Pete Belyea, CXtec president and CEO, addresses the advantages of complete IT life cycle management at the 2019 NY Tech Summit. See how each step of the life cycle can impact you, and how you can stay ahead of the curve.
My name is Pete Belyea, and I'm with CXtec and TERACAI. Just kind of putting it in perspective for you. If you don't know who CXtec and TERACAI are, we're located here in Syracuse, New York, is our main world headquarters. We also have material, a very large facility outside of Atlanta. We're about 250 million, a quarter billion dollars in revenue. We're a pretty material sized organization and we continue to try to help customers redefine their networking infrastructure. We have the pleasure of working with a lot of really big companies over the years, and really helping them understand where and who and how to approach things differently. And as we've gotten bigger, we've really gone through the metamorphosis of really trying to decide how can we position ourselves to best service to our customers and help them kind of, redefine their IT life cycle management strategy.
And you know, the question is why do you need to redefine how you approach things? And kind of a couple of cool little cartoons here to start out with. It's back, if I was to ask most people who, and there's some people who have been in the business ten years or more, ITU should be really responsible to do and meet the needs of what the organization did, more from a tactical point of view, our job was to make sure that we delivered the storage and the compute and whatever, in a way that was really in response to what was happening.
And that's kind of really no longer the case. We're really kind of in the driver's seat in the IT space now. We're an integral part of what's happening in the business. And as we rethink who we are and what we are and where we do, and as we approach the business from the perspective of we're a player at the table along with marketing and HR and all of the business drivers that there are, we really have to take less of a tactical approach and more of a strategic approach to what we're doing with the goal of trying to make sure that we're maximizing ROI from a business perspective.
And what I mean from that is, you know, it was before our budget, we did what we wanted to do and where we won't go. And in today's world, a lot of the projects that I'm associated with, with our customers, the funding for those projects come from other business units. They come from marketing, they come from sales, they come from, you know, whatever part of the business that's there. And our business partners are looking for us to deliver ROI. How do we go about showing those customers that we can help them productively solve their problems? So it really amounts to us having to say, we're going to do this and we're going to do this cost effectively and we're going to provide you with ROI, because as the CEOs and organization, if Tim Duffy was in this room here, he would tell you that, "I'm asking for more and more things to be done every single year. And I'm not particularly generous in the budget increases that I'm giving to my IT folks."
Now maybe there's somebody here sitting around the table who has an unlimited amount of money, but the chance is that probably is not the case. So as we sit here, it's really how do we redefine what we do in IT? And from my vantage point and from the people that I speak with and I just recently gave this presentation to a group of people at the Gartner organization, at one of their conferences. And it really comes down to how do we give the folks in IT control over the things that are predestined and preordained in our world, right? We have product we have to buy, we have services we have to commit, all of these elements that are here and how can we give control back to the IT organization.
So we really have kind of developed this life cycle wheel within the organization to try to help explain what we see as the four big elements. And you can sub these down as you want to, but, and you can start anywhere on this life cycle. Your infrastructure, when you look at this, well your infrastructure, whether that's compute, networking, wireless, storage, all of the things that are there, services. All of the things that allow you as an IT professional to be able to deploy these services, maintenance of the products and the services that you put into place. And then of course, what do you do at the end of the life cycle? Now you could join this circle at any point in place because nobody's starting with totally fresh, totally new footprints to go into.
So let's just kind of take a look at this one thing at a time. I've tried to in this presentation, kind of give you some quotes and thinking from Gartner, is everybody familiar with Gartner? Gartner is like the largest research organization in our space. So try to give you some of their thinking and trying to provide you with a few case studies to kind of dial this in so you can see it in real life as to how, how other people have effected this and tried to do this particular stuff. So when I talk about infrastructure, as I said, it's server, it's storage, it's the compute, it's the network, it's all of the hardware things that we think in this area, how do we go about doing that? Well, if you're speaking with the manufacturers, manufacturers all want us to have the latest and greatest and in true honesty, that is really important in certain places within our infrastructure, there's certain places you need to have the latest and greatest.
There's lots of parts of our infrastructure, whether that's secondary storage, whether that's edge networking, whether it's redundancy in your compute that you can actually look at the secondary market as a way to help you offset some of those costs and manage down your costs. And a couple of Gartner quotes here. My favorite one is the center quote that says, "Despite concerns related to OEM objections to the acquisition of used hardware, the used hardware resale market is an established and growing phenomenon." So anybody who tells you you can't do this, it's probably not a great position to be in because you really should be looking at how do you stretch the life of your assets? How do you use those assets as long as you can in areas that are less than mission critical? You'll never hear me say any one solution in any part of this presentation is nirvana.
