In this series, My Assets are Killing Me, I will explore the effects of digital disruption on the data center, address the obsolescence of tech assets, and develop some strategies to deal with our ever-changing technology environment. As I will explain, technology evolution and change is nothing new, but it certainly feels different this time. Decades of exponential growth have perhaps brought us to an inflection point, where time-tested strategies and operations may no longer work effectively. Assets are turning into liabilities and small start-ups are challenging the very fabric of nearly every industry on the planet – even the tech industry itself!
Three forces have combined to bring us to this tipping point, with the common denominator being rapid progress. First, computers and computer storage have gotten significantly faster and cheaper every year. Second, network and internet speeds have kept pace, perhaps at an even greater rate, allowing nearly instant access to information. And finally, the internet is now accessible by over 4.5 billion users, with nearly 3.5 billion having mobile access via smartphones (1). And each year these numbers grow, with computer speeds increasing at a rate of nearly 40% per year and millions of new smartphone users coming online every month. Amazingly, the average smartphone has approximately 100,000 times the processing power of the Apollo 11 guidance computer that took us to the moon in that historic “giant leap for mankind” 51 years ago! (2). My guess is that the Apollo computer system was built at an enormous cost, likely in the billions of dollars, adjusted for inflation.
Since that first lunar landing, companies for the past 50 years have harnessed computer power to drive innovation, building huge data centers to process an ever-increasing amount of information. For most of this time, bigger was in fact better. Computers helped companies make more informed, quicker decisions to stay ahead of competition. Technology leaders like IBM, Oracle, HP, Dell, EMC, and Cisco thrived by providing the hardware needed to compete in our new digital world. With the acceleration of the information age, the competitive advantage of data and digital technologies has grown at the same exponential rate.
Of course the challenge is in keeping up with the pace of change. Data centers built in 2000, only twenty years ago and filled with the latest hardware, are now totally obsolete. Based on the rate of change over that time period, new systems taking the same amount of space are over 1,000 times faster! Looking at it through a different lens, a competitor could buy the same processing power for 1,000 times cheaper. This is the beauty and the challenge of Moore’s Law.
Moore’s Law is an observation and prediction made in 1965 by the co-founder of Intel, Gordon Moore, that states that the number of circuits on a computer chip would double every year (later revised to every two years). This “law” has roughly held true for the past 55 years, which means that the speed of computer processors has kept pace with this same formula (3). Moore’s law means that every year you can buy a processor that is roughly 40% faster than the year before for the same price. Similar exponential gains have occurred in the cost of computer storage and memory, as well as the speed of computer networks.
This constant advancement has finally brought us to this inflection point, where success in business is ever more dependent on an asset that is obsolete in less than 5 years. There are many variables here and the implications have far-reaching consequences. I will explore the details of these factors in this 5-part series.
- Part 1 – Why is 2020 different? What has changed?
- Part 2 – What is my equipment worth?
- Part 3 – Book values and depreciation schedules: time to re-evaluate?
- Part 4 – Planned obsolescence and refresh cycles
- Part 5 – Planning a path forward
ABOUT THE AUTHOR | MARK METZ
Mark is the Founder and CEO of ReluTech. With many years of experience in the technology field, Mark is the leading force of ReluTech’s stride to change the future of the industry. Outside of the office, Mark enjoys swimming, playing ping pong, collecting comic books, and traveling with his family.
Get in touch with Mark: email@example.com