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Part 8

Managing IT Assets

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Introduction

• Today we will examine:– IT asset management– IT lifecycle– Benefits of good IT asset management

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Objectives

• At the conclusion of this lesson, the student should be able to:– Describe the necessity for IT asst

management– Recall and describe the asset management

concerns in each stage of the IT lifecycle– Explain the benefits of good IT asset

management

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IT Assets

• All information technology assets of the enterprise– Computers

• Mainframe / mid-range / personal• Software and applications

– Peripherals– Networking infrastructure– Network attached devices– Possibly communications and handheld

devices

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IT Asset Management

• “The point at which finance and IT meet”• Three Legs of IT Asset Management

– The management and tracking of software and hardware assets

– The management of service-level agreements (SLAs), software licenses and other service contracts

– The accounting component, including the calculation and depreciation of taxes

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Necessity for IT Asset Management

• Determine return on investment in IT• Avoid unnecessary purchases• Reduce costs

– IDC reports IT firms with good asset management practices save 15% on IT staffing costs

• Legal requirements– Software license compliance– Taxes

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IT Asset Management is Financial

• Asset management primarily a financial activity

• Some theories say that due to this, asset management system should avoid tracking operational and other data about the asset – Concentrate the financial aspects

• Others see it as effective tool for both operational and financial use– (I’m in this camp)

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Tools for Asset Management

• Billion dollar industry

• Thousands of tools available

• All computer based– May be integrated with corporate asset

management or standalone

• May include tagging standards or systems, both physical and electronic

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Asset Management Lifecycle

• Consistent lifecycle model for IT Assets

Adapted from Windley, Phillip J, Managing IT Assets; Office of the Governor, State of Utah 2002

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Procurement Phase

• Asset enters the asset management system– Upon Receipt– Begins to be managed

• Asset management system receives data– All applicable information on the new asset– Includes software licensing/SLA’s, etc.

• Receiving organization acknowledges receipt– Confirms the asset in the asset management system– Authorizes release of payment

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Deployment Phase

• Asset management system updated – location– responsible party in the organization– configuration– vendor– warranty– any other data that will be useful in

managing the asset

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Deployment Phase

• Location – May be physical location – May be link to other asset containing the

asset being deployed• i.e. software or memory may be tied to a

physical system and would be located wherever that system is located

– Critical information for asset tracking

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Usage Phase

• Not simply static

• Should be periodically updated by operational software that measures asset usage– Ensures valuable assets not being used

can be redeployed

• Installed software must be tracked

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Upgrade Phase

• During product lifecyle, at least one upgrade cycle can be expected, i.e.– Software version changed– New hard drive added– Additional memory added

• Configuration information for asset must be updated accordingly

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Decommissioning Phase

• May still be useful in organization– May be redeployed, i.e.

• Linux server• File/print server• Process control

• Otherwise system should have some salvage value– Asset management system should track until

salvage completed or item is recycled

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Benefits: Inventory Control

• Important input into general ledger system for depreciation calculations

• Helps prevent theft of organizational assets

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Benefits: Total Cost of Ownership

• TCO: A measure of all aspects of owning and operating an asset

• System reduces TCO by:– Eliminating costs from

• Duplication of assets• Wasting of assets by not using them after purchase

– Reducing• Effort required to track assets• Risk of software license non-compliance

– Facilitating better asset operations– Tracking warranty information

• Avoids paying for covered repairs

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Benefits: Software License Compliance

• Major task of any IT organization is tracking software licenses & ensuring proper allocation & use

• Failure to comply = financial risk & legal liability• Becomes time sink as IT organization focuses

compliance instead of adding value to the mission of the organization

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Benefits: Operational Monitoring/Control

• Many organizations administer systems using operational monitoring and control systems

• Asset management systems can form the basis for the operational system– Supply vital information to operational

system when asset deployed or remove it when asset decommissioned

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Benefits: Decision Support

• Support decisions about IT resource deployment– IT assets often deployed with little understanding of how

they will be used – In many cases not used as originally intended

• I.e. computer may be deployed and rarely used or may be deployed and overused.

