05 Nov Data center sticker shock? Companies may be in for cost surprise
Phil Loftus, chief information officer and vice president of information systems for Aurora Health Care, can relate to some of the data center concerns being voiced across the country.
Aurora Health Care, which runs its own data center in Milwaukee, is grappling with higher costs for storage, energy usage and cooling. The not-for-profit healthcare provider has facilities along much of Wisconsin’s eastern shore, including St. Luke’s Medical Center, and its cost drivers include:
• Rapidly growing storage needs – about 25 percent per year – that include picture archiving and communication systems (PACs) to store medical images and their associated back-up and retrieval costs.
• Growth in the number of servers. With more than 300 in its Heil data center alone, and more being added constantly, the organization must keep adding cooling capacity to deal with the heat they generate.
• Mid- and high-end server capacity (mid-range and mainframe), both of which are growing at around 15 percent per year as the number of deployed systems, and the use of those systems, continues to increase.
“These are our key drivers,” Loftus noted, “and they are clearly driving up our data center costs overall at more than 10 percent per year.”
Aurora Health Care is not alone. A recent report from Forrester Research is not encouraging, especially for business organizations that outsource data centers to hosted or co-location providers.
Bill Martorelli, a principal analyst for Forrester, issued a sobering report that said these costs are skyrocketing, and many CIOs are unprepared for the fallout from recent market changes as they prepare to renew their data center contracts.
That fallout is the result of the rising cost of power, particularly to cool data centers, but it also has to do with large providers exercising their market power by forcing customers to either include managed services as part of co-location deals – a longstanding ambition for providers who haven’t offered managed services – or scramble to find alternative space, risking added expense and business disruption.
In many cases, Martorelli noted, an attempt was made in mid-contract to increase costs beyond what was in the original contract. In one case, Forrester cited a company that chose to relocate its 100 servers to a new provider, a move that cost $25,000 and forced it to delay and reprioritize four months of project work.
Fortunately for those who outsource, this approach is not a reflection of the entire industry, but the cost drivers facing data center providers are very real.
Market tables are turned
Phil LaForge, director and hosting and managed services for CDW Berbee, a data center host that provides managed services, said the cost pressure is being felt nationally, and it has been building since 2001. At that point, there was a glut of space in data centers, and few customers were paying full retail cost. According to LaForge, organizations with a server cabinet that drew nine kilowatts of power were paying the same amount as one pulling two kilowatts.
Given the glut of space in those days, business customers commanded great deals, sometimes under cost, and some commercial providers went belly up. The market was such that cabinet or rack units pulling four kilowatts, normally about $1,100 per month at that point, were discounted to about $750 a month, and there were no restrictions on power and no price escalators. Industry had so much supply that it acted irrationally to generate business.
Over time, the available space was consumed, the cooling bills in corporate computing environments continued to grow, and now conditions have flipped. Market supply and demand is inverted the other way and there is more demand for, than supply of, cabinet space, power, and cooling to provide a healthy environment for servers. Now that occupancy rates are high, Martorelli noted that suppliers in high-demand geographic areas are in a position to choose clients that can bring the highest revenue per unit of floor space, hence the ability to issue ultimatums to existing customers about managed services.
LaForge believes these factors are driving up costs in corporate computing environments and data center providers, alike. Now, the price for a cabinet that draws four kilowatts is about $1,800, and it’s going to be sold at full retail.
Having been offered discounts early on, it comes as a shock to consumers that costs have doubled. “It’s a stone-cold lock that the days of deep discounts on cabinet space are gone,” LaForge said.
The resulting shortage of data center space is especially acute in the Midwest. CDW Berbee is having a new, 30,000-square-foot “green” data center built in Madison, and growing customer demand is a primary reason.
Of those 30,000 square feet, about 16,000 will be usable data center space but with roughly three times the power density that Berbee built in its eight-year-old facility. That facility was built out to a power density of 1.75 kilowatts per rack, and the new facility will be built out to five kilowatts per rack. As a point of comparison, the new 250,000-square-foot Equinix facility in Elk Grove, Ill., is built out to four kilowatts per rack.
