IBM Global Technology Services Thought Leadership White Paper

November 2010

Taking a strategic approach to optimizing the data center portfolio

Comprehensive planning is the key to application availability, business expansion and operational efficiency

Taking a strategic approach to optimizing the data center portfolio

Executive summary
According to a recent IBM survey of 1,917 CEOs, one feature that sets successful organizations apart from the rest appears to be the emphasis that these organizations place on operating dexterity.1 The CEO is focused on successfully adapting to complexity and change in the business environmentfrom regulatory pressures to mergers and acquisitions to globalization and improving customer relationshipsto keep a competitive edge. These changes, adaptations and competitive pressures clearly affect how you, as CIO, manage IT operations. A recent study of 2,500 CIOs conducted by IBM indicates that more of them are in a state of ux than ever beforean overwhelming nine out of ten CIOs expect moderate to substantial change ahead.1 Regardless of the source of change, in a recent survey we found that CIOs in high-growth organizations manage change successfully 42 percent more often than those in low-growth organizations.1 How do they achieve this high success rate? By implementing a comprehensive data center strategy that helps you play a leading role in keeping your company competitivenot in a far-off future, but here and nowyour company can see similar in responding to change.

CIOs can play an important strategic role in the enterprise by developing a vision of innovation enabled by IT. The data center provides the foundation for that vision. How well you manage your data centers to raise the return on investment of IT infrastructure, to expand the business impact of data center operations and to make innovation real determines the level of your success and the inuence of your leadership CIOs help build dexterity by cutting costs, striving to create a centralized IT infrastructure and completely standardized, low-cost business processes, as well as seizing every opportunity to reduce technology costs. More than 75 percent of CIOs expect their organizations to have strongly centralized infrastructures within the next ve years. A solid data center strategy helps you rationalize your data center portfolio to address increasing application availability and capacity requirements and to improve operational efficiency. It leverages mature tools and techniques to perform rigorous analysis to determine the facts, which, in turn, enable informed business decisions such as:

How many data centers do you need and where should they be located? How can you exploit IT technologies and trends? What is the impact of operational and sourcing decisions? How can you maximize ROI throughout the transformation and ongoing operations?

This paper describes the competitive pressures that CIOs face and the implications that these pressures bring to data center operations, and discusses how a solid data center strategy that leverages a comprehensive set of analytical evaluation tools can enable you to make concise business decisions about complex issues while successfully meeting increased IT demand, lowering operational costs and increasing responsiveness to change.

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What strategy means for the data center

Although data centers are long-term and somewhat static investments, through proper planning and disciplined development of data center strategies that align with business values, it is possible to help your company react to dynamic changes in the near term to gain competitive advantage. Our survey found that successful CIOs are more actively engaged in setting the business strategy, with 74 percent of them working on it as members of the senior executive team. And CIOs of high-growth businesses did this 21 percent more often than CIOs of low-growth companies.1 The tougher the competition and the faster the pace of business, the higher your data centers must perform in supporting the enterprise. If C-level executives are thinking strategically about the business, you have to be thinking strategically about your data centers to support the corporate strategy. A comprehensive data center strategy helps meet business requirements and address potential issues by to balance the business requirements with utilizing objective analysis to determine:

How we enable business expansion, technology growth and new compute models with the required capacity How we address increasing application availability requirements and mitigate risk How we improve operational efficiency while optimizing costs

You may already have a strategy to meet your business requirements. But often, strategies are informal and lack the hard data needed to know whether they will deliver optimal results. Or perhaps the strategy is formal but hasnt been updated to accommodate changes occurring within the business, including macroeconomic conditions, regional changes and industry shifts.

Informal approaches to data center strategy may break down under the marketplace and operational pressures that are stressing your data center. A single event can trigger urgent strategic course corrections, or it can build under the gradual increase in pressure from industry trends. With the right data center strategy, you can direct your organizations funding towards cost-effective investments to improve operational effectiveness. You can strategically reduce high infrastructure costs by relocating away from expensive data center leases or ineffective locations. Such relocation can tactically improve operational efficiencies, reduce assets managed and improve resource utilization. The resources saved can go back into the business, enabling expansion, growth and improved service quality.

Taking a strategic approach to optimizing the data center portfolio

Today

Target

Infrastructure upgrades

Data center expenses

Give back to business, enable business expansion or improve service quality Real estate costs

IT infrastructure Utility costs Labor costs Network costs

Transformation costs Infrastructure upgrades Real estate costs IT infrastructure Utility costs Labor costs Network costs

Implementing an energy-efficient data center A major university in Australia needed to support rapid data growth to be able to serve a population of 45,000 students on 11 campuses. However, the existing data center was constrained by power, cooling and space issues and was exposed to disaster risks. University staff also wanted an energy-efficient solution.

