresh: rising support costs (50 percent), lower productivity (39 percent), declining end user satisfaction (35 percent), and other hidden costs (35 percent). Clearly, choosing to refresh server hardware and applications as soon as possible is the most cost-effective way to avert these risks, even in a still-shaky economy. By working closely with a trusted technology partner with expertise in both servers and the applications they support, SMBs can more readily achieve the greatest cost savings and ROI of a refresh as quickly as possible. << 6 OF 8 >>

7 Getting Your Refresh Priorities Straight WITH AN AVERAGE OF 24 SERVERS in their data centers, survey respondents do not always have the option of replacing every server and its associated software on the same refresh cycle. Instead, they have to prioritize based on factors such as cost analysis, length of warranty, typical component failure rate, and actual or estimated data growth rates. Asked about their most pressing priorities, 61 percent report they will target database applications such as Microsoft SQL Server first. Mail server applications such as Microsoft Exchange and backup and recovery applications tie for second place on the list (49 percent), while network security software, industry-specific applications, and filesharing applications share third place (roughly 35 percent). These priorities are undoubtedly affected by the relative ubiquity of these applications. However, they also reflect other factors, such as the age of the servers and the inability of older hardware to support new software releases. According to Microsoft, more companies still use SQL Server 2000 than all subsequent upgrades combined, and approximately two-thirds of Exchange users are still running the 2003 version of the software. Notably, both of these older software releases are at or past their deadline for extended support, and Microsoft is scheduled to release major upgrades to each in the near future. Upgrading to new servers at the same time allows companies to reap the benefits of more powerful software while also increasing server utilization, decreasing power consumption, and reducing the risk of hardware failure. Hand Arendall, for example, plans to replace its document management server first because the aging system is running out of disk space and adding more is too costly, Evans says. Its server is next, based both on the hardware s age and the fact that it can t be configured to maximize the features of the latest software upgrade. Other SMBs may want to follow that example and set their server refresh priorities based on a combination of how close the hardware is to end-of-life and how critical its associated software is to daily business operations. << 7 OF 8 >>

8 Chain Reaction Restaurant sees fast relief from refresh strategy As a result, the company fine-tuned its promotions, thus increasing profits so much that it achieved a full ROI on its server refresh in less than two months. A MIDSIZE RESTAURANT CHAIN was drowning in data from its franchise operations. Every evening, the franchisees transmitted multiple gigabytes of data about the day s sales to the corporate headquarters to be crunched overnight and transformed into reports for company executives the next morning but as the chain grew, so did data volumes, creating data quality issues and sometimes even preventing the company from being able to create reports in a timely fashion. To solve the problem, the restaurant chain upgraded its database servers as well as the database software. The results were dramatic: The time required to process and report on franchise data instantly decreased by 75 percent, a change so startling that at first the IT team thought something was broken. The company s newfound ability to manage more data faster enabled it to improve data quality and capture more data. That, in turn, paved the way for complex and granular reporting about per-store sales, popular items, effective ad campaigns and other marketing data. As a result, the company fine-tuned its promotions, thus increasing profits so much that it achieved a full ROI on its server refresh in less than two months. Three years later, it s planning another full hardware and software refresh, projecting that the additional computing power, cost savings and new technology features will deliver a performance increase of a further 20 to 30 percent. << 8 OF 8