Innovations Fall 2008, Issue 6

In fact, the biggest boom in data-center construction is going on right now. Many people may think this is a one-time catch-up effort, but I don’t believe that’s true. Unless the fundamentals change, every major company will need to build a new data center every several years.

Facility costs are currently running at 8 percent of IT’s budget. The IT budget is growing at the rate of about 6 percent per year, and the facility’s expenses are growing at 16 percent a year. So there’s a fundamental incompatibility because the growth in facilities expenses will crowd out other IT initiatives.

That also changes the way you have to budget for IT. Investing more in capital expenditures means less money is available for application development.

People think that a $2,500 server is so cheap you don’t need to worry about it. But over three years, the cost of electricity—$750 in a good location— nearly equals the cost of the server, and that’s without the CapEx for building the data center or the cost of running it. The idea that servers are cheap so we don’t need to be very careful about managing them does not reflect economic reality.

Building good financial models to determine the true total cost of ownership has to be a priority. These costs must be built into application justification decisions, but today they typically aren’t.

A classic example is a $22 million investment in blade servers made by an IT organization without consulting the facilities group. Later, the facilities group said, “We’ve got to spend $50 million to add power and cooling

using technologies like virtualization, for example. One of our members in Europe virtualized its 3,150 servers, ending up with 150 servers. They’re saving $2.1 million worth of electricity a year and have recovered $22 million worth of facility capacity.

Haven’t you suggested that virtu-
alization is a one-time saving?

Brill: Yes. And when we’re justifying new servers, we need to look at what the total cost is. That’s the long-term issue.

Why not have some kind of system
of governance in a company to
control these things?

Brill: The energy consumption of a data center is 20 to 40 times that of an office building. In a data center, the biggest potential for improvement is the efficiency of the IT hardware.

“People think that a $2,500 server is so cheap you don’t need to worry about it. But over three years, the cost of electricity nearly equals the cost of the server.”

—Kenneth Brill, Founder and Executive Director, Uptime Institute

Brill: Yes, and I don’t think that’s good. We don’t want to see all this money going into facilities, because it doesn’t add to the productivity of IT. What does add to the productivity of IT is application development. If this course were to continue, there would have to be other cuts elsewhere in IT to make room for the growth of facilities and their cost. This is a senior-executive issue.

What’s the impact of this data-
center crisis on the role of the CIO?

Brill: The skill set of the CIO is changing, because the issues I’m talking about are financial: accounting, capital expenditures, budgeting. This is a skill set that needs to be developed.

capacity, and another $30 million to operate the plant we’ve built for the blade servers.” So it turned out to be a $100 million decision.

These are career-limiting decisions, and they are not uncommon.

Is something more fundamental
going on?

Brill: There’s a convergence of several things: The number of servers being purchased is increasing annually, and consumption per server is going up, as is the price of kilowatt hours.

Do you think it’s controllable?

Brill: In the short term, we can harvest a lot of gold just by being smart,

Beyond turning off some of it, buying more efficient IT hardware would help.

Manufacturers offer efficient hardware, but it costs more. And most organizations—judging by their buying patterns—look only at the original cost. It’s smarter to spend more money up-front on more-efficient hardware, so you don’t have to build a data center. It also reopens the discussion about whether and when to use mainframes, midrange computers or servers, because those platforms have different energy efficiencies.