24 May 2024
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How capacity planning helps your company avoid downtime (Image by OCTOBITS)

Octobits Blog – Capacity planning is how you ensure your IT systems always have the power to support your business.

Think of your servers, your network, and the software you run – these are like the engine of your operations.

If they’re underpowered, everything slows down, frustrating employees and customers.

We must also remember that having too much capacity is like buying a sports car to commute a few blocks – you’re wasting valuable resources.

Capacity planning helps you find that sweet spot. It’s a careful process of analyzing your needs and making sure you have the right resources for today and tomorrow. 

We’ll delve into capacity planning, how it works, and why it’s vital in keeping your business running smoothly.

What is Capacity Planning?

Capacity planning is a strategic process that helps organizations ensure they have the right resources–whether hardware, software, or skilled personnel – to meet their current and future business needs.

One case study about capacity planning comes from Genentech. They faced the challenge of developing a long-term capacity plan for a new major class of cancer drugs.

This task was complicated because planning, building, and certifying a new production facility would take five years and cost over $600 million.

The case outlines the strategic planning required to incorporate the best process technology in the new plant, highlighting the complexities and uncertainties involved​.

Capacity planning in Genentech encompasses several key components. The first is hardware resources or all the physical foundations of IT setup.

We can mention servers, storage devices, network equipment, and all the infrastructure that connects your systems.

Then, we have software resources, like operating systems, applications, and databases.

Those software are equally important, providing the essential programs and tools your business relies on.

Of course, none of this runs smoothly without human resources – your skilled IT staff manages, maintains, and optimizes these systems. 

Human resources are the third main component of capacity planning.

We need to highlight that capacity planning is about something other than utilizing the biggest, fanciest, up-to-date, or expensive components.

Capacity planning is about customizing all components above to support your business as efficiently as possible.

So you can use the 2017 servers with 2015 software and outsource labor to optimize your business.

Nothing is wrong with it as long as those combinations reach the main goal (KPIs).

The combination components of capacity planning must be corrected when not reaching the main goal (KPIs).

Capacity Planning Process

The capacity planning process is systematic and involves several steps. Each step ensures your company can meet demand efficiently while optimizing costs and resource utilization. Let’s break down these steps in more detail.

The first step is assessing your current capacity. This involves gathering detailed metrics on your existing systems.

Let’s identify how much of your server CPU, memory, and storage is being used, the amount of network traffic flowing in and out, software-defined networking, and the performance of critical applications that users rely on.

You can read about Software-Defined Networking (SDN) in Software-Defined Networking: Guide to Simplify Your Network Complexity to get an insight into SDN.

Additionally, taking stock of your support volume (like how many IT tickets are opened) can help shed light on future staffing needs.

Once you have a clear picture of your current workload, the next step is forecasting future needs.

Consider upcoming business growth plans, potential technology updates, seasonal spikes in demand, and even the possibility of unexpected events.

Leave a bit of buffer in your forecast to handle contingencies.

With an understanding of future needs, it’s time to determine your resource requirements. This involves translating your forecasts into concrete needs.

Ask yourself about potential server upgrades, the type and amount of storage you’ll require, whether your network bandwidth will need boosting, and if you should be planning to hire additional IT staff.

By comparing your current state with these requirements, you can identify gaps. Identify the areas where your current resources need to meet future demands.

Finally, you’ll need to develop a plan to address these gaps. 

This could involve hardware upgrades, software optimization for improved performance, or changes to internal processes to reduce the strain on your systems.

Consider outright purchases of new hardware or software or the addition and training of new staff to manage the projected workload.

Factors Influencing Capacity Planning

Various internal and external factors influence capacity planning. For this reason, capacity planning is an ongoing process.

Regularly analyze usage data, stay informed about industry trends, and communicate closely with different business units to make sure your IT infrastructure remains aligned with overall goals and can handle unexpected shifts in demand.

One of the major internal factors is a business strategic pivot. An example are migrating services to the cloud, launching a new e-commerce platform, or expanding into new markets, which can significantly impact your IT requirements.

These changes often require additional resources, including more sophisticated software, enhanced server capacity, or expanded bandwidth.

Another internal factor is seasonal fluctuations in demand, like in retail companies.