Given the capital costs and the cost to operate, this was not a decision to be taken lightly, but there was little choice. Chip manufacturers keep making processors denser and denser, and hotter and hotter, and every 18 months another new chip set creates more heating and cooling pain.
“It will take 18 months to build an enterprise data center from time we said `go’ to the time we’ll be open,” LaForge said. “In that time, Intel and AMD will have doubled its processor [power], and 18 months after opening the doors, they will have doubled it again.”
Vendor-client relationship
According to LaForge, when choosing a host or co-location provider, both the vendor and the customer must commit to partnership in which they frequently communicate over the term of contract because it’s not healthy for either party to “set it and forget it.” Data center providers should communicate with customers about projected cost increases so there are no sudden surprises when a service contract expires.
For the most part, if a vendor is out front of the situation, it allows customers to assess the budgetary impact. Sometimes, that means issuing another request for proposal, but usually the vendor and clients can work out an agreement that makes sense for both parties.
It may cost more to be co-located, but few businesses will be eager to staff facilities that are nearly obsolete the minute they open. They need to support applications that help them compete and grow the business, not worry about running a data center or make an expensive move to another provider. Most don’t object to their host gaining a reasonable return on its investment, but they want the kind of heads-up on bad news that comes from a mutually beneficial, long-term relationship.
“You have to choose a vendor that will collaborate and communicate with you,” LaForge said. “I have customers that want to talk about our plans because we’re an extension of their IT infrastructure.”
Among their options are to cap the amount of power delivered to the rack or, as facilities they become metered, insist on being charged only for what they use. In some cases, a data center can ease the pain by scaling an increase until a customer can get into a new budget cycle, in effect creating an on-ramp to lessen the impact of the cost increase.
How green is your data center?
Although cost of power in some hosted data centers probably has doubled in the last few years, not everyone is feeling the squeeze. Neither Bryan Chan, president of SupraNet and Nicholas Spang of TDS Telecom, both of Madison, believe the co-location costs of their customers will significantly increase at the point of renewal.
The Forrester report did not surprise Chan, who is in the process of designing a “green” data center to deal with the growing cost of energy and cooling. His idea is to pipe Wisconsin’s “natural air conditioning” into data centers to cool servers, saving on HVAC costs.
“What this [Forrester report] does is underscore the need for green data centers,” he stated.
In the long run, Chan said co-location customers should look for data centers that individually meter their energy usage at the server level, and charge based on usage rather than a contractually negotiated fee. Not many providers charge based on power usage, but without it there is less incentive for customers to actively engage in power management.
Spang said the culture of the co-location provider should be factored into the decision, and he suggested that smaller, hometown providers would benefit from heavy handedness on the part of large data warehouses.
Virtual answer
Virtualization is increasingly a favored option for companies that operate their own data centers.
According to Loftus, Aurora Health Care is taking a variety of steps to help control its growing costs. The organization has invested heavily in a storage area network (SAN) environment that can provide shared storage across its major transaction systems, and it is using network-attached storage to provide a similar, but lower cost option in areas such as PACs, where it can use lower-cost storage.
To enable virtualization, Aurora Healthcare also is using VMWare to reduce the number of servers it needs, and it’s not alone in that pursuit.
David Cagigal, chief information technology officer for Alliant Energy Corp., said Alliant’s corporate data center costs actually are coming down because it is incorporating virtual servers that reduce power consumption.
The Madison-based utility is two-thirds of the way through its virtualization program, which so far has reduced the number of physical servers from 743 to less than 500. The number of physical servers at Alliant will come down even more, as will operational costs.
“You see [operational] cost reductions immediately, as soon as you install a virtual server,” Cagigal said.
Related stories
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• CDW Berbee to break ground on new data center
• Wisconsin Internet service provider wants to build model for “green” data center
• CIO Leadership Series: Phil Loftus, Aurora Health Care
• Byron Glick: CIO Leadership Series: David Cagigal, Alliant Energy