It's about hybrid. How do you mix and match things in order to stretch your dollars and meets your needs? So typically when we think about new equipment, this is a whether you agree with where exactly the lines are, this is the marketing slide, so whether you agree exactly where those lines are, there is an install part of your life cycle where you see the higher degree of failure. We've all been there and you install stuff, it doesn't spin upright. Whatever it is, you have your failure rate, you run through the useful life where everything's in and stable and unless you do something dumb, been there, done that. Unless you do something dumb, it runs along happily. And then until you reach a point in it's life cycle where the product starts to age out and can't do that. Typically if you look at it, obsolescence in our space is driven by speed and process, compute cycles, things like that, versus the fact that it's going to die. You know? So you have to look at it from that perspective.
So what we're trying to do is say, where do we need to have new product in our life cycle? How do we mix and match that with used product or secondary market product? And then how do we take the dollars that we're saving and invest those dollars because we're not replacing things that don't necessarily need to be really, how do we replace those dollars to allow us to do things that we need to do? High performance at the core, migration to the cloud, all of the things that might have to happen in that space to make it worthwhile for us. So it's all about saving in that space. So you'll see here, pre-owned new, mix it together, cost savings to our customer base, to our clients. And when I say customers in a group like this, I'm really referring to your end users, the people that you're providing ROI to within within the organization.
Quick case study. So in this particular case study, this is really a server storage case study. This is a financial organization in the south. This particular organization had been through an acquisition cycle and one part of the business had been sold off. Okay? So they were divesting themselves from an organization. Could be an acquisition story, but this particular case was there. So the parent, when they sold off this particular division as part of their separation agreement with the organizations, kind of like divorce within the IT space. Had a certain amount of time, I think it was like six months to get off the parents' compute platforms, everything total soup to nuts, reposition their software and move along. So they went through the typical RFP approach, six, eight weeks of RFP process. The pricing came back way outside their thought process of what they planned in the separation, but more importantly, the installation window was five months past to complete the project. Five months past what they had planned on being able to do.
The penalty to this organization was $10000 a day that they remained on the old platform. A finance organization that knows us, that's been involved with us approached us and in that particular situation they said, "Well what can you do? Some of these lead times are long." We said, "Let's look at the project. Let's redefine how we approach this particular project and let's take an approach of blending new and used equipment along with you know, different professional services and approaches." So this project ended up being a hyper converged project that included net app, Dell EMC, Fordanet, Citrix, VM, big project, nice, nice big project. We delivered this project in and with the savings by using our products into this process and our professional services team, we beat the budget by almost $1.1 million, but more importantly we met their installation date, which was really the critical thing from this, different way of thinking about how you approach a conversion of that kind of methodology.
You still get the softwares that you need from VM hardware using used drive [inaudible 00:10:47] raised. There's a lot of different ways to package this and think about this installation from a different perspective. Second case study, this is more network centric. This particular customer is a lottery service. They're a lottery service north of the wall. As we've Game of Thrones fans say, north of the wall up in Ontario. They were in the process of rolling out a new lottery game, and in this new lottery game that they were rolling out required an expansion of some of their network distribution. They were on 6509 platforms. They were in the process of budgeting on a two year plan to move to a 9K platform, all perfectly strategically correct directions. And all of a sudden a business unit comes in and says, we need this connectivity.
They're traditional VAR that they had approached, came at them with an upgrade of all of their soup engines and blades in their 6509 in order to make this happen, which had they had to spend that money to move it forward, it would have delayed their 9K deployment by about 18 months, so that was not an acceptable solution to them. They came and they saw us talk to us about how can you do it? We'd work with some of their access points and some other stuff and our equal2new® lines, how can we approach this? We were able to secure the end of sale blades for the 6509 for them equal2new®, and instead of paying $2000 a blade, they paid significantly less. So the whole project ended up costing them $88000 keeping their 9K project on track versus $1.2 million.
So it's a perfect example of this wasn't going to be something that stayed a long time. We're really sweating that asset while we're making the migration to the newer technology. So when you look at it again, it's a different way to look at it from a blended solutions point of view. How do I stretch or sweat those assets while I'm making the investment into the new parts of the business that I want to work with? All right, so we talked about manufacturers, new, pre-owned, equal2new® products that are here. We need to talk a little bit about services. Now when I talk to services, especially in the IT areas, people say, I'm not looking to have my department outsourced. And we kind of take a different approach to this as we walk around the circle, we see looking at the services part of the model about creating bandwidth within your organization.
