Server infrastructure has become critical to business performance, prompting many to mitigate risk and cut costs by outsourcing to data centres. We spoke to the Institute of Management Technology’s Dr Jayanthi Ranjan and data centre consultant Chris Miller of Power Harvest about how CEOs should protect and enhance their data networks.
Since the business community first heard the word 'server', it has been thorough in its analysis of the potential risks a company might face from infrastructure problems. As IT becomes a core feature of most businesses, the potential damage to performance and reputation from a technical glitch has become a key concern for many enterprises. While once it was common practice to house servers cooled and locked away on a company's own premises, it has become the norm for many businesses to seek some risk mitigation and cost-efficiency by choosing to use external data centres.
At a time when big data is beginning to define business activity, the storage and analysis of huge flows of data can make all the difference in customer service, and help to shape strategy. The decision to use external data centres is therefore increasingly fundamental to the strategy and operational efficiency of many companies, and it is essential that CEOs understand the full implications of any decision about their use.
"Data centres are the 21st century's factories for any communicating business, and the data pathways between them are equivalent to the roads and railways of the past," says consultant Chris Miller, director of Power Harvest, who advises on all aspects of data centre projects, from site selection and business modelling to power provision across the UK, EMEA and ASEAN regions.
"The CEO's perspective is important," says Dr Jayanthi Ranjan, professor of information management and systems at the Institute of Management Technology in Ghaziabad, India. "The taller you stand, the higher your viewpoint, and many parts of the operation become clearer. You can see how to add value by adding processes to data centres because you can see the value of data and the hierarchy of processes."
The quality of the conversation between the CIO and the CEO is therefore vital when determining how to choose the right data centre solution.
"The CIO and the CEO must talk," says Ranjan. "I work in the area of big data, which is an important concern for CIOs because it is increasingly the knowledge on which companies base their products and services. The CEO may be good at things like business alignment but the CIO must look at how important data is to the company and understand the value of that data. Bringing those two things together is increasingly what differentiates a good company from one that performs poorly.
"The CEO must also understand the importance of IT, which is often the first thing that gets cut when a company is looking for cost savings. It is essential that the CEO has knowledge of what data the company needs, particularly in terms of what it requires in real time. It is also important to understand the need to maintain data. Historical data, which may reside in legacy systems, is something companies sometimes stop storing even though it is important for data mining and analytics."
A strategic perspective
For Miller, there has been a step change in how CEOs need to view the value of data, and this change in perspective must influence any strategic decision over data centres - a decision that was once, and sometimes still is, driven by cost considerations more than anything else.
"Any CEO must understand what their business is and how important IT is to it," he remarks. "Ten years ago, IT was seen as a cost of doing business, so CEOs had a negative view of it. Now, for many companies, IT - or at least data - is the business. From that perspective, it is possible to see how much data is 'mission critical' for the business and how much can be handed over to a third party.
"People talk about insourcing, outsourcing and now rightsourcing, but the key thing is to look at how data enables a company to create revenue in a sustainably profitable way and how it can be used to keep a business competitive - now and in the future. I did studies years ago to find out at what point it makes sense for a company to own its own data centre and from a rent perspective it is pretty soon, but you need to look at how IT develops.
"As a property play, the mechanical and electrical infrastructure is 80% of the cost. Power and cooling costs go up over time, as do infrastructure requirements. The CEO must understand this because the mechanical and electrical infrastructure can soon become out-of-date. Outsourcers face the same issues, but it is their core business, so it can make sense to outsource large centres of data infrastructure."
Ranjan is equally clear in her belief that data centre decisions cannot be driven by cost alone, and that CEOs and CIOs must consider such an investment from a long-term perspective.
"An offshore data centre can be very good value and companies always think about the bottom line, but you have to look at how IT is central to business strategy before making that decision," she notes. "Setting up a data centre is easy but it must be sustainable, which means the CEO has to understand how it fits with business alignment."
In many cases, Miller sees companies finding difficulty with the long-term perspective that he and Ranjan recommend. Choosing an external data centre solution may be an effective way to address short-term pressures, but companies should nevertheless consider the impact on their business three or five years down the line.