Retailers might see a spike in website traffic during the holiday shopping season, while tax preparation services experience higher demand as tax deadlines approach.

These predictable patterns require organizations to scale their IT resources up and down efficiently to handle peak loads without sustaining unnecessary costs during off-peak times.

Then, you must consider an unexpected event, such as a successful marketing campaign or the collapse of a Baltimore bridge.

These spikes can strain your business and IT systems unexpectedly. Therefore, you need scalability and flexibility in capacity planning.

Then, remember external factors, such as technology changes.

Staying abreast of technological advancements and planning their integration into your IT infrastructure is crucial.

For example, adopting new data analytics platforms may require significant processing power and storage capacity increases.

We also need to consider market trends. Suppose rivals adopt a new technology that offers a significant competitive edge. In that case, you might need to adjust your plan to keep pace.

And always remember your customer demand. Increases in customer numbers, changes in their usage patterns, or new service offerings can all affect resource requirements.

Both external factors have a direct impact on your business. Moreover, your capacity planning must adapt when your business needs to change.

Then, be aware of regulatory changes. New compliance regulations could necessitate additional storage capacity, data analysis tools, or security measures.

What are the 3 Types of Capacity Planning?

Capacity planning isn’t a one-size-fits-all approach. Therefore, we need to see things from a broader perspective. 

Because capacity planning takes a long-term view, often spanning several years, and aligns IT capacity with the organization’s primary business forecasts and objectives.

Below are 3 common types of capacity planning fundamental in many companies.

Resource Capacity Planning

Resource capacity planning is focused on the tangible components of your IT infrastructure.

The goal is to ensure that each component has enough capacity to handle current workloads and any short-term increases in demand.

An example is network capacity, which evaluates whether you have enough bandwidth on your internet connection and internal network to handle the expected traffic volume.

Project Capacity Planning

This is designed for temporary initiatives with clearly defined start and end dates.

This type of planning involves estimating the hardware and human resources necessary to complete the project within its defined timeline.

A prime example is a major software implementation project where you might temporarily need additional computing power, storage, or specialized expertise from IT personnel.

Strategic Capacity Planning

This involves long-range forecasting and aligns your IT roadmap with major business plans.

This approach involves analyzing trends in business growth, market expansions, and technological advancements to ensure that the IT infrastructure can support the organization’s strategic direction.

Strategic planning might involve significant investments in new technologies or infrastructure to support anticipated growth or to enter new markets.

Those 3 fundamentals still have derivatives when you meet the dynamic business ecosystem.

So, here are another 3 types of capacity planning based on how they respond to demand.

Lead Capacity Planning

This is a proactive strategy where you increase capacity ahead of time to anticipate future growth. 

This strategy is based on forecasts and predictions of future growth. It requires a long-term outlook and commitment of resources.

It helps avoid performance issues but requires accurately predicting demand and investing in potentially underutilized resources.

The problem is the risk of over-investing in capacity that may only be utilized partially in the short term.

Lag Capacity Planning

Lag capacity planning is reactive, adding capacity only after increased demand.  This cost-effective strategy minimizes the risk of over-investment in unused capacity.

But, this approach can compromise customer satisfaction if the response to increased demand needs to be more swift. 

You must quickly scale your resources to meet demand spikes when using this strategy. It has cost advantages but risks slowdowns or service disruptions during peak usage.

Match Capacity Planning

This strategy aims for the middle ground, adjusting capacity closely to demand.

The main idea seeks to avoid over-provisioning resources and the risks of under-serving customers.

This balanced approach requires sophisticated monitoring and forecasting capabilities to adjust capacity incrementally as demand changes. 

In practice, most organizations use a mix of these approaches tailored to specific requirements.

For example, a business might utilize strategic network troubleshooting for long-term infrastructure decisions but also have reactive lag strategies to handle unpredictable spikes in demand.

To understand strategic network understanding, please refer toHow Network Troubleshooting Made Easy IT System: Step-by-Step Guide‘.

Conclusion

This guide underscores the importance of adopting a holistic approach to capacity planning.

You must integrate capacity planning into the broader organizational strategy for resource optimization and efficiency.

But what we need to realize is operational efficiency, cost savings, and the ability to swiftly address talent gaps.

Capacity planning is indeed continuous learning, adjustment, and improvement.