Just because everybody else is doing it, doesn t make it right!

Full text

(1)

Just because everybody else is doing it, doesn’t make it right! Leonard Inegbedion (leonard.inegbedion@gmail.com), Jodie Wetherall

(j.c.wetherall@gre.ac.uk), Steve Woodhead (s.r.woodhead@gre.ac.uk) KTP Partnership between Lakedale Power Tools and the University of Greenwich

Abstract

Information technology is one of the fastest growing sectors in our world today. Some people are only aware of “new” technologies after newer ones have been released or more cost effective ways of doing things have been identified. In this paper, comparison is made of the different methods of implementing a modern IT infrastructure, identifying both cost effectiveness and risks.

Most SME use Enterprise Resource Planning systems for managing their business processes. Typically, the CEO of these companies are business-men who believe that paying a one-of fee for an item is better than having to rent it and having a tangible product is the preferred option. Research and experience has shown that this doesn’t necessarily apply to implementing computer hardware. The main challenge is in determining the most appropriate server hosting scenario; should you rent or buy a server?

As the saying goes, “just because everybody else is doing it, doesn’t make it right.” After conducting research into the costs, risks, time, this paper presents a logical breakdown of possible hosting scenarios to support a business decision making process. 

Introduction

This KTP project is based on a wholesale and distribution company, Lakedale Power Tools, buying and selling power tools. They have been in existence for over 25 years and have a very strong presence within its locality of south east London. The company recently acquired another company and now run branch operations. Having conducted a thorough audit at the beginning of the project, we realised that we would need to change the company’s central stock control system to help achieve one of the objectives of the KPT project to automate sales order processing between the web and the stock control system. A proposal for change was presented and after sufficient debate, the proposal was accepted and potential software vendors were identified. During the process of choosing a software vendor, the question of where to host the system arose. Their current stock control system is located within the company’s internal network and employees have quick and easy access to the system. It was not possible to

access the system from the internet which makes it a limitation in terms of achieving the integration objective. The option of hosting the new server in a data centre was then proposed to the managing partner of the company. His first question was,

“why should I rent a server that I would use throughout the life span of my business?”

That is a logical question since they are used to having their systems hosted within the premises and they can physically see the server they have paid for. The CEO spoke to some other organisations within its industry to find out if they have their systems hosted externally, and they all responded “NO”. This followed a series of other questions like what if internet access goes down within the company network, how would they access their system to continue trading? How would both branches access the new system? What would be the monthly cost of running the system externally? Before the Knowledgebase answered the questions, they expressed their views by asking, what happens if there is a fire within the company premises? What happens if the physical hardware has a fault which requires the physical presence of a technical person? Convincing the CEO that a new system was required became even easier than telling him that hosting the new system at a data centre was an ideal option.

The Knowledgebase team then recommended the Associate undertake some research to identify different hosting scenarios, the benefits of each scenario, the cost implications and the level of risk.

Research

Research was undertaken into four hosting options to try to identify the most appropriate solution. Option one was to host within the company premises, something familiar to the organisation. Option two considered purchasing a physical server and renting some space at a data centre also called Colocation hosting. This would incur a monthly charge. Option three was to rent a dedicated server at the data centre. The fourth option was cloud hosting option. Cloud hosting is the latest buzzword in Information Technology with respect to setting up IT infrastructure. It is similar to renting a dedicated server but the suppliers of the service guarantee 100% uptime and other marketing hype which has brought about its popularity. Pundits compare

(2)

Cloud hosting with utility service like electricity where you only pay for what you use. The table provided in the Appendix provides a breakdown of the research conducted. The results were presented in a matrix format to ensure a like for like comparison could be made.

