The Cost of Infrastructure
In our first two blogs in this series on the value of using a Total Cost of Ownership (TCO) model to make better publishing decisions, we examined the cost of printing (in Part 1) and the cost of distribution (in Part 2).
In this, the third and final blog on the subject, we will examine the cost of infrastructure and in particular, the cost of Information Technology (IT) infrastructure.
We suggested in previous articles that it is not sufficient to use the traditional product Unit Manufacturing Cost (UMC), because that data excludes the larger macro view of costs such as waste and asset obsolescence. By contrast, a TCO approach includes the costs from all phases of ownership, acquisition, manufacturing, and distribution of product. It highlights the difference between the cost of manufacturing a book and the entire cost of investing in equipment and resources while the book is in the publisher’s possession.
IT – More than just the Price of Hardware and Operating Costs
When considering Information Technology and its value to the publishing enterprise, we must review more than just the purchase price of hardware and software and operating costs. A TCO analysis shows important differences between price and long-term investment costs. It highlights the value to the business, including waste, sustainability, and the aging expertise of technical resources. Once these differences are understood, publishers can begin to make better decisions on further capital investment in IT equipment, personnel, cyber security, and the mitigation of risk to safeguard the continuous delivery of valuable data to the business.
There is no question that technology plays an important role now and an increasingly important role for publishers in the future. Part of the technology investment that a publisher makes is that of providing a continuous stream of good data to management. This includes data on its own operations and just as important, data on competitors, and how well each is doing compared to the other. It used to be that most of the data that companies needed was for feeding internal operational systems such as accounting and production planning. However, publishers today need data from outside the company, from social media, on customer and audience building and other sources that can generally be categorized as BIG DATA. Publishers need to gather it effectively and use it profitably in order to stay ahead of their competitors.
Why Outsource IT Infrastructure?
The problem is that most medium- to small-sized publishers do not have the software capability, the hardware capacity or the technical expertise to get that job done. Our conclusion is that one of the best ways to keep pace in this respect is to outsource IT operations to large expert cloud providers.
The same arguments apply here that we used in Part 2 of this series, in which we reviewed the outsourcing of distribution. Firstly, economies of scale apply. Bigger computers can do things that smaller ones can’t, especially when it comes to analyzing Big Data. It means that publishers can deploy the latest technologies and the latest applications that an individual publisher cannot hope to compete with, using in-house equipment. Secondly, the large global cloud providers employ the most skilled staff, educated in the latest technologies that can ensure the long term viability of IT services. They can protect publishers’ investments from cybersecurity criminals that are increasingly expensive to guard against, and even more expensive to fall prey to.
The other reason to outsource IT is that upgrades and updates to your software are no longer as time-consuming and risky. We have written about the advantages of moving IT operations to the cloud. You can read our article here.
Microsoft and Sustainability
There is one more major reason to strongly consider outsourcing IT that a TCO analysis may reveal. That is the whole question of sustainability. The major providers of cloud services have made significant commitments to sustainability goals that the typical publisher cannot match. For instance, Amazon Web Services, and Microsoft Axure (used by knkpublishing) have made significant and quantifiable commitments to reducing the carbon footprints of their data centers. Even if they had not done this, there is plenty of evidence to show that simply outsourcing your IT infrastructure to the cloud makes a valuable contribution to sustainability by lessening your carbon footprint in computer hardware. By centralizing that computing resource in a relatively small number of very large data centers, there is a net reduction in emissions. And by passing that responsibility onto computing experts, publishers get value by managing and securing data and providing long-term viability and continuity.
Without the commitment of the major cloud providers to sustainability, there is no doubt that their data centers would be responsible for enormous emissions. Studies have shown that by 2025, data centers will be responsible for over 3% of total global carbon emissions of all kinds and the consumption of about 20% of global electricity. Simply storing data is predicted to consume about 14% of total world emissions by 2040.
Users of Microsoft Azure cloud services can be confident that Microsoft is at the forefront of global efforts to manage data centers sustainably. The number one cause of the environmental cost of data centers is in cooling. Microsoft has committed to use 100% renewable energy by 2025, be water positive by 2030, have zero waste certification by 2030 and have net zero deforestation from new construction at the same time. They are building new data centers in cold climates and engaging only with electrical power suppliers from renewable sources. This amounts to big numbers. Microsoft Azure has over 100 large data centers globally, serving cloud customers in 140 countries. In the year 2021 alone, it slashed its carbon footprint by 6%.
In our view, it makes perfect business sense for publishers to outsource non-core activities and to monetize their sustainability efforts at the same time. They contain many of the same issues and the same solutions. Outsourcing IT falls into that category and with cloud services providers like these, we are moving in the right direction.
Photo by Taylor Vick on Unsplash
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