• When data from asset management system combined with operational data adverse usage patterns can be easily seen & resources reallocated to better add value

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Benefits: Zero-day Employee Provisioning

• New employees should have everything necessary to start work and be productive in place

• Includes computer properly set-up & configured with right software, access to appropriate data, a phone, & other devices

• When employees leave, equipment should move to decommissioning phase – Available for redeployment

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Benefits: Standardization and Compliance

• Non-standard equipment/software cost money• Non-standard IT infrastructure requires more

employees to manage – Employees may less productive as they are less

likely to be experts at managing non-standard assets

• Time is wasted when people are required to use and understand non-conforming data and systems

• System can tell an organization the level of compliance with standards

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Benefits: More Informed Purchasing

• When combined with operational data, asset management system can help in evaluation of past purchasing decisions & assist in better future purchasing decisions

• System can track vendors & provide data about how one vendor performs relative to another in key areas such as delivery, support, etc.

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Benefits: Business Resumption Support

• If assets lost through disaster or theft or damage, system can help business resume operations more quickly

• By knowing what assets are in use and how they are configured, the system contains data vital to disaster recovery

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Conclusion

• Failure of asset management may result in – Wasting time and resources managing

inventory– Purchasing unnecessary equipment and

software– Unnecessary effort in maintaining license

compliance for software

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Conclusion

• With functional asset management, we can:– Reduce the total cost of ownership for IT

infrastructure – Provide a solid foundation for operational

systems necessary to keep infrastructure operating efficiently

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By shifting to more up-to-date computer hardware, Organization were able to provide more computing power for their operations. To select the right computers, management needed to understand :

How much computer processing capacity its business processes required?

How to evaluate the price and performance of various types of computers?

The financial and business rationale for hardware technology investments.

Issues in Management Hardware Assets( Management Challenges )

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Management also had to plan for future processing requirements and understand :

How the computer worked with related storage, input/output, and communications technology.

Selecting appropriate computer hardware raises the following management challenges:

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1. The centralization versus decentralization debate.

A long-standing issue among information system managers and CEOs has been the question of how much to centralize or distribute computing resources. Should processing power and data be distributed to departments and divisions, or should they be concentrated at a single location using a large central computer? Client/server computing facilitates decentralization, but network computers and mainframes support a centralized model. Which is the best for the organization? Each organization will have a different answer based on its own needs. Managers need to make sure that the computing model they select is compatible with organizational goals.

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2. Making wise technology purchasing decisions.

Computer hardware technology advances much more rapidly than other assets of the firm. Soon after having made an investment in hardware technology, managers find the completed system is obsolete and too expensive, given the power and lower cost of new technology. In this environment it is very difficult to keep one’s own systems up to date. A considerable amount of time must be spent anticipating and planning for technological change.

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Successful use of information systems to support an organization’s business goals requires an understanding of

computer processing power and the capabilities of hardware devices.

The role of hardware technology in the organization’s information technology infrastructure,

managers can make sure that their firms have the processing capability they need to accomplish the work of the firm and to meet future business challenges.

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Managing Hardware Assets

Managers need to balance the cost of acquiring hardware resources with the need to provide a responsive and reliable platform for delivering information systems applications.

We now describe the most important issues in managing hardware technology assets:

1. Understanding the new technology requirements for electronic commerce and the digital firm.

2. Determining the total cost of ownership (TCO) of technology assets.

3. Identifying technology trends impacting the organization’s information technology infrastructure.

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The Strategic Role of Storage Technology in the Digital Firm

Although electronic commerce and electronic business may be reducing the role of paper, data of all types (such as purchase orders, invoices, requisitions, and work orders) must be stored electronically and available whenever needed. Customers and suppliers doing business electronically want to place their orders, check their accounts, and do their research at any hour of the day or night, and they demand 24-hour availability. For business to occur 24 hours a day anywhere in our electronic world, all possibly relevant data must be stored for on-line access, and all these data must be backed up.

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Hardware Technology Requirements for Electronic Commerce and the Digital Firm

Electronic commerce and electronic business are placing heavy new demands on hardware technology because organizations are replacing so many manual and paper-based processes with electronic ones. Companies are processing and storing vast quantities of data for data-intensive applications, such as video or graphics, as well as for electronic commerce. Much larger processing and storage resources are required to handle the surge in digital transactions flowing between different parts of firms and between firms and their customers and suppliers.

