Posted by Michael Bullock on Fri, Oct 02, 2009
With data center operations, equipment maintenance, staffing and licenses consuming the lion's share of today's IT budgets, companies can gain a great deal by optimizing their current operations.
Given the current recessionary environment, technical expertise, strong budgetary controls and procurement discipline are more critical than ever to maintaining operating margins.
Across the board we are seeing organizations taking on smaller, quick hit projects to balance spending and risk. Conversely, most companies are postponing or scaling back major transformational projects as managers look for rapid ROI either by better utilizing the technology assets they already have or by undertaking initiatives with shorter implementation times and faster paybacks. Not surprisingly, fewer companies are willing to fund multi-year projects that will not begin paying back their investment for 18 to 24 months or more.
But saving money is never easy. Many initiatives to reduce recurring long term costs are complex and expensive endeavors in themselves and especially difficult to implement during a recession. Even in the best of times, such projects warrant a thorough technical and financial analysis to make sure they align with the company's business direction and economic goals.
My advice for CIOs and their enterprises is to continue to invest in solutions that deliver well-defined results that at the same time minimize disruptions to employee productivity. You may be surprised how many projects can produce a healthy ROI in just nine months or less. These are the initiatives that will easily pass muster with your CFO and executive team.
Here are two examples of how taking a fresh look helped two companies save significantly on OPEX and CAPEX - delivering faster value to their organizations:
Example 1: How we saved $17M and moved one year early
A Fortune 1000 manufacturer planned to relocate to a new data center at a projected cost of $17 million. The company's facilities manager had spent months considering the move and was among the chief advocates for building a new data center over the next two years. He knew facilities (but not data centers) and his site selection was based on traditional real estate values -- size, location and cost -- which, unfortunately, do not always translate well into data center requirements.
Fortunately, with some outside help, the company took a closer look at the proposed relocation, set aside its internal preferences, and a $17 million mistake was avoided. The company discovered that it would need to install a fiber ring connecting the new data center at a recurring cost of $500,000 per year. On top of that, the new facility would not have sufficient cooling capacity for the anticipated power load.
By starting with the requirements, not the real estate, the company found suitable colocation/lease space with total annual costs equivalent to the fiber trunk expense alone. By going into a collocation facility with multi-carrier access, the fiber trunk requirement was eliminated, facility construction costs were avoided, and the cooling problem went away. On top of this, the client moved into the space one year ahead of schedule.
The moral of this story is that in-house employees, and even senior managers with lots of experience, can become cheerleaders for projects that keep them in their comfort zone or may even seem to guarantee long-term job stability. Companies need to spend some effort on understanding that which is less familar and looki in unfamilar places for fast payback rewards.
Example 2: How to save $300,000 per year and improve service
Large enterprises with big IT operations and large facilities staffs typically have multiple departments reporting to different parts of the organization. It's not uncommon for such groups to operate in silos, ignorant of each other's
For example, a major Boston-based investment firm's IT infrastructure had grown over the years through mergers and acquisitions and by decisions made by department heads who didn't communicate.
As the company became alarmed by its ballooning IT budget, it sought help from an independent IT consultant with no ties to a specific hardware vendor. After looking at all its processes, the company discovered that it was spending $2.7 million annually on a jumble of security systems with many overlapping features. Worse, these systems were installed in a cascading fashion that created management headaches and performance bottlenecks.
By redeploying the existing technology more effectively and retiring unnecessary systems, the company immediately cut annual fees by $300,000 per year while improving manageability and performance.
Stories of the left hand not knowing what the right hand is doing are rampant in business. The lesson here is that taking a full inventory of systems and services across all groups is an important first step in consolidation and cost containment.
As you search for new ways to deliver value, don't forget to take a hard look at areas that you may have forgotten during the boom years. Be open to questioning your internal biases and the ways you've always done things. There are many places you may be able to recover budget simply through smarter operations.
Posted by Michael Bullock on Mon, May 18, 2009
Maybe it was just wishful thinking on my part but I really believed that the Berlin Wall between IT and facilities had been torn down a long time ago and that in corporate America these groups were generally aligned. Okay, maybe IT and facilities weren’t holding hands and singing “Kumbaya,” but at least they were talking to each other and beginning to understand where their mutual interests lay. But at the IT Roadmap Conference in Boston last week, I realized how far off base I really was.
While I’ve been busy blogging about power usage efficiency (PUE), ultrasonic humidification, green data centers, the power density paradox and the like, it seems I’ve been operating on the mistaken premise that most IT execs are reasonably aware of how much running their data centers costs in electric power. I also assumed that these execs were at least somewhat motivated to make improvements, especially when doing so would entail no risk to operations and paybacks could be achieved in months, not years.
But no such luck. Most of these IT guys have no idea that they’re probably spending as much dough each year on the electricity to run their servers as they’re paying to buy new ones. Most have no clue that for every dollar they’re spending to run IT systems, another dollar (or more) may be wasted by facility inefficiencies.
According to Johna Till Johnson of Nemertes Research, a full 87% of the IT execs Nemertes interviewed (more than 2,500 from Fortune 2000 companies) said they didn’t know their data center energy costs. And that, Johnson says, includes the 97% who said they’ve consolidated or virtualized their data centers. “Basically,” she concluded, “nobody knows their data center energy costs.”
