Investing Wisely in IT: An IT Director’s Roadmap to Infrastructure Excellence

CTOs and IT Directors are the architects behind a company's success when it comes to IT stuff.

Now, why does IT infrastructure matter? Well, the IT infrastructure is the backbone of a company. It is super crucial for making things efficient and innovative.

So, we’ll be talking about where to invest, how to be smart with money, and dealing with the challenges of growing your IT setup. It's all about giving you a roadmap, so you can make decisions that keep your companies strong and moving forward.

What are the costs associated with maintaining and operating the IT infrastructure?

For different setups, different factors affect the costs. Let me first explore the on-site IT infrastructure setup.

So, how much does an IT infrastructure cost for an on-site setup?

On-site, as the name tells you, is a setup that is completely on the site of the enterprise. They own, operate, and maintain their entire IT infrastructure.

This may sound tempting - you have complete authority and control over it. But it’s one of the costliest setups - in terms of upfront and maintenance costs.

What are the upfront costs?

Anything that demands you to shell out money to get something is an upfront cost. Data centers are expensive to set up. A Greenfield data center setup costs anywhere between $7-12 million per megawatt of commissioned IT load.

Next, you have the networking components. The wired connections, LAN or fiber optic cables, routers, switches, wifi access points aren't cheap. And if you are a big enterprise, like Mumbai International Airport, you’d need a lot of it, driving up the cost.

Oh, and you’ll also need the physical servers to process, computer, and manage the vast amounts of data. They’re the heart of the IT infrastructure and host your business-critical applications like CRMs, ERP applications, project management applications, and so on.

The average spend on similar enterprise applications in 2022 was around $4.7 billion by Indian companies.

All of these add up to the massive upfront costs of investing in IT infrastructure. And it can be daunting to spend so much.

And then, there are maintenance costs

Let’s say you've set up the perfect IT infrastructure for your business needs. And everything is running super smooth. But will it be that way a few months down the line? I don't think so.

With every technical component, you'll face some issues, hiccups, and glitches as time goes by. It’s inevitable.

And to keep the business continuity, you’ll have to get them troubleshot and fixed. You’ll need to get a set of professionals. And it’ll come with its costs. These costs will keep going up as your infrastructure becomes old with time.

IDC quoted that the performance of your IT infrastructure drops by 22% as it turns three years old, 33% after 4th year, and a whopping 59% after 7 years. But the demands from it will only grow. And so will the costs of its upkeep.

Upgrading the infrastructure

Your current IT infrastructure will need an upgrade down the line. Maybe the performance won't be as you expect it to be. Some parts will reach End-Of-Life(EOL) status, and their OEMs won't support them.

Facing these problems and still keeping the old infrastructure is simply inviting troubles - lowered performance, security risks, vulnerabilities, and frequent downtimes.

So, you’ll HAVE to upgrade.

What's more, there are security and compliance

With the vast amounts of data that modern systems generate and process, it’s a goldmine for cybercriminals. And if you belong to industries like healthcare, aviation, or fintech, security is the top priority.

Adhering to the standards of the industry and keeping the security up to date is one more cost you’ll have to bear in an on-site setup. And that includes security audits, compliance certifications, professionals to help you achieve that, and their consulting fees.

How much does an enterprise spend on IT infrastructure?

On average, enterprises across industries spent 6.7% of their revenue on IT infrastructure in 2022. But that number has jumped to 12.3% for 2023. And software companies spend the most, 19%.

It’ll keep increasing with every passing year as IT infrastructure gets more complex and just as important for businesses.

How to plan efficiently and forecast IT investments wisely?

It’s a big task to get your IT investments right. Compare it with planning and building your home. If you get the basic structural foundation of the house wrong, it’ll be a catastrophic collapse. Similar results can follow here with your IT infrastructure investments.

We begin with the scope of work - and highlight the objectives, milestones, and pains we want to address by investing in IT solutions.

Your business objectives are the true north here. Anything that doesn't serve and align with your business goals is not worth spending on. And to have that clarity, you must be clear about your goals and future needs.

Once we have clarity on this, we list the resources we’d need - hardware, software, professionals, and so on.

Trends and forecasts play a significant role in budget planning and cost forecasting.

Check if the industry trends, forecasts, and cutting-edge technologies align with your business goals. Yes, future-proofing is important. But it doesn't always mean installing the latest technology and hoping it'll make your setup future-proof.

