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Cost justifying infrastructure projects
Some of the more difficult projects to get funded by senior management are infrastructure projects. The best way I have found to get their attention on projects of this nature is to relate the need in business terms. What that usually means to the CEO and CFO is that you need to discuss the issue in financial terms.
Senior managers think about the business, not technology. Granted, there are exceptions, but most CEO and CFO's I've met think about improving profitability (increasing revenue and decreasing cost), becoming more competitive, and planning for the future. Very few of them are focused on technology.
Sounds simple enough, but how do you relate infrastructure investments with financial benefits?
First of all, it may be difficult to present a million dollar investment, or even a $50,000 investment, as a tangible benefit. However, it isn't too difficult to present the cost of avoiding a risk when making infrastructure improvements.
For example, let's say you need to upgrade a server due to downtime issues you have been experiencing or that you are anticipating from the network monitoring feedback you are getting and you believe the cost will be $25,000.
Senior managers base such spending decisions on several things:
1. Is it cost justified and will the expenditure have a return on investment (ROI)?
2. Is there a material risk if we do not spend the money?
3. Does the requestor have a good business case?
4. Does the requestor have a good track record and credibility?
Do not underestimate the value of establishing a good track record of doing things you say you will do. Managers who deliver the goods and do what they say they will do earn valuable credibility with senior managers. In my career, I can honestly say that this piece has had as much to do with me getting projects funded as having a good business case. Trust is a huge factor.
Let's take the server and let's assume that the company's accounting applications reside on this server. That means the people who manage accounting, accounts payable, payroll, purchasing, and accounts receivable are the users who will be affected if the server goes down.
To build a financial business case, you can start by pointing out the disk errors that have been detected by your monitoring systems and that these "spikes" point out potential hardware failure. You can add the fact that the server is older technology and that the server in question is approaching the average life that is defined by the industry or by the vendor.
The last part is to put some dollars on the value of an hour of downtime. This is the "risk factor" that you need to emphasize to the senior manager who needs to understand the issue and make a decision to fund the $25,000 for a new server. Follow the steps below to develop the cost of an hour of downtime.
1. List the employees who are materially affected by downtime of this server (all employees in accounting, purchasing,
accounts payable, accounts receivable, etc.
2. Approximate each person's annual salary.
3. Total the salaries of the affected people.
4. Do the same for people partially affected and use a percentage factor of how much they are affected (25%, 50%, etc.)
5. Add up the total annual salary dollars.
6. Divide the total by 2,080 hours to get the employee productivity dollar equivalent of an hour of downtime.
You will be surprised at how much impact on productivity this is. You can also show a full day of downtime and the cost it has on the company. If you have encountered downtime in the past, you have more justification for your concerns and need to replace the server.
Sometimes, a CFO will challenge the number by saying, "When we are down, our people can do other things such as filing, follow-up phone calls, etc." That's true, but it still impacts the business operation. If you don't believe it has a 100% impact on certain people's productivity, have the CFO give you a impact percentage that he will agree to. Even using a diluted factor of 50% still has big cost ramifications for the company.
You can use the same approach to help justify a network upgrade to address remote office challenges. If the remote office circuit goes down, virtually anyone in the remote office that is dependent upon the central server applications will lose productivity. Using this "risk factor" approach will work in most situations where you need to upgrade equipment or networks to maintain a stable systems environment.
Establish credibility, relate risk in financial terms, and recommend only the projects that have true justification to maintain a stable environment and you will have a much better chance of getting your projects funded.
Best of success.
Mike Sisco, ITBMC Founder
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