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For example :

On-line banking has become very important at Chase Manhattan Bank, forcing Chase to change its check-handling method. Until recently, the bank stored its 12 million daily checks on microfilm and microfiche, which were not available on-line. Now Chase creates a digital image of each check that is stored on-line for 45 days, after which it is archived to a fast tape system. Customers can now view any recent check within one to two seconds. Each check requires about 40,000 bytes, so Chase needs more than 20 gigabytes to store checks at current levels in a business that is expanding fast. Electronic commerce and electronic business have put new strategic emphasis on technologies that can store vast quantities of transaction data and make them immediately available on-line.

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Capacity Planning and Scalability

Capacity Planning

The process of predicting when a computer hardware system becomes saturated to ensure that adequate computing resources are available for work of different priorities, and that the firm has enough computing power for its current and future needs.

scalabilityThe ability of a computer, product, or system to expand to serve a larger number of users without breaking down.

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Although capacity planning is performed by information system specialists, input from business managers is essential.

Capacity planners try to establish an optimum level of service for current and future applications.

Outages and delayed response times translate into lost customers and lost revenue.

Business managers need to determine acceptable levels of computer response time and availability for the firm’s mission-critical systems to maintain the level of business performance they expect.

New applications, mergers and acquisitions, and changes in business volume all impact computer work load and must be taken into account when planning hardware capacity.

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Electronic commerce and electronic business both call for scalable IT infrastructures that have the capacity to grow with the business.

Servers need to provide the processing power to keep electronic commerce up and running as Web site visitors and customers grow in number. Delivering large Web pages with graphics over the Internet or private intranets can create performance bottlenecks.

There are several approaches to achieving scalability.

One is to scale up, replacing, for example, a small server with a larger multiprocessor server or even a mainframe.

Another approach is to scale out, which involves adding a large number of smaller servers.

The choice of approach depends on the nature of the application or set of applications requiring upgraded hardware capacity.

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Management Decision Problem

Hardware Capacity Planning for Electronic Commerce

Your company implemented its own electronic commerce site using its own hardware and software, and business is growing rapidly. The company Web site has not experienced any outages and customers are always able to have requests for information or purchase transactions processed very rapidly. Your information systems department has instituted a formal operations review program that continuously monitors key indicators of system usage that affect processing capacity and response time. The accompanying report illustrates two of those indicators: daily CPU usage and daily I/O usage for the system. I/O usage measures the number of times a disk has been read.

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Your server supports primarily U.S. customers who access the Web site during the day and early in the evening.

I/O usage should be kept below 70 percent if the CPU is very busy so that the CPU does not waste machine cycles looking for data.

I/O usage is high between 1 a.m. and 6 a.m. because the firm backs up its data stored on disk when the CPU is not busy.

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CPU and I/O Usage

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1 3 5 7 9 11 13 15 17 19 21 23

Hours

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I/O

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1. Anticipated increases in your e-commerce business during the next year are expected to increase CPU usage and I/O usage by 20 percent between 1 p.m. and 9 p.m.

and by 10 percent during the rest of the day. Does your company have enough processing capacity to handle this increased load? Explain your answer.

2. What would happen if your organization did not pay attention to capacity issues?

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Managing Software Assets

Software costs represent one of the largest information technology expenditures in most firms.

Amounting to more than double the expenditures for computer hardware.

Software represents another major technology asset. At many points in their careers, managers will be required to make important decisions concerning

the selection, purchase, and utilization of their organization’s software assets.

Following are some important software issues of which they should be aware.

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Rent or Build Decisions: Using Application Service Providers

Technology expenditures will increasingly focus on ways to use software to cut down on “people” costs as opposed to computer hardware costs by increasing the ease with which users can interact with the hardware and software.

More organizations are using software packages, fourth-generation languages, and object-oriented tools because such software lowers

“people” costs by reducing the need for custom-crafted software written by skilled computer programmers.

Renting software and software services from other companies can lower some of these “people” costs even more.

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Application Service Providers (ASPs)

Chapter 5 described hardware capabilities for providing data and software programs to desktop computers over networks.

It is clear that software will be increasingly delivered and used over networks.

On-line application service providers (ASPs) are springing up to provide these software services over the Web and over private networks .

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An application service provider (ASP)

is a business that delivers and manages applications and computer services from remote computer centers to multiple users via the Internet or a private network.