If you believe that techs like AI or blockchain will revolutionize your business, go ahead. But not before conducting a thorough cost and ROI audit.

Keeping track of every spend and continuously comparing it with the initial predictions will help you keep the spending in check. It'll also keep you from spending rashly.

So, what are the strategies to reduce IT infrastructure costs?

Let’s start with the basic strategies and move towards more revolutionary ones. Else, it can seem a bit too overwhelming.

Work and improve the existing infrastructure

Identify components that are potential leaks and fix them. You can use automation tools and save significantly on the operational costs of repetitive tasks.

Data can give you answers to questions your eye cannot see. Use it to your advantage to see insights and performance metrics of your infrastructure. It'll help you identify the components that need to be improved.

Imagine the cost of an upgrade of a component is $100. But its impact on your business goals is worth $10,000. If you find such components, upgrade them first. Don't hesitate. They’ll pay themselves off.

Often overlooked, you need to standardize your IT infrastructure. It becomes easier to troubleshoot, fix, and maintain when you have the same standard components across the board.

Align your infrastructure improvements with your business goals

For this alignment to be spot on, the IT and business leaders should be on the same page. Open and regular communication is the key.

Next, conduct a business impact analysis. It’ll show the impact of the several components of the IT infrastructure on the business. That’ll allow you to evaluate factors that can contribute to cost reduction, better revenue generation, and other KPIs of the business.

Defining KPIs of the IT infrastructure that directly reflect its impact on the business goals will better align you with your business goals. It’ll help you uncover the areas of improvement and cost savings.

And this isn't a one-time fix. It's a continuous process. So, keep assessing the business-IT alignment regularly.

A more radical option - moving to the cloud

In 2022, only 32% of the enterprise applications ran on traditional servers. That percentage was all the way up to 63% in 2019.

We saw the kind of upfront costs you bear if you go for an on-site setup. And it's a pain to maintain and operate that infrastructure.

You'll need a team of professionals who understand your business goals and the infrastructure in and out. And that’s never easy to find.

The drop in traditional servers shouldn't be a surprise anymore.

To save yourself from this pain, you can consider moving to the cloud. It saves you from the CAPEX. You move to a pay-as-you-go model for the services that you use. Your cloud provider is responsible for the operations and maintenance of the setup.

Consider Virtualizastion

What is virtualisation?

It's creating virtual counterparts of the physical components like servers, storage, networks, and so on.

With multiple virtual servers, storage, and networks, different systems can use the same physical infrastructure without the need for separate physical components for their applications.

Smead Manufacturing, a facility in Hastings, saw that their servers were underutilized. The utilization figure was somewhere between 5-15%. And this increased their server costs.

They slashed the number of servers from 206 to 107 and virtualized them. The utilization rate went up to 60-80%. They saved $915,000 on CAPEX in the first four to five months. And they predicted to save $3.2 million over the next 5 years.

It was just the cost of servers saved, thanks to virtualization. Virtualization makes a lot of things easier.

Improved efficiency and productivity

Less servers and storage components means less time and resources to maintain and install updates. You update one server, and it’ll update all the virtual machines on that server.

Better security and disaster recovery

You have better visibility into a virtualized environment, thanks to hypervisors. It means you can proactively monitor and analyze for cyber threats and have better security against them.

The virtual machines are isolated from each other. An attack on one will not affect the other. Your disaster recovery is much easier. You can just recreate that VM in the unaffected region.

It'll reduce your security costs while enhancing your security posture.

Less energy consumption and operating costs

Smead Manufacturing dropped their energy consumption by 10kVA in the first 12 months. Less servers, network hardware, and physical storage means you save huge amounts on energy bills.

And less hardware to maintain means less operating costs.

How can your IT infrastructure investment give you a competitive edge?

We invest in IT because we want it to give us a competitive edge - better profitability, leaner operations, better customer experience and relations, future-proofing, and so on.

Being scalable and flexible is a win

With time, the business and its needs expand. And you’ll need to scale up. With the uncertainties of the current era, flexibility is just as important. Who knows when the next pandemic can strike?

So, investing in IT with the future scalability and flexibility requirements is the key. Cloud gives you that flexibility and scalability. You aren't investing in your own infrastructure. You're just paying your cloud provider to use its resources.

