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Understand Cost vs Expense To Unify Data Center Decisions

Don Lineberg

by Don Lineberg, cStor CFO

In every organization there are natural points of friction—between individuals or functions—that can take the focus off serving the marketplace. Often there are competing and conflicting internal goals demanding compromise or deference among teammates and functions. Much of the conflict can come from budget management in areas where there is overlapping investment. Respect and empathy that is ingrained in the corporate culture along with an understanding of cost vs expense can unify efforts in an organization.

Understand the difference between cost and expense. A cost is the utilization of resources and it may or may not be quantifiable. An analysis of costs demonstrates how effectively leadership employs resources. Expense is an accounting term of how to treat certain costs. In theory, one can cut costs without reducing expenses by improving efficiency and increasing productivity.

To better understand the distinction, consider the expense for your receptionist which might be say $50k annual salary plus benefits. However, what is the cost? The cost could be far greater than the expense if this person upsets and causes the loss of a client.

The CFO shares a common goal with CIO/CTO.

There is synergy in the way CIO-CMO Share Interest in Data Center Management department heads need to look at responsibility. Among many other items, the CFO of an organization is responsible to ensure a sound internal control structure, to safe guard the organization’s assets, and maintain a healthy cash flow. IT is in some ways a subset of finance since in certain aspects it grew out of the finance function. While the CFO is ultimately responsible for the entire internal control structure and asset safeguarding, the CIO/CTO shares in that responsibility. It is in the mutual interest of Finance and IT to work together to satisfy the many overlapping business requirements in the most cost effective manner possible.

The CTO/CIO is in a very interesting and always evolving position. At times the CTO/CIO has found itself on the front lines in helping their organization achieve its business goals. At others, the role has risked being relegated to one of effectively administrative support. For IT to serve as both a service to the business and a force for the business it must not only stay on the forefront of technological developments but also stay keenly aware of certain economic and financial realities as they pertain to the organization’s business objectives.

CLOUD is in many ways just a marketing term.

There is a tendency in any industry to confuse having tools with achieving objectives. “Cloud” is a perfect example of this phenomena. While the ”Cloud” may be a cost effective and viable data management option for some companies, for others it may not be cost advantageous at all. The team at cStor reviews our client’s business variables and data center management needs to see where the “Cloud” may or may not make sense.

“If you were to give me the latest selection of tools and materials from Home Depot and asked me to build a dog house, it would be one ugly dog house. A master carpenter, with antiquated tools would build a beautiful dog house.” In the end it is not just having the tools so much as having the expertise and experience to properly scope problems and deploy solutions. It is in this way that cStor helps add tremendous value to our clients.

In the end, business is business.

For every business it is important to properly target and understand the needs of its customer. People may buy products but a powerful value proposition is often required to sell a new solution. From enterprise to entrepreneur, the IT department’s vision, needs, and responsibilities vary widely. cStor endeavors to understand both our client’s business and technology needs, to help identify and apply the correct solution given the situation.

CIOs estimate that 79% of IT spending will be “inside” the IT budget (up slightly from last year), Gartner says 38% of total IT spending is outside of IT already, and predicts that by 2017, it will be over 50%. This is a “shift of demand and control away from IT and toward digital business units closer to the customer,” says Gartner. It further estimates that 50% of all technology sales people are actively selling direct to business units, not IT departments. 

If the CTO/CIO doesn’t understand how business outside of technology works, and how you interact with the marketplace—the goals and objectives of a CMO and CFO and CIO—they will struggle to be fully relevant. The data management function needs to show value outside of the IT department, and cStor can help the CTO/CIO add additional value to their organization. Our team members have seen lots of people’s problems. We don’t have a horse in the race with any one technology—instead, we have best in class partners from which we can bring together the best of class technologies available without bias or influence. Client needs and best interests always come first.

Expertise from a team of skilled professionals adds great value at very little expense and provides a tremendous return. Safeguarding assets for cStor, and for cStor clients’ data assets is the CFO commitment. While all expenses are costs, not all costs are expenses. The expense of a data center management suite may save other expenses and improve costs through increased productivity. This is a unifying goal across business disciplines.

Don Lineberg
About Don Lineberg
Don Lineburg joined cStor as Chief Financial Officer in February 2014. Since beginning his career at KPMG, over the last 25 years he has held senior level positions in a variety of industries and brings cStor unique financial and management experience. Providing leadership, strategic direction, and a strong understanding of how a business operates and interacts with its community he has helped create sound financial infrastructures, manage costs, and facilitate and support top-line growth.

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