Options 1 and 2 involve a capital cost of about £3,000 which can be avoided with options 3 and 4, however, a monthly cost is required. The investigation considered the total cost of ownership over 5 years, the warranty period in option 1. The hardware cost includes the server, internet access, virtual private network for security and depreciation cost of the server. Prices were based on quotations received from the various suppliers. It turned out that after a period of five years, option 1 was the most expensive option while option 3 was the least expensive with around £7,000 price difference. The main reason for such a margin was the cost of setting up a very high speed and reliable internet access to allow remote branches access to the system and integration with the website.

The physical server is an item that depreciates rapidly over time. After a period of 5 years, the server will need replacing and the old server with be worthless. This makes options 1 and 2 a relatively poor investment.

Option 4 provided the most benefits such as ease of scalability; if sales increase, increasing the servers capability would be relatively straightforward. Option 4 also provided a pay-as-you-go service such that if the server wasn’t in use, you wouldn’t have anything to pay. However, the pay-as-you go option can also result in very high bills with high usage but some people might argue that high usage means more revenue generated so this would balance out. With options 2, 3 and 4, the mean time to recover from hardware failure is low (usually minutes or hours depending on the issue) whereas the providers of the hardware in option 1 can only offer four hours before fixing a problem. This would mean four hours of business would be lost if the server within the premises goes down.

There are risk in all 4 options but option 4 provides the least level of risk because if there were a fire or the server crashed for any reason, option 4 had an auto-failover system in place which makes it very resilient and able to offer 100% guaranteed uptime.

Conclusion

Option 3 clearly is the ideal choice as the level of risk is manageable, it is the most cost effective, the burden of managing the server has been moved to a third party (hosting provider) and the company can face the core of its business which is buying and selling rather than creating backups and managing the server. In a different scenario where access to the system was only required within one location, maybe option 1 would have been ideal as a larger investment would not be needed for internet access. The company might be able to manage the risk by putting in place policies and procedures to avoid a total shutdown.

Five years down the line, the organisation might consider option 4 as it reduces the risk to the lowest possible level and the business would have generating sufficient revenue to fund the cost of the hardware.

Option 2 does not appear to be a very wise option in any scenario as it would involve a capital cost and the organisation also pays a monthly rental fee. After five or ten years, newer hardware technologies would have been released and the hardware would cost little or nothing.

Going back to the questions raised by the CEO,

why should I rent a server that I would use throughout the life span of my business?”

The outcome of the research has shown that, it’s more cost effective to go for option 3 and the level of risk is much lower as compared to option 1.

“What if internet access goes down within the company network, how would they access their system to continue trading?”

There are ways around this; the company might have a relatively cheap backup internet link, such as a 3G like broadband dongle. The cost of the main broadband with the backup broadband would still be much cheaper than paying for a very expensive internet option.

“How would both branches access the new system?”

With option 3 being the likely choice, the system would be hosted at a data centre with high speed internet access; branches could connect via a virtual private network to the data centre. If internet access goes down at

(3)

any branch, especially the head office where it would be located, the other branch can continue trading.

“What would be the monthly cost of running the system externally?”

The research has shown the monthly cost of running the server, after a period of five years; it would be cheaper than having the server hosted within the company premises.

 

 

 

(4)

Appendix In-house Hosting

Option 1

Hosting externally with company server Option 2

Dedicated server hosting with data centre

Option 3

Cloud hosting option Option 4

HP DL320 G6

1 x Intel Xeon Quad-core L5520 @ 2.26GHz CPU 4GB RAM

2x 160GB 7.2krpm SATA drives

P410i/256 RAID Controller Redundant PSU

Windows Server Standard Edition 2008 R2 (64bit only) Cisco ASA 5505 for VPN Firewall

Cost £3,093 capital cost

Based on software vendor quote.

5 years warranty. £2,628/year for an alternative to leased line service.

