CFO UK magazine – Rob Edwards , NGD

CFO UK magazine – Rob Edwards

By devstars 11 | September | 2013

Exploding the myths about data centres 

CFOs should not underestimate the growing impact and role of their data centres

By Rob Edwards - Next Generation Data | CFO UK | Published 12:19, 29 July 13

In the absence of CIO or CTO positions in many of today’s companies, CFOs continue to shoulder responsibility for IT at board level. More than ever, in the face of dynamic IT environments, CFOs need to keep a weather eye on latest developments to ensure they can hold their own alongside IT staff and professional consultants when evaluating the most cost effective strategies for ensuring secure and resilient applications and services.

As part of this CFOs should not underestimate the growing impact and role of their data centres, not only on IT delivery, but on the bottom line and shareholder value. The financial considerations at stake may also help with new thinking and dispel some of the popular ‘urban’ myths about data centres themselves. Here are a few popular ones to consider:

Build your own, save money

While on paper depreciating the build cost of a privately owned data centre over 15 or 20 years may appear to give a lower total cost of ownership (TCO) than a comparable outsourced co-location solution, the reality is that it is either sized to cope for 10 years of growth, in which case it will be massively under-utilised for many years, or it is sized for just the immediate requirement in which case it will be too small to enjoy the economies of scale of a larger data centre.

Putting this into perspective, consider a self-build project including the power, cooling and associated infrastructure for supporting an initial 25 racks with additional capacity to take up to 80 racks.

On the face of it considering a self-build approach may be right. Assume a build cost of £2.5 million, depreciate it over 10 years and you get a cost of £250k per annum (pa) or a cost per rack of £3,125 per year. That is cheap! But is that the full story?

Of course there is the cost of capital – say an average of £100k pa and equipment maintenance, perhaps another £50k pa. And of course rent and rates – say £90k pa. Staffing? Even assuming a bare minimum you will need £150k for salaries including all uplifts. So now the total is £640k pa or £8,000 per rack. Not such a good price after all.

But that is the least of the problem. Remember only 25 racks were wanted initially. Those now work out at an average of over £25k pa each. Still within a couple of years the data centre will be full so price per rack will get back down to the lower level. But what if it keeps growing? What if 85 racks are needed? Where do the extra five racks go? Build another 80 rack data hall for a further £2.5 million?

So the own-build option looks cheaper than colocation only if the cost of real estate and staff are ignored and full occupancy is assumed. It also assumes that there’s an available site which is suitable (secure, safe from flooding and flightpaths etc), planning permission, a source of power, connectivity options, a quality design and build contractor and plenty of cash to invest.

By comparison, housing the same number of initial and potential additional racks in a modern tier 3 UK colocation data centre will cost between £5k and £10k per rack pa depending on location (with London/inner M25 locations being at the higher end of the scale). This includes space, power, cooling and associated infrastructure.

Keep it close to remain in control

Take a hard look at the cost of your data centre location. With fibre costing less than £10 per mile compared to the £1000s of only a few years ago, it is perhaps wishful thinking on the part of diehard server huggers to suggest data centres still need to be within a handful of miles of central London: real estate costs around £25 per sq ft, build costs are £10M per MW, and power connection anywhere between £5M and £15M. Best case for outside London is at least half of this which could translate into savings of around £10M over 10 years for a 10,000 sq ft custom data hall.

Nine times out of ten, the affordability of high speed fibre networks combined with sophisticated remote IT monitoring means it is now totally viable for most businesses to manage most, if not all, of their data in facilities located well away from inner city areas without any risk to performance or data integrity.

Outsource – any place will do

If some or all of your IT is being put into the cloud or virtualised be certain the data centres concerned have the power, cooling and support infrastructure necessary for the kind of high density racks required. Otherwise it will be a case of when applications and emails stop working, not if.

If you are outsourcing, no doubt you will have pinned your cloud provider down to tight service level agreements and they will have remote 24-7 systems monitoring in place.

But ultimately your cloud resides in data centres which may be located literally anywhere and even the most diligent cloud provider cannot predict or prevent the consequences of data centre downtime caused by power outages, storm damage or security breaches. On top of this, many providers are often reliant on third party data centres they don’t actually own.

To mitigate these risks, you need to know what’s behind your cloud - not just who’s providing it: who owns the data centres, where they are located, which of your applications they are hosting. Also check there’s a legal agreement in place should your cloud provider or their data centre partner go into administration. An escrow agreement will ensure you have legal access to retrieving your data.

Rob Edwards is financial director of Next Generation Data (NGD)