An IBM team conducted a data center strategy engagement to determine the risk factors, a logical data center management process and requirements for a new data center. The university then asked IBM to assist with implementing a scalable, modular data center. The university was one of the rst institutions in Melbourne to adopt free cooling. This helped the university realize US$200,000 in energy savings over the ten-year life of the data center.

Taking charge of data center strategy can help bring order out of chaos
When considering your data center strategy, youll want to ask yourself: Can you enable business growth? You know your data centers arent static; they change all the time. But are you ready for the big changes? Could your data center absorb the impact of a major application implementation? Would the limitations of your data center thwart a merger or acquisition? How long would it take for you to upgrade to new servers, storage or networking systems?

Growth and management must also be considered. The explosion of data, transactions and digitally aware devices is straining IT infrastructure and operations. It is increasing demand for IT, such as the explosion of information that we now see driving a 54 percent growth in storage shipments every year.1 A comprehensive strategy lets you know how well your data center infrastructure can adapt to change so that you can articulate to executive teams what is possible in support of the business and what actions still need to be taken.

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Do you have condence in your application availability? Youll also want to be condent that your existing strategy can anticipate and avoid crippling unplanned outages. The revenue costs of unplanned application outages can run from the hundreds of thousands of dollars to millions of dollarsper hour. Even for planned outages, customers have increasing application availability requirements and decreasing tolerance for downtime. In the end, its pretty simple: Your data and your applications must be available to deliver value. But you also have to balance the requirements of availabilityrecovery time objectives (RTO), recovery point objectives (RPO), archiving and regulatory compliancewith the costs of meeting those requirements. You can always implement more redundancy into the infrastructuremore power supplies, more batteries, more generators or even more data centers. What is not easy to answer is the question, Is it worth it? How much insurance do we really need? Not all businesses require the same degree of data center reliability. For example, in air traffic control centers and hospitals, outages could lead to loss of life. Investment rms that must trade online around-the-clock online could lose signicant amounts of money and incur compliance violations during unplanned downtime. These types of businesses would need to invest in the higher levels of data center reliability. A comprehensive strategy can help you plan your data center or recongure your data center to address both changing business requirements and the associated changes in application availability, business continuity and disaster recovery requirements.

Can you improve operational efficiencies without impacting service delivery? Controlling costs is always a top priority. Youre tasked with improving operational efficiency without sacricing service delivery. Those enterprises that already have signicant data center investmentsnearly half of IBM enterprise clients in the United States and Europe have more than ten data centersneed to consider data center strategies that enable them to optimize costs for operational efficiency across those broad and dispersed resources.2 A strategy engagement can help you nd savings in hardware, space footprint, energy usage and ongoing management. Strategy can also determine the best way to reduce operational complexitywhether through consolidation or through improvements in remote management of existing data centers.

Proven analytical tools bring strategy to life

Developing a comprehensive data center strategy requires analytical tools that leverage extensive research from interdisciplinary teams with deep skills and knowledge ranging from data mining and analytics to outage mitigation. Working with IBM Research, weve infused innovative mathematical modeling into our tools to help bring the future into the present so you can take action today. The tools are designed to reveal your existing data center state in both nancial and operational terms and to present alternative scenarios based on hard data. Using these tools can help you:

Plan for data center capacity by understanding how the newest technology and IT strategies will affect your data centers years into the future. Select the resiliency options that yield positive value to the business in terms of risk avoidance and application availability Choose optimization alternates based on their complete total cost of ownership across all the IT domains of facilities, network, storage and servers.

Taking a strategic approach to optimizing the data center portfolio

Physical infrastructure threshold capacity analysis

The purpose of this analytical tool is to the forecast data center capacity requirements many years into the future, allowing you to know how long your data centers will remain viable and when they will need to be upgraded. A patent-pending algorithm developed by IBM Research empowers decision making and improved business performance through the use of Monte Carlo simulations and modeling to determine how to meet unpredictable demand in data center capacity. Based on your input on expected application growth, IT strategy and current data center capabilities, the tool provides objective analysis of business and IT demands on the data center capacity thresholds to predict energy and space capacity requirements. In the example in Figure 1, the analysis shows that the consolidation plans extend the life of the existing UPS system for at least ve years, and possibly up to nine years. The analysis also show where to prioritize operational efficiencies to meet projected growth by mapping relative growth of applications and IT platforms over multiple years. In Figure 2, the analysis shows that the processing applications using 60 percent of the UPS are not the optimal consolidation target. Rather, the organization should focus on the database applications, which will eventually dominate the power requirements of the data center.

