Cutting Costs Through 'Disintermediation'

Jul 9, 2004

Tim Young

With the advent of Internet banking, financial institutions have garnered significant cost savings by cutting out intermediaries (the so called "middle-man") in their business models. The elegant term financial institutions have created for this trend is "disintermediation".

Today, many organizations, not just banking, are making significant cost savings from applying this same approach to their internal systems operations processes.

Organizations are continually challenged to implement cost reduction programs across their enterprise. One key area that is consistently overlooked is IT systems management infrastructure, a prime candidate for cost cutting because significant savings can be made by removing expensive intermediary software products. Once a vital part of systems monitoring, these tools are now largely redundant because:

  • The trend among IT vendors such as Microsoft, Oracle, IBM, Sun and SAP is to embed systems management subsystems in their base products.
  • Advances in network capacity that make centralized monitoring a more cost-effective alternative to remote server-based monitoring.
  • The proliferation of systems management standards, such as Web-based enterprise management (WBEM) that makes management tool integration more straightforward.
  • The opportunity for cost reduction has existed for several years, but its potential has not been exploited since the cost of integrating these disparate tools into a common management umbrella outweighed the cost of using a one-size-fits-all, proprietary product. The availability of high-function/low-cost event management tools has now changed this situation.

    Ultimately, the goal of any systems management function is to provide an IT service; one that maximizes the operational efficiency of the business, but at the lowest cost possible. Increasingly, attention of the systems management community has focused on digital dashboards -- the front end for business service management (BSM).

    The data collectors that exist between the digital dashboard and the application components that enable the business are intermediaries, i.e. a means to an end. They collect information, analyze it, and pass it on to the dashboard for display.

    Disintermediation is the process of removing unnecessary intermediaries. In systems management terms, replacing expensive proprietary monitoring tools with either native tools embedded in an application or removing them altogether and retrieving metrics directly from the dashboard platform itself. Disintermediation is made possible because of the availability of competitively priced event management tools.

    These tools retrieve event messages and other performance data from a plethora of management tools, effectively bringing all the native management tools under a single management umbrella, and displaying the service provided on the dashboard.

    Today, the proliferation of native systems management tools means most organizations are running at least two management tools to do the same job: one being native, such as Microsoft WMI, the other being a proprietary management agent, such as CA Unicenter.

    Apart from being an additional burden on resources, the true opportunity cost to the organization is that you are paying more money for a proprietary management tool that provides less value than the free native product! In fact, if that isn't bad enough, if you look carefully under the covers, you will see that these high-cost proprietary management agents actually retrieve their data from the native tool. Eliminating this redundancy and all the costs associated with it is the driver for disintermediation.

    Worse still, according to Gartner, 50% of server-based network and system management (NSM) software purchases are never fully deployed across the intended device population. Therefore, we must look to disintermediation to control waste and as a strategy for reducing annual maintenance costs by removing redundant intermediary management tools.

    Over the next few years, the face of NSM will change significantly and will have a major impact on the role IT plays in an organization. Breakthroughs in data analysis will allow organizations to better understand the business value of IT. This value will be further enhanced by the reduction in total cost of ownership (TCO) that disintermediation brings.

    Today, disintermediation is fueled by a necessity to cut costs, but because systems management is prominent in lowering TCO, the question isn't so much why disintermediation, but when?

    Tim Young is chief strategy officer at Proxima Technology in Denver, a systems management vendor measuring IT service levels. He has been with the company since its start in 1996 and is responsible for steering the marketing and business development efforts. Please feel free to contact Tim at


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