You know, how do we create bandwidth? How do we save you man hours? How do we do the things that are busy work for the IT organization? So that you can use your talent and resources to deploy projects that are critical or important or significant to the business. So probably most people, this is what your schedule looks like, right? It's funny, but it's true. There's not a lot of free cycle time. Everybody wants everything yesterday. I'm one of those people, you talk to my IT organization, it's, you know, what about this? Well, what about that? Well, what about this? Well, you asked me to do that. Well, it still all needs to get done. So we see augmenting from our perspective, from a professional services is creating bandwidth for you. Not job illumination. That's not what we're looking, we're temporary resources to bring into an IT organization to do your cleanup, to do your business busy work, to provide knowledge transfer to really make your schedule look more like this.
I always wondered why these weren't green faces too, versus the red faces, but anyways, it's really about freeing this up. Kind of a case study on this one, may you never find yourself in this situation. This was a mid sized college in the Midwest, their CTO up and left. When he left the server storage person, the director of service storage just got a battlefield promotion. He was the new CTO for the college, chancellor of the college was kind of irate because there were a few things that weren't happening in the organization, or in the university that were affecting students, which made their infrastructure look less appealing. 'Cause if you're familiar with education, their ability to develop or deploy technology to the student body and professors is probably as important as anything else they can do, it's a differentiator for the university.
Well in this particular case, we had had a relationship with them for about four years. They hired us on our first really big professional service engagement, the service storage guy who's now the CTO, hired us to come in and do a full top to bottom network assessment for them. So we provided a full network assessment, described their architecture, identified their gaps for them. We were on a highly compressed timeframe. This timeframe was we had to have a report back to them in four weeks, compress this all through, built out, identified their gaps and there were a fair number of them. To go through and really mapped this all out while the existing IT organization was trying to keep the ship afloat and moving forward. So this is stuff that they couldn't have done.
Based on that recommendations and the assessments that we came out, we then augmented them through a six month process where we upgraded servers, storage, compute in that space and left with them with a roadmap that could move forward. Perfect example of how to use professional services in this life cycle to augment what you've got and where you're going from that vantage point.
Next thing, maintenance. So maintenance is a sticky wicket. That's the best way I think to put it. I mean how many many of you are really out there and you're kind of held hostage to your approach. Everything now and as we move on becomes more and more subscription-based. We all know, that everything's another subscription, more OPEX, more OPEX, more OPEX, we continue to pace in there. And you really, when you look at it, maintenance is about how do you save OPEX, how do you create flexibility? How do you still maintain assets? Because when something goes down, we're all looked at very, very seriously as to why is it down? How do you do that? And how do you delay that CAPEX to again maximize where you're going and keep the investments where you need to go?
So kind of look at it this way as manufacturers should have us believed that the only thing that our vending machine is manufacturers service offerings that are there, right? You have to do this, you have to do that. You need this upgrade, you need to make sure you have all of that stuff. There are things in your network though that don't need to be upgraded on an ongoing basis. You know, whether you're thinking servers or storage or networking, there are points in the lifecycle of those products where there's an opportunity to save money, still maintain them, still assure your upside, but really give you the flexibility to maintain the products in a way that gives you the reliability you want, but also saves you money. So Gardner is a big fan of this. I mean when you're out there, you can read these, all these slides by the way, will be available for you at the end of the conference when you fill out your survey, all of the presentations that you attend and even some of the ones you don't will be available. So if you miss one, feel free to go through here.
The one I like here is some enterprisers consider the flexibility and customized support from TPM as an advantage. This is Gartner saying it. It is truly what it's all about. How do you come out of the box, figure out what you're doing, where you're going and how to put it together. Maintenance is always, always a hybrid approach. If you're looking at third party maintenance and somebody tells you that they can do everything for you, if you're in IT, you should run as fast as you can. There is no third party maintenance provider out there in the world that can provide you everything in a legal and ethical way to provide you the service you need. If somebody is providing you with third party maintenance and they tell you they can give you software upgrades, run as fast as you can because you're gonna find yourself in a really bad space.
Only the manufacturers can provide you with software upgrades or intellectual property that's out there. Now, that being said, there are places where you can freeze your life cycle. Whether that's storage, whether at some point in time NetApp, EMC, whatever, is going to freeze and do very little in the way of upgrades. Perfect places to upgrade before you go off, freeze your storage software level and run it. Typically in that case you're looking at second tier storage, right? It's not stuff that you're in production with on an everyday basis. So on the left hand side here, generally speaking, OEM support, collaboration, you want to have the ability to upgrade your collab software because it's key. Security, nobody's going to freeze their security footprint that's there. You need the OEM for that. Application foundation, data analytics, mission critical compute, I think of this is tier one.