Primar y data center | Post consolidation - UPS 1600 1400 1200 1000 kVA 800 600 400 200 0 2010 2012 2014 Year 2016 2018

Figure 1: Mapping relative growth over multiple years

Primar y data center | Post consolidation - UPS Breakdown by application group 100% 80% 60% 40% 20% 0% 2010

Database Web Processing Infrastructure

2012

2014

2016

2018

Figure 2: Breakdown by application group

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With this information, you can make informed decisions about upgrades, identify lower-cost options and establish longterm capital budgets while better determining how new technology adoption is going to affect where investments should be made to optimize asset utilization.

Resiliency rationalization

Rationalizing a strategy to manage risk and growth A U.S. technology manufacturer needed to update its data center strategy to address asset concentration and improve application availability. Around 90 percent of its global production workload was concentrated in a single, nonredundant aging facility. Not only was the manufacturer at capacity for power and power density, limited disaster recovery meant that it would be difficult to stay in business if a disaster were to occur. With the help of IBM, the manufacturer developed a strategy that included upgrading the existing primary data center to improve resiliency and hardening, building a new 750 kW data center outside the region, relocating critical production into the new data center and disaster recovery into the existing data center. As a result, the manufacturer can provide capacity for new acquisitions and meet service-level agreements and disaster recovery objectives. In addition, the manufacturer realized 32 percent ROI from moving applications to another data center location and reduced capital expenses for infrastructure upgrades by 50 percentall without increasing the existing operational budget.

How do you right size the resiliency prole within your data center infrastructure? Current metrics for understanding reliability typically focus on the capital costs and dont facilitate the business decision of understanding the value of availability to the ongoing operations. Using your input on relative application values, recovery times, operational quality, vulnerabilities and other inputs, the analysis can provide visibility into the trade offs between the value of availability with the costs of reducing risk exposure. It enables you to forecast the risks exposure of strategic alternatives and identify which alternative maximizes your investment in resiliency. Figure 3 shows four possible data center portfolio strategies. Each has a different total implementation and operational cost that is specic to this example. Note that the most expensive option is almost 5 times more expensive.

Cost of each alternative ($)

140 0 0 0 0 0

120 0 0 0 0 0

10 0 0 0 0 0 0

8000000

60 0 0 0 0 0

40 0 0 0 0 0

20 0 0 0 0 0

0
Single site Twin sites on campus Twin sites in region Twin sites out of region

Figure 3: Four competing data center portfolio strategies.

Taking a strategic approach to optimizing the data center portfolio

Resiliency rationalization analysis leverages historical variances in outage exposures, Markov chain distributions and sparse event simulations can forecast the application outage exposure for each alternative. Figure 4 shows the analysis for the same four alternatives provided in the previous diagram. Note that the most expense alternative is predicted to only encounter a fraction of the total outages as the other alternatives.

Average hours of outage in a year

40

Figure 5 shows these four options plotted against a range of potential business values expressed in terms of exposure (or loss) per hour of outage. The height of each line is based on the cost of the alternative represented in Figure 3. The slope of each line is based on the reduction in risk exposure represented in Figure 4. These lines show the overall resiliency value of each alternative across a range of business value at risk. The graph identies the optimal data center conguration for different levels of business value, showing that if the cost per hour of outage is greater than US$600,000, the optimal choice is twin sites out of region.

35

30
$16,000,000.0

Resiliency value ($) to outages per year

25
$14,000,000.0

20
$12,000,000.0

15
$10,000,000.0

10

$8,000,000.0

$6,000,000.0

0
Single site Twin sites on campus Twin sites in region Twin sites out of region

$4,000,000.0

$2,000,000.0

Recommend: Single site

$0.0 $0.0 $100,000.0 $200,000.0

Recommend: Twin sites in region

$300,000.0 $400,000.0 $500,000.0 $600,000.0

Recommend: Twin sites out of region

$700,000.0 $800,000.0 $900,000.0

Figure 4: Analysis for alternative data center strategies.

