Time is Money
September 07, 2016

Robin Lyon

Share this

Time is an important measurement of IT service, especially if we use transaction time. Time is well understood and begins to answer some of the fuzzy questions such as slowness and what is performance. Of course there are other great questions in IT and one of the most dreaded is: "How much does this application cost?" This question creates countless man hours of work quickly running into the diminished returns of hours spent vs. accuracy.

Here is an enumerated example:
1. The cost of the actual application (license, lease etc.) + depreciation as appropriate.

2. The cost of maintenance agreements.

3. The cost of the man power supporting the application (often fractions of various head count.)

4. The cost of the dedicated hardware supporting the application.

5. The proportion cost of shared hardware and software such as Databases and SAN space.

6. The proportion cost of network equipment + and then network support hours.

7. The cost of data center space + power + environment.

8. The proportional cost of management.

9. The cost of shared services such as backup and monitoring.

10. …

As you can see this becomes quite a long list and rapidly becomes time intensive. I remember one organization that spent days deciding how to divide the data center power bill into the application numbers. The humorous or sad reality is thousands of dollars of time in meetings was used to shift increments of hundreds of dollars between the applications. What was disturbing is at the end of weeks of work by most of IT, a reasonable number was returned but what it didn’t show was one of the greatest and most forgotten costs of an application, that of user time. There are good reasons for this such as "user time is not part of the IT budget" or "how could we possibly calculate that number to any accuracy?"
Now that we have a method to understand transaction time, we can understand the cost of slow application. A simple formula is (the number of transactions) x (the average transaction time) x (the cost of loaded headcount per time).

This is not perfect, nor do I want to make perfection the enemy of good. It is reasonable to say if a user waits more than a minute for a result, they start multitasking. This can be corrected by ignoring transactions longer than one minute for this simple formula. There are other exceptions and all can be corrected for, but let’s take an example application and figure out some numbers.

We have an application that 600 users use 60 times a day with an average transaction time of 10 seconds. That comes out to 36,000 transactions or 360,000 seconds or 100 hours. HR tells us that our loaded headcount is 40 dollars an hour so we have $4,000 per day of lost time spent waiting for application response. This is a shocking number; it often exceeds the total cost from the tedious exercise of calculating an application cost. Other ways to think of this number are $88,000 per month or 12.5 people doing nothing but waiting every single day.
Fortunately, with information comes opportunity. There are several beneficial ways to use this discovered cost. One way is it may help reluctant organizations understand the importance of IT and good systems. When the cost is presented to the application owner, they might want to invest in improving application performance. Assume when looking at the application performance we find most the time is spent in the database. After a bit of testing we can see a 25% increase of performance by moving to a DB cluster and the cost of doing this is $100,000. Using our $88,000 cost of time per month we calculate the DB improvement pays for its self in 5 months ($88,000 x .25 x 5 = $110,000) in increased productivity.
This number is also a key management number. During the year end budget and priority cycle there are several ways to decide how to assign the all too few resources given to IT. Other than compliance and obsolescence, a strong argument is improving what will gain the most productivity, and money is the understandable measure to use.
Businesses run by understanding costs. Application management allows IT to start speaking the same language as rest of a company – one of dollars and cents. An old basic business adage is you can’t manage what you don’t measure.

Robin Lyon is Director of Analytics at AppEnsure.

Share this

The Latest

June 26, 2017

Many organizations are struggling to resolve customer-impacting incidents quickly enough to preserve brand loyalty and revenue, according to PagerDuty's recent State of Digital Operations Report ...

June 23, 2017

"Become the Automator, Not the Automated." While it's a simple enough phrase, it speaks directly to how today's organizations and IT teams must innovate to remain competitive. A critical aspect of innovation is acknowledging the digital transformation of businesses. The move to digitalization enables organizations to more effectively unlock the power of information technology (IT) to fuel and accelerate business innovation. It is a competitive weapon and a survival imperative ...

June 22, 2017

Executives in the US and Europe now place broad trust in Artificial Intelligence (AI) and machine learning systems, designed to protect organizations from more dynamic pernicious cyber threats, according to Radware's 2017 Executive Application & Network Security Survey ....

June 21, 2017

While IT service management (ITSM) has too often been viewed by the industry as an area of reactive management with fading process efficiencies and legacy concerns, a new study by Enterprise Management Associates (EMA) reveals that, in many organizations, ITSM is becoming a hub of innovation ...

June 20, 2017

Cloud is quickly becoming the new normal. The challenge for organizations is that increased cloud usage means increased complexity, often leading to a kind of infrastructure "blind spot." So how do companies break the blind spot and get back on track? ...

June 19, 2017

Hybrid IT is becoming a standard enterprise model, but there’s no single playbook to get there, according to a new report by Dimension Data entitled The Success Factors for Managing Hybrid IT ...

June 16, 2017

Any mobile app developer will tell you that one of the greatest challenges in monetizing their apps through video ads isn't finding the right demand or knowing when to run the videos; it's figuring out how to present video ads without slowing down their apps ...

June 15, 2017

40 percent of UK retail websites experience downtime during seasonal peaks, according to a recent study by Cogeco Peer 1 ...

June 14, 2017

Predictive analytics is a popular ITOA technology that you can leverage to improve your business by leaps and bounds. Predictive analytics analyzes relationships among various data points to predict behavioral trends, growth opportunities and risks, which can add critical value to your business. Here are a few questions to help you decide if predictive analytics is right for your business ...

June 13, 2017

Many organizations are at a tipping point, as new technology demands are set to outstrip the skills supply, according to a new Global Digital Transformation Skills Study by Brocade ...