So when you're in a tier one environment, you want the OEM to be participating in your service strategy. When you move into the hybrid maintenance piece, third-party maintenance fits for reliable hardware. Things that are stable aren't being upgraded, you know, whether it's networking, storage, whatever it is, you know the networking provider will typically, after the first year, 18 months, you'll see very little in the way of software enhancements that are there, noncritical gear and then end to sale, end of support products always fits into this.
By coming up with a hybrid approach to this, you can save a significant amount of money in your maintenance and most people that I've spoken about, their maintenance contract is quickly creeping up past 20% of their network, their IT network spend or infrastructure spend. Cost savings, support experience, methodology and flexibility. It's not a one size all fits model that's here and it really allows you to sweat your assets, typically on the edge, secondary compute, secondary storage, great way to save money in that space. It creates really IT independence for you, right? It's about you having the opportunity to choose what you want to do and how you want to do it and still provide your infrastructure and your company with reliability options. This is a great case study because I didn't believe this one when it actually happened. So it comes under the categories of, you know, the doubter sitting at the top of the organization.
And as we move through this, I said, "You guys are insane, this is never going to work." So this happens to be a very large multinational oil and gas company located on four continents, products floating around in the Gulf of Mexico, products, server storage products floating around on oil platforms in the Gulf of Mexico, one in the North Sea, but located everywhere. And in this particular case, this was a full out OEM support relationship. Some of these servers that are on some of these oil platforms are five years old, you know, probably not in the best environment in the world. Every single product in this company's infrastructure was on a same day, four hour response, seven by 24, four hour response. Now anybody in this room that thinks you can get an HP server to an oil platform in four hours is probably daydreaming a little bit.
So we sat down with them working with a very large multinational consulting company and mapped out their entire infrastructure. This is a multi month project. Mapped it out and said, "Okay, these products you have should be on OEM support. These products you have should have onsite spares. These products you have should be next business day. These products you have should be third party maintenance." So we took a really comprehensive deep dive into their infrastructure and mapped out a third party maintenance strategy that blended those solutions and came up with a hybrid solution. We saved them 1.8 million dollars every single year. We're in year two of this contract.
This is real stuff that works in the real world. Whether you're a small SMB shop or a large company, the right maintenance approach can get you where you need to go. You don't have to be 100% OEM related or tied if you think about it strategically. Again, keep in mind the warning messages that I gave you, you have to have the OEM support for software. Always recommend it in tier one applications, but there are certain places just like the secondary market product that we talked about where you can go through and it can apply to you and save you material money as you deploy what you need to do to accomplish your goals. Accomplishing your goals and saving money doesn't mean less budget dollars to you. It means more things that you can do from an IT perspective to accomplish the things that really make a difference to your business versus churning through the same things over and over. Maybe.
So the next thing in the circle or the first thing in the circle, because this part is about what to do at the end of your life cycle and different people have different life cycles. We have customers in this space that big cloud providers that, because of their footprint, will move from a two terabyte drive to a four terabyte drive nine months after they've installed it. Just because they can put it in the same chassis and double their storage space and move it forward. So different people are on different time horizons, which allows us to provide product into the secondary market that can be valuable to other people that are slower in that pace or still acceptable in that space. This is about decommissioning, it's about data security. It's about how do you migrate? What happens if you're taking a material portion of your infrastructure and you're moving into the cloud? What do you do with those assets? How do you move them forward?
It's interesting because I'm probably the laggard in this topic because I've never been a believer that everything can go to the cloud. You know, and I , five years ago I had a over a few cocktails with a business colleague of mine. I was told how much of a laggard I was and everything will be in the cloud in five years and now here we sit here and if you follow the trends and what's happening, people are saying, "Well you really don't want everything in the cloud. You know it's going to be a hybrid strategy and you move it forward." I actually collected a bet on that one, but that's a different story for another day. But it really is about how do you mix and match everything?
So whether it's your cloud strategy or whether it's your infrastructure strategy or your service strategy, it's all about hybrid and moderation. In this case though, if you're moving to the cloud, IT asset disposition can be a great way for you to recover, but more importantly, protect yourself. I stole this from a friend of mine at Gartner. The only thing on this slide that's important is down here when you're taking stuff out, whether it's storage or whether it's networking product or it's server product, don't play pink slip Roulette with the product that you're taking out. Because all you need is one mistake or one set of product that comes out that's not hygiened properly and people lose their job or make it into the newspaper. Gartner's keeps talking about it. Service providers have become an important link in this life cycle. But here, big categories of risk, data security, number one thing the Gartner's talking about when you take product out of your environment, and I've seen strategies from, they don't care, to everything needs to be crushed and shredded. Reality is somewhere in that continuum.
