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How to Calculate the Savings from Better IT Monitoring

thayes's picture

“I understand that some IT monitoring solutions are better than others, but can I really relate these differences to true savings?” I hear this sentiment a lot. Intuitively, IT leaders know that having a better monitoring solution will help the team work smarter, faster and prevent service outages. But calculating the dollars/pounds/euro, etc. impact of these benefits seems difficult. 

It is not as difficult as you think if you try not to get bogged down in too much detail, especially at the start. If you begin with a few large categories of savings and use a few basic assumptions, the first level assessment becomes much easier. Eventually, you may wish to go deeper, but only if your first pass calculations warrant it. 

Start with three categories of savings – IT efficiency, reduced downtime, and smarter spending. By comparing the before and after states and using a bit of industry data, you can approximate the impact of a better IT monitoring solution. Let’s go through each of the three categories:

1.    IT Efficiency: 

You or your team can calculate the IT efficiency gains of an improved monitoring solution by comparing the time and effort spent today versus what it would be with

IT efficiency

the new solution. For example, if the team spends 20 hours a month doing manual configuration and this can be reduced to 2 hours, you record 18 hours of savings. Or, if the team spends 10 hours a month preparing reports and this can be reduced to 1 hour, record these savings as well. Or, if it takes the team an average of 4 hours to identify the cause of an issue and this can be cut in half, capture the difference and multiply it by the number of issues per month. You get the idea. With these simple comparisons, you can calculate the hours saved and multiply it by the FTE (Full Time Employee) costs to see the monetary impact.

Now in truth, it really isn’t about the monetary savings because you are not about to let key IT people go. It is about the time that is freed up to work on important projects that drive the business. Rather than outsourcing or hiring more people, you can complete more projects with the existing team. In fact, the need to complete projects at the speed of the business continues to be one of the top challenges for IT. 

2.    Reduced Downtime: 

It is rare that I talk to someone in an IT organization who has really had the time to calculate the actual cost of downtime of business services. Everyone knows that

Reduced downtime

the costs are substantial, but figuring out the actual number is not easy. So to help our conversation, I looked at five relatively recent downtime studies (referenced at the end), to learn that downtime costs can be as low as $20K per hour to as high as $1M/hour. As you might expect, these numbers can vary depending upon your industry and size of company. However, the average downtime costs for an enterprise is often quoted at $100K per hour.
 
If you start with the enterprise average, you then just need to multiply it by the amount of downtime you experienced in the last year. (I find that most IT leaders know this number or have a good approximation of it.) The result is your current annual cost of downtime.

The final step is to determine what percentage of your annual downtime hours can be eliminated with a more effective monitoring solution. Any reduction is typically driven by arming your IT team with better information to identify and resolve issues before services are impacted. A good way to estimate this reduced downtime is to take a couple of the recent year’s most painful outages and determine if they could have been avoided or mitigated with better monitoring capabilities. 

3.    Smarter Spending: 

You have heard the expression, “Throw money at it”. Unfortunately, too many IT teams end up taking this approach to address service performance issues because

Smarter spending

they don’t have the information they need. Using a monitoring solution with better tracking and reporting may allow you to more accurately pinpoint areas for additional investment and spend capital dollars more wisely. The capital savings can then be applied to other important IT needs. 

As with both IT efficiency and downtime reduction, estimated capital savings will be driven by a before and after assessment. Looking back over your past year of spending, would you have been able to make better decisions if you had the improved information provided by a better monitoring solution? This retrospective view of a few expenditures may then be extrapolated to apply a percentage savings to your capital spending. 

If you find yourself struggling to calculate the impact of a better IT monitoring solution, Opsview can help. We have created a simple Savings Calculator which can help you get started. Also, if you would like to see how Opsview Monitor can help you save, try Opsview Monitor for free.

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