Data Center ‘nomics 501: Doing the costing math…

August 6, 2013 Nlyte Software


Anyone that has spent any time with an Nlyte representative would likely have heard us say that one of the primary values we bring to the industry is to support the massive change management requirements in the data center and that Nlyte supports the business optimization associated with that massive investment over the long term. I know you would have heard those words, because that’s what we do. Sure we also handle monitoring of power and drawing high-fidelity elevations of racks and floorplans, but the BIG value is managing asset lifecycles over long periods of time. It’s possible however that you (and perhaps your peers) would NOT have had the context to internalized that message in your world, as it applies to YOU! Let me explain a few Data Center numbers to help us come to a common communication ground.

Data Center Math

Data Center math is critical for strategic planning requirements

First, a Data Center is expensive when viewed in the context any point of reference. A conservative estimate for a ‘Tier-3′ structure and all of the facilities inside it (power, cooling, lighting and security) is about $1000 per square foot. So a 50,000 square foot center will cost about $50MILLION to build. Then you have the challenge of filling it up with gear. Every center’s computing needs are different, and gear can range from simple 1U servers to advanced 15U blade centers. And all of those ‘U’s need to be mounted in racks. Lots of racks which take up that finite space in the data center. So how many square feet is a rack? 32! Yup. Every rack in your data center consumes about 32 square feet for estimating purposes. (The rack itself, and all of the maintenance clearances, the walkways and facility/overhead space.  Trust me, if you think long and hard about all of the ‘overhead’ space used in a data center your representative number will be closer to my estimate of 32 than it is to a low ‘gut’ figure of say, 10 or 15). To complete the picture,  a good estimate of the number of IT devices per rack is 25. Sure, some racks are more dense, some are less, so we use a figure of 25. Now using a little hand-waving and estimating the price of various types of gear, I think it is very safe to say the cost to deploy gear inside the data center will be about 3-4 times what it cost to build the structure itself, or about $3000-4000 per square foot, which yields about $100,000 per rack for the equipment itself. (I have seen single filled racks costing $200,000 or more as well, so the figure of $100K is just a mid-point estimate). How many racks will you have? Simple math again, 50,000 divided by 2 (half filled), and then divided by 32 (per rack) yields about 800-1000 racks.

So now you’ve built that 50,000 square foot data center, which cost $50Million for the box, and you’ll spend another $100 Million to fill just HALF of the space with IT gear on the first day. (HALF is a conservative estimate of your day-1 usage of the space). Lastly, remember that each rack has about 25 device on average, so your shiny new  data center has about 20,000 devices installed on the first day it is operational!

But HERE is where the story gets more interesting strategically and much less intuitive…

As it turns out, for the past 20 years your finance team has been biting their lips and clenching their teeth when they look at the data center general ledger. First of all, it has traditionally been a sunk cost, which means that every dollar spent for the data center works against the bottom line. These same finance folks have also lived with the burden of aging assets on the books way past their financial schedules, and dealing with assets that are ineffective and yet still operational. In a nutshell, in a highly optimized data center planning model, most gear is designed to ‘live’ on the books and on the data center floor for 3 years. Yes, 3 years. Most depreciation schedules, leasing schedules and even warranty schedules are built upon this three year model. So what happens after three years? The gear starts COSTING the company much more than it needs to and it’s actual VALUE to the company sharply decreases as all of the financial benefits vanish. (Not to mention that the technology itself is also likely at least 75% slower and this old slow gear is using 50% more power than something new). While in the old days it was ‘cool’ and a bit of a right of passage to prove that equipment could be keep alive for years and years, it is no longer the business model that is rewarded. Gear needs to move into service quickly, be consumed fully when it’s value is high, and then be retired aggressively when it’s schedule dictates. In short, IT gear that stays in service past it’s three year schedules directly work AGAINST the bottom line efficiency of that data center.

So what does this mean? For your data center to be optimized and run as a strategic asset, ONE-THIRD of everything you see in the data center should be changed every year. In that example above, one third of 20,000 devices or almost 7,000 devices per year. Now with 200 business days in a year that means 35 devices each and every day SHOULD be changed. 35 new ‘projects’ each and every day, and anything that doesn’t get done today becomes backlog for tomorrow. This is not just theory, but the new reality of running a data center as a strategic asset.

In the new economics of the data center, these simple and yet strategic math discussions are becoming commomnplace with the executive teams, and beginning to perculate down. This type of financial management of the data center as an asset is real and here today, and this is what Nlyte does. We manage hundreds of concurrent projects and workflows to enable those change projects to be on schedule and accurate. We support the moves, adds and changes and we identify each various device’s business schedules. DCIM is a fascinating business management solution, and the Nlyte implementation in direct support of IT’s financial goals is a hard value to overlook.


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