"The majority of requirements for data centre space usually come from companies firefighting to solve a problem," explains Miller. "They are making decisions under pressure. It typically takes 18 months to build a good quality data centre, which is a lifetime in IT, and it is a massive investment. A key driver of outsourcing is that it can be achieved in three to six months. The big technology companies need big space, so they make strategic plays around the globe, but other businesses have a less long-term approach.
"The value of outsourcing is defined by cost vs time vs quality. You may save time and money if you don't have to handle the data centre yourself, but you must ask whether the quality suffers. Everything has to be sustainable. There are alternatives and the cloud is increasingly an option, but the IT guys don't like it because they are not happy with ownership and controls issues, and they are uncomfortable with questions about who is responsible if something goes wrong."
Whichever path a company takes in its strategy on data management, some servers will be kept in-house while others may be sent elsewhere. A key concern for Ranjan in this situation is that CEOs should understand the importance of integrating the internal and external.
"You have to have different identities in your approach to data," she explains. "There must be connectivity between offshore data and internal data to complete the information value chain. One of the most important factors in using an external data centre is the assessment of that connectivity."
Offshoring and the potential in Asia-Pacific
Once the decision has been made to use an offshore data centre, this is only the start of a journey that may take a business to the other side of the world. The Asia-Pacific region is a hotbed of growth for the data centre market, and the cost perspective alone might draw companies from far afield to either the mature data centre markets - Taiwan, Hong Kong and Australia - or emerging players like Malaysia and Indonesia.
Some estimates suggest that the Asia-Pacific region will see 10% growth in data centre space over the next three years. China, which already accounts for around 30% of data centre space in the region excluding Japan, is likely to see the fastest growth in the market, but the focus across the region on energy efficiency is resulting in a slowing of the rate of increase of power demand for data centres in many locations. This means that companies will find attractive solutions in many destinations.
Some companies may baulk at locating data centres in Asia-Pacific if they are not also based in or near the region, but distance should not be the defining factor.
"The questions to ask to find the right partner are fairly simple," says Miller. "What are its reference points in terms of existing clients? What covenants will it provide to share risk? How long a contract is required - the ten years that service providers want or the three-to-five years clients want? What indicators are there of its quality of service? Location should be the last consideration, although it is important.
"The data centre does not have to be within commuting distance of the head of IT - though I have seen some companies make decisions on that basis. You can't be a server-hugger these days. Location is important in terms of data legislation, not because servers need to be located near to a company's HQ. You have to consider the usual factors like natural disasters and flight path risks, of course, but the key driver in terms of location is still cost," he stresses.
For Ranjan, location matters not only because of cost implications but also for reasons of connectivity to local markets for businesses operating in a global marketplace.
"Data centres are growing fast in the Asia-Pacific region and the location of data centres is becoming more important as even though the market is globalising but there is still a need to localise operations," Ranjan notes. "Local connectivity is important for businesses operating in emerging markets.
"Data quality and integrity are the most important things to consider. They should be the CEO's first consideration. The market changes very quickly, so it essential to keep up with the changes to make sure the right decision is made. South-East Asia is emerging as a destination for data centres but it is fragmented, with some markets less favourable than others. Malaysia has a very good environment for the industry."
Miller also believes that Malaysia illustrates well the advantages of locating data centres in Asia-Pacific for reasons of cost and quality.
"Malaysia is very forward-thinking and it has the advantage that it has Singapore on its doorstep, which is a major data centre hub, a booming financial market and excellent connectivity," he explains. "Malaysia has a lot of water for cooling and a lot of land on which to build data centres. It will do well because it has political stability and it is a mature economy. In Vietnam and India there is a big uptake of technology, too, and China is a good place to be involved because it is a massive market in itself, but Malaysia has a strong and established data centre community already so there is a lot of the right expertise available."
There is no single roadmap for CEOs when it comes to choosing whether to invest in a data centre or where to locate one, but with a keen understanding of the importance of IT and data to the business the CEO at least has options to achieve sustainable savings and performance improvement.