Data Center Outsourcing

Outsourcing takes center stage

Outsourcing data center operations in toto is catching on amongst Indian organizations as setting up one’s own data center is an expensive proposition both in terms of money, time and human resources says Abhinav Singh

The operational costs of Indian Data Centers (DC) are increasing which is pushing DC managers to outsource their DC operations in toto. The increasing cost of power, cooling, raw space, security issues and management are all fueling this trend in India. Additionally the initial high capital costs, management and staff costs, which crop up while running one’s own data center are factors that are leading company’s to think outsourcing. Routinely adding new services or upgrading to the latest technology is not always feasible; sometimes it requires bringing down the DC. Today service providers specializing in data center outsourcing are emerging, as there has been a significant increase in DC maintenance cost, which is high for Indian organizations. The challenges in managing in house data centers have forced them to give the work to Managed Service Providers (MSPs). Adopting changing market dynamics and benchmarking the infrastructure space combined with increasingly tight budgets have led to the creation of a scenario in which it makes sense for organizations to outsource this service to a co-location, carrier-neutral DC. Not every enterprise will have the resources and know-how to deal with these issues. This is why it is important to examine a data center sourcing alternative as part of a company’s overall IT strategy. Adopting these innovative strategies to develop a data center that’s aligned with business goals can give businesses a lasting competitive advantage.

The likes of Bank of Baroda, Bank of India and Britannia have outsourced their data center requirements to HP. Then there are others such as Moneycontrol, IBN Live, Johnson Tiles, WorldSpace Radio, Indiainfoline, TELCO, Travel Guru and Yatra that have outsourced their DC requirements to specialized MSPs such as NetMagic Solutions. Express Computer probed deeply into the aspects pertaining to the outsourcing of DC requirements to third party specialist firms by organizations and the reasons for this trend.

Owning data centers is a difficult proposition

As per research conducted on behalf of HP it was estimated that more than one-third of Chief Information Officers (CIOs) believe that in two to five years their DC will be unable to meet the rapidly growing demand for business services and applications and solutions for building a next-generation DC. The research pointed out that a large number of companies are facing the challenge of transforming their technology infrastructure environments into agile, energy-efficient and cost-effective assets to drive business growth. Increased pressure is being placed on CIOs to deliver more business services at a reduced cost, while at the same time DCs are approaching the limits of their energy, cooling and space resources. The research estimated that over 50% of large enterprises would face DC floor space shortage in the next five years and by 2010, more than half of all DCs will have to relocate to new facilities or outsource some applications to third party players. The report also observed that over the next five years, power failures and limits on power availability will halt DC operations at more than 90% of all companies and that in the next two to five years present day DC will be incapable of dealing with the rapidly growing demand for services and applications. Globally many CIOs are aiming at reducing the number of DCs that their companies operate through transformation including improving technology, increasing productivity and lowering overhead and management costs which includes improving technology, increasing productivity, lowering overhead and reducing management costs. These findings are not very different in India. Large enterprises have already started the feeling the heat.

Barry O’Connell, Director of HP’s Consulting and Integration Business Unit, explained, “DC operations are core to an organization’s business and there are certain elements of risks involved when they built their own DC. Risks can be in the form of choosing an appropriate location and maintaining uptime based on business requirements. Nowadays customers have the liberty to exercise different sourcing options, which help them, define as to what part of the DC operations they would like to outsource. Customers are looking towards an optimized DC environment by outsourcing it.”

There have also been environmental concerns and DCs are under increasing pressure to reduce their carbon emission footprint and dispose off old computing equipment in a safe and eco-friendly manner. To meet these evolving demands, DCs are aiming to achieve near continuous availability, increase capacity and efficiency, and become greener. Unused capacity, redundant functionality, inefficient or outdated designs, an ever-growing number of assets, and aging servers make these environments complex and expensive to manage and maintain as well as difficult to scale. In addition, power costs are rising steadily, leading to exorbitant electric bills.