Exposure ($) per Hour

Single site

Twin sites on campus

Twin sites in region

Twin sites out of region

Independently, these diagrams do not enable a business decision to select the optimal strategy. For that, we must account for the amount of business value you have at risk. The business value at risk could be the transactional value of a specic application, the total shareholder value of the entire organization, or the value the business is needs to protect.

Figure 5: Alternatives based on a range of potential business values.

Resiliency rationalization can be applied to virtually all of your strategic decisions that address application availability, including clustering technologies, data center designs, and site selection. This technique allows you to understand the truths and tradeoffs between resiliency options, and make the best valuebased decisions for your organization.

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Alternative cash ow

If the goal of operational efficiency is cost savings, then measuring alternative data center strategies is necessary to determine their effect on cash ow. With our Standardized Financial Analysis, IBM helps determine which alternatives can cost-effectively meet your business goals. Consolidate or upgrade? Two data centers or one? Short-term benet or long-term approach? This tool is designed to tell you. Just as important, this analysis calculates the do-nothing strategywhat would happen to investments if left in their current statewhich provides a baseline for other nancial comparisons. Alternative cash ows are based on tactical projections that provide a consistent and holistic method of deriving the total cost of alternatives for true apples-to-apples comparisons. This helps ensure that no one-time or recurring costs are missed. Also, the tactical projections are based on IBMs years of experience conducting relocations, data center hosting and design/build services.

rationale to your executive stakeholders. The output from the strategy services we provide can help you do that. We can give you the following:

Strategic decisions require board commitmentand we can help you make the case
Using the tools available through an IBM data center strategy engagement, you can get hard numbers to help you decide where to invest in your data center. While the proof is in the numbers, you have to put them in context and present a

Business environment and decision criteriacontains the underlying assumptions and a dynamic, reusable decision model that drove the strategy decisions including your guiding principles, business and technical requirements, decision criteria and capabilities. Base case assessmentEvaluate the current environment, operations and capabilities to meet the business demands. Business case analysisProvide the full business justication, including nancial optimization, availability and capacity implications of alternative data center congurations. Execution road mapShows when funding allocations are necessary, what business constraints are affecting the implementation schedule, how you mitigate risks during the transition process and which metrics to monitor to help ensure effective management. Board-level presentationLearn how a data center is not a cost center but a foundational piece of business infrastructure that enables innovation and success with an executivelevel presentation that summarizes the key decision factors, future goals and nancial objectives for the data enter strategy

10 Taking a strategic approach to optimizing the data center portfolio

Next steps for developing a data center strategy

In an environment where everyone is trying to cut costs or is just trying to stay in business, others may not view data center strategy as a top priority. You know otherwise. To prove it, you may have to employ some strategies of your own:

Determine the strategy goalsEstablish the priorities of your business, identify impending events and timelines, potential solutions and fundamental constraints. Specify objectives of the strategy initiativeArticulate the success factors: supporting growth, reducing costs, improving application availability, increasing resiliency and so on, and identify logistic requirements for how to assemble your team. Ensure resource availabilityDetermine the stakeholders and extended team that would participate in the engagement process and assemble a cross-functional strategy team that includes a project liaison and senior executive sponsor to champion and lead the strategy initiative.

strategy that meets your specic requirements. To focus on more transformational, forward-thinking aspects of the business, 56 percent of high-growth CIOs currently use thirdparty business or IT services versus 46 percent of low-growth CIOs. That is one of the main reasons why theyre so much more successful in managing change. CIOs in low-growth companies spend nearly 75 percent more time engaged in activities related to providing core technology services than high-growth CIOs. In contrast, high-growth CIOs leverage third-party expertise to devote 87 percent more of their time to enabling the CEOs business and corporate vision.1

Why IBM?
When it comes to data center strategy, IBM provides a structured, asset-based consultative process methodology that guides your staff through the decision process to create a strategy unique to your requirements and capabilities. Our time-tested methodologies match our experiences with sophisticated technology forecasting to your specic business needs. With the combination of leading technology and tools and virtually unparalleled data center experience, we offer our clients data center strategy recommendations that can help their businesses address their data needs today and tomorrow.

A trusted partner can provide the specialized skills, methodologies and tools to help you address these and other steps of the strategy process and translate them into a data center

Notes

For more information

To learn more about the IBM data center facilities strategy services data center strategy and plan, please contact your IBM marketing representative or IBM Business Partner, or visit the following website: ibm.com/services/siteandfacilities
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IBM, The New Voice of the CIO: Insights from the Global Chief Information Officer Study, September 2009. Based on previous IBM engagements. Please Recycle

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