Hi Team,@Ed Hayman

Client asked the following great question today and think your answer will benefit our entire TBM Community.  Question was:

Can someone explain whether the use of the word Effective in the Effective cost KPIs (and columns on the table below) is qualifying in some way?  I looked on Connect and didn’t see anything articles explaining that. 

Thanks very much,

Edie Quenby-Brown

Strategic Customer Success Advisor

Edie,

Here are definitions for Unit Cost and Effective Cost to compare and contrast.  

• Unit Cost is the total cost divided by the total capacity
• Effective Cost is the total cost divided by the actual used capacity

As an example:

• Data Center costs $100k
• Space Capacity = 2000 sq ft
  • Used 1000 sq ft (meaning 1000 sq ft is “empty”)
• Power Capacity = 1 MW
  • Used is 400 kW (meaning 600 kW of power is still available)

Space 

• Average Unit Cost = total cost / total sq ft = $100k / 2,000 sq ft = $50/sq ft
• Effective Unit Cost = total cost / used sq ft = $100k / 1,000 sq ft = $100/sq ft

Power

• Average Unit Cost = total cost / total kW = $100k / 1,000 kW = $100/kW
• Effective Unit Cost = total cost / total kW = $100k / 400 kW = $250/kW

The effective unit cost is typically greater than the average unit cost since it is burdened with the cost of unused capacity.  This may be more impactful in the early stages of a new technology build-out before the service has been fully rolled out or adopted by users.

This data center is one example of average vs. effective unit costs.  Effective unit costs can apply to any areas with a fixed, build out of capacity with only a portion that is used. Other examples:

• Storage (storage array with 50 TB available vs 20 TB that is allocated)
• Compute / Private Cloud infrastructure (total build out to support 10,000 average virtual instances vs. only 2,000 virtual instances deployed)
• Software license (e.g. 100 licenses purchased, only 60 licenses actually used)

Thanks Ed.  Hope this helps others who may have wondered!!!