In 1965, Intel co-founder Gordon Moore made a prediction, popularly known as Moore's Law, stating that the number of transistors on a chip will double about every two years. Intel has kept that pace for nearly 40 years. For IT, this translates into a roadmap that enables IT to buy new servers that cost roughly the same as the previous server but performs so much better. Compare Intel’s 4 Socket MP server performance introduced in 2006 (Intel Xeon processor 7000 series) to today’s server introduced in 2008 (Intel Xeon 7400): 3x more performance throughput as measured by SPECint*_rate_base 2000*, 2.4x more ERP users as measured by SAP-SD* and 2x more database transactions as measured by TPC-C*.

Now, introduce a global economic downturn into the mix and suddenly IT is forced to cut costs and projects (i.e. delay or cancel upgrades and non-revenue generating projects). New articles start popping up from magazines like the Economist that take Moore’s Law and propose flipping it on it’s ear: instead of products providing more performance at roughly the same price, provide products that offer the same performance as IT is already experiencing, but now at a lower price. Call it “inverting Moore’s law” where IT takes the dividend it provides in dollars vs. extra performance.

So here’s something to think about: You can also “invert” Moore’s Law by making new targeted IT investments today that offer attractive payback scenarios tomorrow - giving you similar performance but at a much lower cost. With mortgage rates dropping, you may have already benefited from a rapid payback in your personal life (i.e. I recently refinanced a house down from 7% to 5.25% 30-year fixed rate that I had continuously made additional principle payments for. The ~$5k up front investment (i.e. closing costs) will be “paid back” to me after 5 months due to monthly mortgage payment savings.

Here is a server refresh example that explains how you can also get an attractive payback for your IT department.

Oracle Database Refresh: Let’s next look at a hypothetical example of an IT department running current Oracle Database Enterprise Edition on 12 servers purchased in early 2006 (dual-core Intel Xeon 7041 based servers introduced in 2005) and assess the total cost of ownership difference in moving to new servers.  We’ll assume the IT manager is paying per processor licensing fees for Oracle Database. We’ll compare the old server equipment to new 4-core Xeon 7440 based servers that offer up to ~3x more database performance (Xeon processor 7400 Series come in flavors of 6-core and 4-core versions).  This should enable consolidation ratios of 3:1, enabling the IT manager to reduce from 12 servers to 4 new servers. 

First the new investment: 4 New Xeon 7400 based servers at roughly $20k each = $80k.  Add another $5k for Network, Server Maintenance and Install Costs.  Remove ~$2k in tax implications associated with the expense in year 0.  Total investment ~$83k. 

Next, let’s look at the savings: The IT Manager is paying $41.8k yearly on Oracle maintenance/support costs x 12 dual-core MP servers today, that is $501k.  The 4 new quad-core servers will have larger Oracle database maintenance/support costs because of the core count ($83k x 4 servers = $334k) but this will still result in $167k SW savings each year (difference between $501k and $334k) which my calculations show about $669k savings over 4 years.  Moving from 12 to 4 servers also reduces about $72k in network, server maintenance, and utility (power/cooling) costs over 4 years as well. In addition to all of these costs savings over 4 years, my calculations show that the original investment of ~$83k has a payback of 9 months.

Targeted IT investments today can offer attractive payback scenarios and cost savings tomorrow - giving you similar performance but at a much lower cost.   Let me know what you think?