Insight and analysis on the data center space from industry thought leaders.

Understanding the Cost of Delivering a Service

Organizations of all sizes and at all levels must understand the Total Cost of Ownership (TCO) of their IT estate in order to understand the real costs of delivering a service, writes Zahl Limbuwala of Romonet.

Industry Perspectives

September 22, 2014

5 Min Read
Understanding the Cost of Delivering a Service

Zahl Limbuwala, is co-founder and CEO of Romonet

Throughout the history of the data center, understanding the true costs behind the technology has been an uphill struggle.

Recently, eBay and Facebook announced that they are taking steps to understand data center cost and efficiency. And while this proves that the struggle is gaining momentum, it doesn’t mean much to the average data center owner who can’t command the budget to take similar steps.

That said, unless organizations of all sizes and at all levels understand the Total Cost of Ownership (TCO) of their IT estate, they cannot begin to understand the real costs of delivering a service.

Key factors that must be taken into consideration

The increasing demand for IT, whether for business or consumer services, has resulted in more and more data centers springing up worldwide. However, a number of factors are combining into a single tipping point that could undermine these services.

First, IT services are increasingly seen as a commodity, meaning that users expect much the same costs regardless of who provides the service. Second, IT budgets are coming under greater scrutiny, meaning that IT departments need to justify more and more of their expenditure to the CFO. Finally, the pace of technological change has been so rapid that the demands placed on data centers themselves have changed. This means that continual investment is needed to guarantee performance.

Without understanding these factors, data center owners will be unable to ensure that they can justify and use the IT resources at their disposal.

Understanding the contribution from IT

An increased reliance on IT means additional investment in energy, storage and the necessary skills to ensure everything is running smoothly. It also means that IT is taking up more of the budget.

In general this would be fine, however, most organizations are unable to precisely identify exactly what business activities IT spending supports. As long as the company as a whole is profitable, most see no need to identify which of their IT services are consuming the most resources and where money could be better allocated.

Other areas of the business are beginning to take note of this. One recent trend we have seen is that facilities departments are no longer willing to support the IT infrastructure and are asking for power consumption in data centers to be allocated to the IT budget.

Essentially, data center and IT spend can no longer be seen as a single monolithic cost that is separate from the rest of the organization. Instead, it needs to be an integral part of the overall budget and strategy.

Ensuring profitable growth for all

Understanding the TCO of a data center and how each service operating from there contributes to this, is key to ensuring that the business runs profitably as a whole. This is only in this way that businesses can truly understand the cost of delivering a service.

The sad fact is that data center owners have no easy way of predicting the costs of their data center, since they can only go by historic data gained after the fact.

While measurements like Power Usage Effectiveness (PuE) and other data from metering have helped data center operators understand efficiency, they give no real understanding on how this relates to TCO. Without aligning data center cost and efficiency to the goals of the business then measurement is useless on its own.

This is particularly true when data center owners are considering expanding or modernizing existing operations. The IT department has to justify new spend to a CFO, who may well be sceptical thanks to previous projections falling short of the mark and eroding confidence in any Return On Investment.

The problem is that without the right tools, accurate prediction is impossible, meaning organizations have no idea how a data center will perform until they have already built it. Numerous factors need to be considered such as ambient temperature, the distance to the local power supply, energy costs, taxes, data center design, and the hardware running inside. For example, a data center being built in Norway will have wildly different factors influencing its TCO than one built in Texas.

Eliminating the uncertainty

Data center owners and managers must be able to accurately predict performance of data centers to justify any future financial decisions. This is where predictive modelling comes in.

While organizations can measure how data centers are performing based on factors such as ambient temperature, data center design, cooling, and so on, predictive modelling is more concerned with how data centers ‘should’ be performing. By modelling data center performance based on these variables, organizations can understand how current performance stands in relation to the goals of their business and what they need to do to gain the most from their investment. Organizations can also predict the performance of data centers while they are still on the drawing board and say with certainty how much it will cost the business to operate, before they have allocated budget or committed to any construction.

To get long-term value out of IT investments, businesses need to optimize all aspects of the data center estate. By understanding how the full architecture operates, data center owners and operators can predict the actual cost of IT decisions and eliminate uncertainty in the process.

The data center of the future

With the right tools organizations can identify where further energy savings can be made, predict performance based on real data, and understand the real costs of delivering a service.

Real understanding of TCO cannot be achieved by reactive methods. Organizations need to take proactive steps toward understanding the cost of operating their data centers and how this relates to TCO.

As the commoditization of IT continues and the data center market inevitably follows the same path, the ones that survive will be the ones that understand how their investment decisions will impact on the wider business and which ones will come to fruition to bring them success in the future.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library.

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