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Determining whether an investment in virtual technology is paying off requires a different approach than evaluating physical assets. Here's a framework for assessing value, cost, and impact.
When planning long term for budgets and IT investments, CIOs take stock of assets that are nearing the end of their physical lifecycles. If you have on-premises hardware, the process is a relatively straightforward exercise because the inflection points for reevaluation are self-evident. Hardware is systematically depreciated over a three- or five-year span, so you know when it is nearing the end of its useful life.
However, evaluating where to continue investments in virtual technology is trickier, because virtual technology doesn't have the physical tangibility of a hardware asset. Nevertheless, it is just as important to vet your virtual investments as it is to vet on-premises investments.
The good news is that we now have some industry feedback on how different categories of virtual investments are doing. To confirm the results of independent research I have conducted, I polled a group of IT executives. Here are some "report card" findings on virtual IT investments.
Virtual servers--Grade: A
The benefit of virtualizing servers and operating systems has improved data enter efficiencies and time to market for new applications. In addition, CIOs have been able to document actual savings in energy usage and data floor square footage consumption, as well as dollar savings from avoided hardware purchases and upgrades. Better yet, CEOs and CFOs have also recognized these gains.
Virtual on-premises storage--Grade C
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Virtualizing storage in the data center has worked well for larger enterprises that have the storage expertise on their staffs and the storage management software to make the most of an on-premises virtual storage investment. However, small and midsize companies still struggle with virtualizing storage in the data center because their IT staffs lack the bandwidth and the expertise to develop and execute an onsite virtual storage architecture.
Cloud-based virtual storage--Grade B
Using the cloud to store data payloads you don't need immediate access to, or as auxiliary storage for active data, is paying dividends to companies of all sizes. Cloud-based storage is affordable and is helping companies avoid new investments into on-premises storage equipment. The downside is that cloud storage vendors still need to improve governance to meet the privacy, security, and compliance levels of their corporate clients.
Software defined virtual networks (SDNs)--Incomplete
SDN is still not widely adopted in most companies because it is not well understood as a technology. There are also integration issues that remain with software trying to manage a diverse network devices and nodes. SDN vendors have more work to do on unifying standards and interoperability--and in demonstrating the SDN value proposition in dollars and cents to prospective clients.
Voice auto attendants that virtualize corporate telephony--Grade D
From a technology standpoint, it's easy to justify the savings of not having to hire real people to answer phones. But the complicated calling trees and instructions that consumers battle with every day are fast becoming a customer satisfaction issue that could threaten customer retention. Few companies are monitoring the ties between convoluted phone automation and customer satisfaction and retention--and more should. They will likely find negative impact on their original ROI expectations.
Virtual office apps--Grade B
Virtual office applications like Microsoft Office have been effective for many companies. The apps have assisted them in moving workstations (and employees) to a thin client computing concept, with most office data centrally secured and administered by IT. The glitches in the process usually have to do with optimizing virtual offices so they work well in a cloud configuration.
Virtual cloud-based applications--Grade B
Virtual applications work well in many important business areas because they save on hardware and maintenance costs. IT can either farm out the infrastructure of these applications while continuing to manage them or farm out all system support and development to a third party. (The former choice is most popular.) More companies of all sizes and in all industry verticals are flocking to cloud-based virtual apps, but principally in non-mission critical business areas. In areas where systems are deemed mission critical to the company, the preference is to keep these systems on premises.
- Executives need to assess the effectiveness and return of value to the business on their virtual as well as on their other physical IT assets. To do this, they need to look at the cost of running virtual technology (versus other alternatives) and evaluate the impact these systems are having on internal work processes and external processes that are customer-facing.
- In some cases, the concept of a virtual technology in a given area might be great, but the technology isn't mature enough to deliver the value that the business seeks.
- Executives who carefully weigh all these factors have the best chance of correctly projecting the insertion of new virtual technology into their future roadmaps, with direct alignment to business benefit.