For all the knowledge of technically astute network engineers and architects Yoke has known, he says many could not accurately calculate equipment costs, implementation costs and total cost savings.
During the 22 years I’ve been in technology, I have worked with and managed some of the most intelligent and technically astute network engineers and architects. Their knowledge of network engineering and data communications far exceeded anything I ever knew.
While I needed a subnet calculator, Cisco cheat sheets and Newton’s Telecom Dictionary to design networks, these engineers casually discussed classless interdomain routing blocks, Open Shortest Path First route summarizations and Border Gateway Protocol confederations. As I was skimming the daily comics over morning coffee, they were reading Radia Perlman’s Interconnections: Bridges and Routers and arguing the intricacies of Spanning Tree Algorithms.
Yet for all their knowledge, many of these people could not accurately calculate equipment costs, implementation costs and total cost savings. A proposal for $250,000 in equipment that would generate $1 million in annual savings would ultimately cost $500,000 in equipment, implementation and migration costs with no cost savings in the first year, partial savings in the second and $1 million annual savings achieved only in the third. But by then, the equipment was outdated, and they needed another $250,000 – or $500,000 – to maintain the savings.
This was acceptable during the late 1990s, when technology was a business requirement and cost justification was a minor concern. The ability to do something faster was often justification in itself, and new equipment every two to three years was just a cost of doing business.
This changed when the Internet bubble burst in 2001. Technology went from a strategic requirement to an operational cost item in the budget. Most companies now require a real return on their technology investments. As a result, engineers need to be able to quantify the savings that new technology will generate. More important, they must accurately state when these savings will be realized. From a cash-flow basis, a $500,000 investment that generates a $1 million savings in the first year is very different from a $500,000 investment that generates no savings in that year and $2 million savings in the next.
If engineers want to be valued resources in today’s business world, they need to understand financial concepts such as cost savings, cost avoidance and cash flow. They also need to be able to quantify the implementation costs that can affect savings. Items such as circuit overlap costs, installation charges, contractor costs, software licenses and maintenance fees need to be factored into the overall financial justification.
Finance departments can calculate equipment depreciation but are not always aware of the costs required to implement networks. Engineers know what is involved, and need to be able to quantify these costs and their impact on the savings timeline. And when issues arise that can increase these costs, engineers need to take the lead in resolving the problems and controlling the costs.
If you’re an engineer, don’t tell me you don’t understand finance. I was reading “Peanuts” while you were reading about Ethernet’s stochastic collision recovery. I was struggling to understand basic IP class addressing while you were discussing variable-bit subnet masks. If I can understand circuit overlap costs, you can, too.
Yoke is director of strategy and architecture for a global travel and real estate corporation. He can be reached at ckyoke@yahoo.com.