Server depreciation cost For a period of 5 years, LPT would spend: • Price of server: £3,093 • Hardware support: Free • Alternative to leased line (based on quote from an Internet Service Provider) for connection between the server and website: 5 X 2,628 = £13,140 • Internet setup fee £500 • VPN hardware between two locations £760 • Worth of server after 5years: £0.00 Total: £17,493

£3,093 one-time cost

Based on software vendor quote. £100 for monthly rental. Server depreciation cost For a period of 5 years, LPT would spend:

• Price of server: £3,093

• Rental fee: £6,000 • VPN hardware between branch locations and data centre £760 + £1100 (£50/month)

• Worth of server after 5years: £0.00

Total: £10,953

£138.91/month (based on average quote from two hosting companies) For a period of 5 years, LPT would spend:

• Price of server: £0.00

• Rental fee: £9,600 • VPN hardware between branch locations and data centre £760 + £1100 (£50/month)

• Worth of server after 5years: Not Applicable

Total: £10,194.60

Being a scalable option. First year price starting with 20GB hard disk £180.08/month. Year 3 scaling to 30GB HD is £185.08/month. Year 5 scaling to 50GB HD is £195.08/month. (based on hosting company quote) For a period of 5 years, LPT would spend:

• Price of server: £0.00 • First two years Rental fee: £4,321.92 • Next two years Rental fee: £4,441.92 • Fifth year Rental fee: £2,340.96 • VPN hardware between branch locations and data centre £760 + £1100 (£50/month)

• Worth of server after 5years: Not Applicable

Total: £12,964.80

Benefits • Access to the server from

any location. • Internal sales can continue even if the

• Access to the server from any location.

• Mean Time To Recover from hardware failure is shorter than having to contact the software

• Avoid capital cost.

• Much cheaper than in-house hosting

• Cost can be further reduced if

• Elastic provisioning to scale up and down based on demand creates a new way for enterprises to scale their IT to enable business to expand.

(5)

internet goes down. • Physical access to server for troubleshooting. • Using the system is usually faster within the local network.

vendor.

• With the internet down in one location, sales can continue in other locations.

• Access to the server from any location.

• Technical support when the need arises with no extra cost. Depending on the nature of the problem.

paid yearly.

• Avoid depreciation cost. • Mean Time To Recover from hardware failure is shorter than having to contact the software vendor.

• With the internet down in one location, sales can continue in other locations.

• Access to the server from any location.

• Technical support when the need arises with no extra cost.

Depending on the nature of the problem.

• More resilient and guaranteed 100% uptime

• Pay-as-you-use – The customer would only pay for what it uses • Avoid capital cost.

• Much cheaper than in-house hosting

• Cost can be further reduced if paid yearly.

• Avoid depreciation cost. • Mean Time To Recover from hardware failure is shorter than having to contact the software vendor.

• With the internet down in one location, sales can continue in other locations.

• Access to the server from any location.

• Technical support when the need arises with no extra cost.

Depending on the nature of the problem.

Risk/Hazards • Risk of fire.

• Higher possibility of hard ware failure.

• Disrupts business in other locations situation of interruption to power or internet.

• Risk of fire

• Data Centre would close down • Hardware failure

• Power failure

• Risk of fire

• Data Centre would close down • Hardware failure

• Power failure

• Data Centre could close down • Traditionally when you buy hosting, you pay in arrears and you renew after each year thereafter. In the cloud you are susceptible to rise and fall in server charges on a monthly basis and maybe stung with a freak bill that wasn’t foreseen.

Back Up Can be done by company

staff though could be time consuming and no proper environment to test the

Can be done by company staff or hosting company. Though at some cost using a hosting

Can be done by company staff or hosting company. Though at some

Can be done by LPT staff or hosting company. Though at some

(6)

backup. company. cost using a hosting company. cost using a hosting company.

Support/Maintenance Annual maintenance

agreement and response time to attend to a hardware failure is 4 hours. No support on weekends or bank holidays

No annual maintenance cost and 24/7 support

No annual maintenance cost and 24/7 support

No annual maintenance cost and 24/7 support

Figure

Updating...

References

Updating...