Instead of buying and installing software programs, subscribing companies can rent the same functions from these services.

Users would pay for the use of this software either on a subscription or per transaction basis

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For example:

Companies can pay $5 per month per user Plus ( a one-time start-up fee of $5,000)

to rent travel and entertainment (T&E) expense reporting software from ExpensAble.com

instead of buying and installing T&E programs on their computers.

The ASP creates a single solution that can be rented, replacing all or part of a customer’s IT infastructure.

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The ASP’s solution combines

package software applications and all of the relatedhardware, system software,network, and other infrastructure services

that the customer would have to purchase, integrate, and manage on its own.

The ASP customer interacts with a single entity instead of an array of technologies and service vendors.

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application service provider (ASP)

Company providing software that can be rented by other companies over the Web or a private network

The “timesharing” services of the 1970s, which ran applications for functions such as payroll on their computers for other companies, were an earlier version of this application hosting.

But today’s ASPs run a wider array of applications than these earlier services and deliver many of the software services over the Web.

At these Web-based services, servers perform the bulk of the processing and the only essential program needed by users is their Web browser

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The following Table lists examples of ASPs.

Large- and medium-size businesses are using these services for :

enterprise systems,sales force automation,or financial management

whereas small businesses are using them for functions such as : invoicing, tax calculations, electronic calendars, and accounting.Employease.com, described in the chapter opening vignette, is an ASP providing human resource software.

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Companies are turning to this “software utility” model as an alternative to developing their own software.

Some companies will find it much easier to “rent” software from another firm and avoid :

the expense and difficulty of installing,operating, and maintaining complex systems, such as enterprise

resource planning (ERP).

The ASP contracts guarantee a level of service and support to ensure that the software is available and working at all times

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For example, Telecomputing ASA charges $349 per seat per month for a three- to five-year contract that includes a guarantee of a 99.7 percent service level.

Today’s Internet-driven business environment is changing so rapidly that getting a system up and running in three months instead of six could make the difference between success and failure.

Application service providers also enable small and medium-size companies to use applications that they otherwise could not afford

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Companies considering the software utility model need to carefully assess application service provider costs and benefits, weighing all management, organizational, and technology issues.

In some cases,

the cost of renting software can add up to more than purchasing and maintaining the application in-house.

Yet, there may be benefits to paying more for software through an ASP if this decision allows the company to focus on

core business issues instead of technology challenges.

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Software Maintenance

After software has been created for the organization, it usually has to be modified over time to incorporate new information requirements.

Because of the way software is currently designed, this maintenance process is very

costly,time consuming, and challenging to manage.

In most information systems departments more than 50 percent of staff time is spent maintaining the software for existing systems

Exampl : At the end of the millennium, an unusually large maintenance problem called the Year 2000 Problem emerged. The Year 2000 Problem, sometimes referred to as the millennium bug or the Y2K problem,

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Management Decision Problem

Evaluating an Application Service Provider

Your company has grown from 40 to 200 employees in the past two years. All of your human resources record keeping, such as processing hired and terminated employees, documenting promotions, and enrolling employees in medical and dental insurance plans used to be performed manually, but your two-person human resources department is swamped with paperwork. You are looking at two options to automate these functions. One is to purchase a client/server human resources package to run on the company’s midrange computer. The other is to use an application service provider that runs human resources software over the Web. The company’s human resource department has PCs with Web browser software and Internet access. Your information systems staff consists of two people

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     The human resources software package that best fits your needs costs: $9,500 to purchase. One information systems specialist with an annual salary of $65,000 would have to spend 4 hours per 40-hour work week supporting the program and applying upgrades as they became available.

Upgrades cost $1,000 each and the vendor provides one upgrade every year after the first year the package is purchased.

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The application service provider you have identified charges $1,500 to set up the system initially and $5 per month for each employee in the firm. You do not need to purchase any additional hardware to run the system and the vendor is responsible for supporting the system.

1. What are the costs of each option in the first year?

2. Which option is less expensive over a three-year period?

3. Which option would you select? Why? What factors would you use in making a decision? What are the risks of each approach?

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Selecting Software for the Organization

Although managers need not become programming specialists, they should be able to use clear criteria in selecting application and system software for the organization. The most important criteria are as follows.

Appropriateness

Efficiency

Compatibility

Support