But I bet your facilities group knows. Why? They know because they’re the ones being asked to reduce the electric bill by the CFO while the CIO asks them to provision more services even though they’re fast approaching the limits of available power and cooling. And they know because they’re the ones paying for the rising maintenance costs caused by systems constantly running above their designed load limits.
In other words, the facilities guys know what you IT guys should know, what you need to know to do your jobs properly. So stop being clueless and get on the same hymn book page with facilities. And if you need more reasons, check these out:
- Much of the OPEX you’re wasting on power can be recovered and goes directly to your company’s bottom line. You can continue to ignore this at your peril.
- Whether you know it or not, you’re probably running out of power and cooling and ideas like migrating to higher density systems or containers are not going to solve your problem; they may, in fact, make it worse.
- If you think that the increased maintenance resulting from constant duty cycles of facilities infrastructure isn’t your problem, think about the fact that these systems are more susceptible to failures that may result in full data center outages.
- As your company strives to become a more responsible corporate citizen, IT will come under the microscope. There will be pressure to reduce your company’s carbon footprint and increase corporate sustainability. As these initiatives gather steam, IT and facilities will be heroes or goats. There’s no middle ground for either group.
This is a great opportunity for IT to take a leadership role and drive the changes that will save money, increase capacity and reduce your company’s carbon footprint. The only way for IT to do this is to get beyond thinking about facilities as simply square footage and maintenance. At the same time, the facilities group has to stop regarding IT as pointy-headed know-nothings. Working collaboratively is the only way IT and facilities can solve their mutual challenges.
Posted by Michael Bullock on Wed, Jan 21, 2009
CIOs are facing a critical resource shortage and, if they don't plan accordingly, will face escalating costs and end up squandering a large portion of their budgets. Yes, the looming data center shortage, which has already hit London hard, is fast approaching the United States as well.
With over 85 percent occupancy, data center lease costs have doubled in London in just the last 12 months. And with the Olympics coming in 2012, and a moratorium
on building new "data centres" (as they spell it in merry old England) proclaimed by the power company that supplies London's electricity, the situation is bleak.
Across the pond in New England, I've seen monthly lease prices for colocation data center space increase 675 percent over the last five years. The same provider that offered Tier 3-type space for $4 a square foot back then is now charging about $30. In the metro New York market, don't be surprised to see prices in the $45 to $50 range.
And keep in mind that this is just for the facilities and the redundant infrastructure costs necessary for Tier 3 / N+1 availability. The increases are even greater when you add in the rising cost to power and cool modern severs.
Some people believe (incorrectly) that data center costs will drop because the bad economy is driving down real estate prices. Wrong. Real estate costs account for less than 10 percent of a leased or newly built data center. Even if the real estate were free, it wouldn't change the situation much.
I see a perfect storm brewing, with three powerful forces colliding to drive up data center costs:
1. Shrinking Supply. Since 2005, the demand for high-quality colocation space has outpaced supply. Many facilities are filling up. Making a bad situation worse, data center providers DuPont Fabros, Savvis, Equinix, even Google and Microsoft, already have scaled back plans to build new data centers. And with the time-to-market for large data center projects taking 12 to 24 months, I don't expect to see relief any time soon. With limited supply, prices will continue to rise.
2. Increasing Demand. Enterprise applications (ERP/BI) and infrastructure (storage and virtualization) are driving the resurgence of centralized IT and its increased demands on existing data centers. Plus, the growing need for regulatory compliance, and upgraded security and disaster recovery systems are all fueling the need for more resources by colocation customers. This expansion is causing ever more of the colocation facility's resources to be consumed by its current customers.
3. Infrastructure Limitations. The migration to high density servers is causing data centers to bump into power and cooling limitations long before anyone anticipated they would, and forcing enterprises to make additional investments in order to increase the capacity of their existing facilities. Facilities built for 100 watts per square foot capacity are being upgraded to accommodate increased loads up to 400 watts per square foot. With current colocation customers locked into long term deals, these cost increases are being passed on to the facility's new customers. Lucky them.
If you are not bumping up against limits of space, power or cooling in your current facility, you may be able to wait out the storm. On the other hand, if your data center lease is expiring over the next 24 months, you need a plan now or you'll pay a big price later. It may, for example, make business sense to build your data center yourself. You can now build a 2,000 square foot facility with Tier 3 redundancy for around $2.5 million to $3.5 million, all inclusive (based on 300 kilowatts of IT equipment capacity). With equivalent leased space running about $750,000 per year, you'll break even early in the third year -- if, of course, you do it right.
In addition, a modern design using the latest energy efficient (green) strategies and technologies will also reduce your power consumption (and your monthly electric bill) significantly.
One last point: Don't be tempted by a lease price that's "too good to be true." It probably is. Look beyond the building and ask yourself these questions:
1. Are there multiple power sources (i.e. fed by different substations)? There should be.
2. Are there multiple network provider options? Competition can keep down network costs. And do the network providers have redundant fiber trunks to assure high availability?
3. Is the location susceptible to disaster or disruption? And I'm not just talking about "acts of God" but equally likely accidents or terrorist attacks.
4. Who built and who operates the facility? How well funded is their business? And what are their plans to address growth and capacity. Do they have any?
If you'd like, I'd be happy to write more about data center site selection in future posts. As always, thank you for sending comments, tips and topic suggestions to me at CIOblog@TransitionalData.com.