The Economics of the Data Center

It’s hard for most organizations to accurately predict the actual costs of running any given application in the data center. A particular server may be used to support several different applications. For example, how do you accurately judge how many personnel resources are dedicated to a single application? Although there may be a particular month when your staff is updating one application, those same staff members may be troubleshooting a different application in another month. In some organizations, there may have been attempts to tie computing costs to specific departments, but if so, the model is likely to have been very rough.

Consider, as a simple example, the use of e-mail. Some departments are very heavy users, whereas others barely touch it at all. Pockets within a single department may be heavy users. Although technically you can monitor individual use, doing so would require more overhead than it’s worth. In addition, overhead costs associated with supporting customers when they forget their password or accidently delete an important message can surpass expectations and add to the overall costs of running an application such as e-mail.

Listing the costs

In order to prepare for your evaluation of on-premises data center costs, you need to look at the costs that are directly and indirectly related to the application or type of workload you want to move to the cloud (public or private). Some of these indirect costs are hard to evaluate, making it difficult to accurately predict the actual costs of running any given application in your company. Here is a fairly comprehensive list of the possible costs, with notes:

Server costs: With this and all other hardware components, you’re specifically interested in the total annual cost of ownership, which normally consists of the cost of hardware support plus some amortization cost for the purchase of the hardware. Additionally, a particular server may be used to support several different workloads.

Storage costs: What are the management and support costs for the storage hardware required for the data associated with this application? Storage costs may be very high for certain types of applications, such as e-mail.

Network costs: When a web application you host internally, such as e-mail or collaboration, is moved to the cloud, the strain on your network may be reduced. However, keep in mind that ensuring that users in your company have on-demand access from anywhere to cloud services requires substantial bandwidth.

Backup and archive costs: The actual savings on backup costs depend on what the backup strategy will be when the workload moves into the cloud. The same is true of archiving. Say that you’re thinking of moving some workloads to the public cloud. Will all backup be done in that cloud? Will your organization still be required to back up a percentage of critical data?

Business continuity and disaster recovery costs: In theory, the cloud service will have its own disaster recovery capabilities, so there may be a consequential savings on disaster recovery. However, you need to clearly understand what your cloud provider’s disaster recovery capability is. Not all cloud providers have the same definition of disaster recovery. IT management must determine the level of support the cloud provider will offer. This can be an added cost from the provider, or you might seek out a secondary vendor to handle disaster recovery and procedures. Many organizations have redundancy and diversity built into their cloud strategies to mitigate business continuity concerns.

Data center infrastructure costs: A whole series of costs — including electricity, floor space, cooling, building maintenance, and so on — go into the data center. Because of the large investment in data centers, moving workloads to a public cloud may not be financially viable if you’re only utilizing 40 percent of the data center’s compute power. (Of course, you can deploy a private cloud to take advantage of the underutilized space and the advantages of the cloud.)

However, if your data center is 80 percent full and has been expanding at 10 percent a year, you’ll soon need a new data center. At that point, you may have to build a data center that could cost as much as $5 million. The cloud will be a much more economical choice in order to divert workloads away from the data center.

Platform costs: Some applications run only in specific operating environments — Windows, Linux, HP-UX, IBM z/OS, and so on. The annual maintenance costs for the application operating environment need to be known and calculated as part of the overall costs.

Software maintenance costs: What’s the annual maintenance cost for the software you may move to a cloud-based service? Although the answer to this question may seem simple, things can easily get complicated if a specific software license is part of a bundled deal or if an application is integrated with other applications in your environment.

Operational support personnel costs: A whole set of day-to-day operational costs is associated with running any application. Some costs are general ones that apply to every application, including staff support for everything from storage and archiving, to patch management and networks, to troubleshooting and security. Some support tasks, however, may be particular to a given application, such as database tuning and performance management.

Infrastructure software costs: A whole set of infrastructure management software is in use in any installation, and it has an associated cost. For example, management software is typically used for many different applications and can’t easily be divided across specific applications.