Agility with leave your competition in the dust

The ability to respond and adapt much faster to changing market conditions will always be an edge. You'll be able to deploy and adapt new technologies more rapidly to be on track with the changing market dynamics.

Efficient operations all around

How about higher profitability and lowered costs? Newer hardware, software, platforms, and tools will streamline your operations, cut costs, eliminate waste, and enable employees to be more productive. A solid advantage.

Robust security translates to resilience

57% of organizations see a phishing attack almost daily. You can avoid falling to those attacks when you have robust security. Cyberattacks result in downtime and loss of data and money. With better cybersecurity, you one-up your competition.

How much would it cost to strengthen the existing IT infrastructure?

Even after overseeing so many similar projects, it is difficult for me to predict an exact cost. Every business, its goals, and its use cases are different. That results in a unique IT infrastructure setup.

But what I can give you is a guide on how to estimate the cost of strengthening your existing IT infrastructure.

Start by Conducting a Comprehensive Audit

Begin with a thorough audit of your current IT infrastructure. Identify hardware, software, network components, and security measures in place.

Then, Assess the Current Performance

Evaluate the performance of your existing infrastructure. Identify bottlenecks, areas of inefficiency, and potential points of failure.

Define your Security Requirements

Clearly outline your security needs. Consider data sensitivity, regulatory compliance, and any recent cybersecurity threats. It will guide investments in security measures.

Evaluate Scalability

Anticipate future growth and scalability requirements. Ensure that the strengthened infrastructure can accommodate increased workloads and emerging technologies.

What Technology Upgrades would you need?

Assess the need for upgrading hardware and software components. Consider advancements in technology that could enhance efficiency and security.

Conduct a thorough Risk Assessment

Identify potential risks and their financial implications. It includes downtime, data breaches, and the costs associated with recovery.

Research the hardware and software you’d need

Obtain quotes from OEMs and service providers for necessary hardware, software, and services. Research thoroughly to ensure fair pricing and quality.

Analyze the Total Cost of Ownership (TCO)

Consider the long-term costs, including maintenance, licenses, and operational expenses. Sometimes, maintaining an infrastructure is costlier than just installing it. And you need to be aware of that commitment.

And then, Prioritize Investments

Based on the audit and assessments, prioritize the areas that need immediate attention and allocate the budget accordingly.

Lay out a detailed Implementation Plan

Develop a detailed plan to implement the upgrades to strengthen your existing infrastructure. This plan should include timelines, milestones, and responsible authorities.

From my experience, this step-by-step approach ensures that your investment aligns with your organization's long-term goals, enhancing both efficiency and security.

Making informed IT infrastructure investments: Principles to follow

The IT infrastructure space is quite dynamic. Your decisions have a deep impact on how your company will function. As someone responsible for making decisions, you need to be on top of your game.

Balancing Short-term Needs with Long-term Vision

For sustained success, you must align IT investments with long-term business goals. We discussed this previously as well.

Consider how each IT investment contributes to your goals, ensuring scalability and adaptability for long-term relevance.

Companies that invest in IT considering their long-term vision are often more resilient to market shifts and emerging technologies.

Balancing Cost with Quality and Performance

We all know we need to strike a balance between cost-effectiveness and performance in IT investments.

Evaluate the total cost of ownership (TCO), including initial investment, maintenance, operational costs, and potential downtime. Look for solutions that offer optimal performance within your budget constraints.

Prioritize quality over cost savings. In our experience, it’ll lead to fewer disruptions, enhancing your overall performance and productivity.

Strategies for Efficient Investment in IT Infrastructure

A thorough assessment of the existing infrastructure is a given. It'll uncover bottlenecks and help you prioritize upgrades based on critical needs. Implementing the upgrades in a phased manner will minimize disruptions and maximize efficiency.

From my learnings, companies that adopt a modular approach navigate transitions more smoothly. By doing so, they position themselves to adapt to emerging technologies seamlessly.

Final Thoughts

Navigating the world of IT infrastructure can be daunting. But as we wrap up this tech talk, investing in IT isn't just about money. It's about making choices that keep things humming smoothly. Whether it's knowing where to put your cash, being smart about costs, or tackling the challenges of growth, the roadmap is there.

So, to all the tech trailblazers out there, let's keep the tech engines running, the data flowing, and the business thriving.