Don't want to be in the news, really, really important you don't want to be in the news. So when you look at this strategy, you have to think about how can I decommission equipment safely and how can I move that equipment into an environment where potentially the cost to clean it or the cost recover it is offset by potentially selling the product into the secondary space. So not always possible, but always has to be secured. Bless you. Security is always the number one thing. And you might say, okay, this applies to disc drives, right? The supplies, the disc drives? Frank will tell you a story that we received from a bank, a huge buy from a banking network and when the switches, routers, all this stuff came in the entire bank networks, Schema, passwords, everything, IP strategy, were still on the units, still on the units.
That's important because a lot of people when you sell into the secondary market, never do anything to your equipment. They take that equipment from you and they send it to another dealer broker in the market space who then sends it to somebody else who might put it in to place. All of that private information gets wiped off. Our practice in our organization, whether it's network servers, storage, is to always hygiene that process as we go forward. That's what gives you the peace of mind that when you're decommissioning stuff, it's going to go where it is and get the right things. So here's a perfect, 'cause, another great story. I like this one because it shows the depth of our organization be able to respond to weird stuff. In this particular case, this was a very large ride hailing company who set up business in mainland China.
They'd been in business in mainland channel for about twelve or 13 months when the Chinese government decided you're no longer allowed to do business in mainland China. We want you to be able to go away. So I had all this equipment with all this proprietary information on it, sitting in a big data center in mainland China and they're looking for somebody who can come in and help do the hygiene piece of this. But more importantly, the product couldn't leave China and they had to recover the cost of decommissioning it as well as selling them. So in this particular case, we dispatched a group of professional services people to Beijing. They spent four months there decommissioning this data center, brought our own hygiene equipment, cleaned it up.
We have a facility in Hong Kong that has a relationship with customers in China. We liquidated the product and took what was still a loss, I'm sure for them. But still recovered several million dollars worth of assets for them and liquidated those assets in country in a safe, clean way to be able to do this. We do this all the time, day in and day out. Our two facilities are here in Syracuse, our facilities specialize on the network side. That's our network center of excellence. Our facilities in Atlanta speak to server storage. We do on average, on the drive space, north of 70000 drives every single week. We wiped clean, we recover on an average of about a hundred thousand pieces of memory a month in that space to be able to move it. That's the size and scale you need to do it, but you need to do it in a safe and clean way to be able to pull it together.
So really what should you look for when you're looking for a partner? As you look to redefine all those four aspects of your IT spend, how do you maximize the equipment spend? How do you smartly use professional services? Where does third party maintenance come together and how do I take equipment out of commission? So it really nets down to these things. You need to be able to do these things at scale, because depending on who you are, where you are, even if you're a mid sized company and you're decommissioning drives, you want to be able to offset some of those costs with the resale of that product. So you need to have somebody who's at scale that can be able to do that. You need to make sure there's product diversity and they're not willing to say, I'll just take your network switch or I'll just take this PC or I'll just take this set of disk drives. You have to have the diversity of solve your problem, not their desire to buy something. Right?
A lot of people come in and say, "I'll buy your server a by your network switch, I'll buy your PC's." You have to have somebody who's gonna solve your problem, which is moving it out of your organization a safe and clear way. Service delivery, we talked about that, longevity of business. It's a sad situation, but in this world there are a lot of people who exist either just in the back of their garage or only on an internet site that's there. The secondary market in particular right now has kind of gone through a a lot of turmoil. The TPM market is going through the same thing right now where there's a lot of organizations that are really small, who are spinoffs of other organizations and it doesn't take, to sell secondary market equipment, it doesn't take a lot to just set up a shop and say, I'm going to buy from person A and sell to person B. It takes a lot to have the infrastructure behind it and go through how many you, anybody visited our TCDC here in Syracuse? Our facility?
Anybody with their hands raised see them because they can tell you the difference between what we do and what other people do. It's truly impressive, the same situation exists in Atlanta for server storage. You have to have comprehensive inventory. Can they deliver the product you need when you need it? A lot of people say they do that and Frank will tell you that his team fields hundreds of calls a days from these little people who are out there looking to say, "Yeah, I got a deal for this. Can you provide me the product?" We can go through and do that. So you've got to have that comprehensive inventory and value recovery, value recovery is important because again, it comes down to the cost you're spending. If you can take product out and liquidate that product in the secondary market or in an offshore market where there's value that can be recovered, it reduces the costs of what you're doing. Really, really critical for what you're doing. So with that, thank you very much and I'm available for any questions you might have.