Measuring IT's Business Value in Kilowatt Hours

By Michael Vizard  |  Posted 04-09-2013

Measuring IT's Business Value in Kilowatt Hours

By Michael Vizard

Measuring the value of IT to a business has always been a difficult goal. The challenge most IT organizations face is that while there is no shortage of IT metrics, translating those metrics into something the average business person understands has been problematic.

At the recent Green Grid Forum hosted by The Green Grid consortium, however, the IT leadership at eBay revealed it may have cracked that code using a Digital Service Efficiency methodology, which the company has been developing for the last three years, to determine the value of an eBay transaction against the cost of a kilowatt hour used to run the IT infrastructure that processed the transaction.

Dean Nelson, vice president of global foundation services for eBay, says the e-commerce site started developing its approach to measuring the business value of IT as part of an effort to help the company’s business leadership better understand the monetary value of an IT investment.

“A lot of time when we’re talking to the business, you could see the eyes glass over,” says Nelson. “We wanted to uplift the conversation.”

By giving business execs access to a set of key performance indicators that are tied to the value of a transaction on eBay, Nelson says one of the benefits to IT is that it becomes easier to justify an investment in IT infrastructure.

But, just as importantly, the performance indicators are shared with application developers and can end up saving lots of money in investments in IT infrastructure, says Nelson. Because developers can see how much their applications are consuming in IT resources compared to other applications, they are more aggressively fine-tuning their applications.

“Because we were able to show one developer how much memory their application was consuming, we were able to put off a $200 million server refresh,” says Nelson. “Developers don’t want to show up on the list of shame we now keep.”

Of course, there’s also a corresponding eBay list of fame that identifies the applications that are making the most efficient use of IT infrastructure. Once developers can see their decisions’ impact on the cost of IT, their behavior starts to change, says Nelson.

The application and energy usage information is gathered using a data collection and analytics framework from OSIsoft, and eBay shares the information via a set of dashboards delivered by Apptio, a provider of IT financial management software.

Nelson concedes there may be an occasional discrepancy between what a developer thinks is occurring versus what the reports are presenting, but that also creates an incentive to further fine-tune the system.

“It’s really about starting the right dialogue,” says Nelson.

With more than 52,000 servers to manage, eBay needs to operate its data center like a factory because, as a digital business, a direct relationship exists between IT investments and the business’s profitability.

While that direct relationship may not exist in every vertical industry, there is an increasing consensus that the cost per watt of power consumed by IT provides a base unit of measurement that IT organizations need to track.

Measuring IT's Business Value in Kilowatt Hours

“There’s no real standard,” says Stefan Deutscher, a principal at Boston Consulting Group. “The challenge a lot of businesses are going to have is that, unlike an eBay, they don’t have as many homogeneous application workloads running on similar types of servers.”

As a result, it’s easier to produce a relatively accurate cost per transaction in an environment that is comprised mostly of x86 and RISC servers and mainframes, says Deutscher. In addition, other industries, such as the pharmaceutical industry, where IT is not as big a percentage of the overall cost of the business as it is in entities that are almost entirely digital, the cost of a transaction is harder to discern from an IT perspective.

Nevertheless, John Pflueger, Dell principal environmental strategist and a board member of The Green Grid, says there is growing interest in using the cost per watt as a metric to gauge the cost of IT.

“As a point of comparison with someone else, the cost per watt may not be that meaningful,” concedes Pflueger. “But it is a productive metric for measuring your own efficiency over time.”

In fact, that growing interest has led Schneider Electric, a provider of data center infrastructure equipment, to launch a new Mission Critical Services and Software division as part of an effort to bridge the gap that often exists between IT organizations and the facilities people who are tasked with power management.

“People are starting to talk about the cost per watt more and more,” says Domenic Alcaro, vice president of mission-critical services and software for Schneider Electric. “It’s becoming critical to get IT and facilities people all in the same room so they can get on the same page.”

Whatever the approach toward finding a way to measure the value of IT, things are quickly moving away from the theoretical to the practical.

“This is a problem every CIO in the world has,” says eBay’s Nelson. “If we come up with key indicators for the business, then we can start to change the way IT is consumed.”