Gartner presents a contrarian view to the Cloud hype. By Heena Jhingan
Gartner has identified areas where IT heads are going wrong and suggested five key measures for getting data center strategy right. According to Rakesh Kumar, Research VP, Gartner, most CIOs in India had been making decisions about their data centers without understanding the issues around availability and depreciation of assets. During a study it was found that, in 2011, enterprises used only 26% of their total IT spend on capital investments.
Some organizations believed that operators could provide a relatively high degree of availability for relatively low cost hosting or Cloud services solution for their infrastructure and operations, ignorant of the fact that, since the cost of capital has fallen drastically over the last four years, it may be less expensive to build a data center rather than rent space over a period of 25 years.
CIOs should maintain an appropriate balance between CAPEX and OPEX. In 2010, capital investments took a nose dive by 5%, to the lowest level since 2003. Though 2011 saw a minor increase, spending had still not touched the levels of 2009.
Spending money on assets such as data centers, IT hardware and even software licenses that are carried on the balance sheet may, in some cases, be more advantageous than having a high level of operating expenses. Having a reasonable amount of CAPEX allows IT organizations to be more flexible in the way that they manage their budgets.
Gartner indicated that the cash flow of the data center rental model may reach a breakeven point with the capital cost of building a new data center in as little as seven years.
The demand for capacity is bound to increase in the future. Kumar pointed out that Indian CIOs were too focused on the short-term and they needed to expand their strategic thinking to the long term.
Many factors affect the growth of assets for any given company, such as levels of virtualization, degree of consolidation, its business model and the state of the local and national economy. Therefore, it would seem logical that demand would continue to rise for the next ten years.
A critical question that IT heads had to answer was ‘what is the price of having variable capacity that may benefit short-term demand cycles, when the underlying curve for most IT capacity is going up?’.
CIOs tend to ignore the correlation between asset lifecycles and business agility, simply due to cost. The problem that most CIOs and CFOs face is not that different data center delivery options have different asset lifecycles but rather that they have been used for some time. The ability to integrate these different lifecycles with the agility of the business is important. Therefore, CIOs must consider asset lifecycle against business agility.
Organizations should consider switching to an operational model from a hosting or Cloud provider, for example, if the (capital) purchase of assets (such as servers and facility equipment) reduces the business agility of the organizations in more than three years.
Businesses are investing in IT to ensure an adequate level of business continuity. While it is a basic concept that the cost of availability rises exponentially with the level of availability, the market is becoming confused around the provisions of availability from hosting and Cloud providers. CIOs have begun to believe that data center operators can provide a relatively high degree of availability, offering relatively low-cost hosting or Cloud services, which may not be true.
Organizations must look at at getting the documented evidence of levels of Recovery Time Objectives (RTO)/Recovery Point Objectives (RPO), list of recent outages and resolution details (impact, time to resolve, etc.) from all relevant Cloud and hosting providers.
They must provision adequate budgets for business continuity management of critical systems to supplement the capabilities of Cloud and hosting providers.
Lastly, the report suggested that the users had to be aware that, at a certain point, the law of diminishing returns could apply to large infrastructure and operations projects.
This is true for hardware and software, and especially for consolidation of physical sites. For example, instead of managing numerous sites across the country, consolidating them to two sites might appear to be a logical strategy to save costs. Gartner’s experience with clients had shown that, at some point in the process, the net savings began to diminish.
In such cases, it is important for organizations to reassess each infrastructure and operations projects (consolidation, rationalization, etc.) after each milestone to receive the financial and technical benefits of continuing with the project.
heena.jhingan@expressindia.com