There have also been concerns about building DC skill sets, which are a challenge for organizations. Sharad Sanghi, Chief Executive Officer and Founder NetMagic Solutions, explained, “Building skill-sets to run DC operations is a challenging aspect for many Indian organizations. Different skill-sets to manage databases and applications are required in a DC environment, which is not only costly but also hard to come by and also puts an additional burden on an organization’s IT budget. Skill-sets are also required to design and execute a modern day DC.”

Supporting more applications

The demand for storage and compute capacity is rapidly rising as business processes become digital and businesses perform more critical transactions and activities go online. Besides controlling internal processes, today’s IT departments also support external processes, including enterprise Web sites, as well as business-to-consumer, business-to business, and even customer-to-customer processes. All this means that failures in the DC can now seriously impact customer satisfaction as well as a company’s reputation. Another challenge is on account of the need for greater business integration, which in turn has been a driver for stronger application and infrastructure integration and has led to the adoption of modular, service-oriented architectures (SOA) to simplify development, integration, and reuse of ‘core’ enterprise services. As a side effect of this evolution, it is not uncommon to have unexpected or large application dependencies which can be managed to a great extent by outsourcing DC requirements. The DC Institute in the US recognizes these challenges and predicts that within the next five years, one out of every four data centers will experience a business disruption serious enough to affect an entire company’s ability to continue business-as-usual. Running out of power or floor space, having tons of cabling under raised floors, being unable to support high-density cooling, and with little budget for modernization—data center managers are increasingly concerned that they may not be able to support growth. According to the Institute, by 2010, more than half of all DCs will have to relocate to new facilities or outsource some applications.

DC Management proves expensive

Meeting this demand has led IT departments to quickly build and expand DCs and integrate new technologies ahead of schedule. This added complexity has resulted in rising infrastructure and management costs. Power and cooling costs have also sharply increased as data centers add new energy-hungry equipment, asset utilization has become less efficient, and energy costs have risen. As per market estimates on average, data center costs represent about five percent of the average IT budget. This figure includes buildings, facility management and support, power and cooling equipment costs, and electricity; but does not include IT infrastructure-related costs such as networks, servers, and storage. Hence organizations are under immense pressure to outsource DC requirements as it is facilitating consolidation, automation of data center operations, virtualization, and modernization of IT infrastructure. Expanding the DC typically means more of everything—more data and compute power, more assets to manage, more data to back up, more power and floor space consumed, more complexity, more network traffic, and more technology upgrades, migrations, and installations.

Optimizing the DC

Organizations in India are hopeful that by outsourcing DC requirements they would be able to increase productivity and drive growth, broadly to create new lines of business and provide for a safer environment. By outsourcing DC organizations are looking towards expanding capacity, flexibility, speed and availability. There is also the belief that outsourcing DC requirements can help improve performance and reduce risk while maintaining business continuity. Many organizations are also thinking that by outsourcing their DC they would be able to meet future demands for increased the DC capacity, which will result in lower operational costs. Many organizations are also hopeful that they would also see a significant return on investment (RoI) in DC transformation.

There is no doubt that by outsourcing companies would be able to take advantage of a more secure and reliable DC which will dramatically improve availability and minimize interruptions to critical business processes. The main objective of outsourcing is to evolve from a model where security, availability, and business continuity are architected for every application or business process to a model in which the DC is considered as a whole. This approach, along with an adaptive sourcing strategy, can improve business continuity coverage as well as customer and employee satisfaction, and it can also reduce cost and optimize it.

Additionally outsourcing DCs will result in improving energy and space efficiency along with achieving ‘always on’ availability. It also meets the requirements pertaining to consolidation and virtualizing DC and IT infrastructure. Outsourcing of DC requirements is also helping organizations in implementing service-centric, automated data center operations using the best sourcing options. Third party vendors are also providing thermal assessments, smart modular cooling at asset, rack, and DC level and full data center assessments. Barry said, “Our team initially understands the key business processes of an organization and their application portfolio. This helps the team in optimizing their application requirements in the DC environment.”

Hence when major companies in India in today’s changing business environment need to move swiftly to adapt to change, seize new opportunities and meet the demands for increased productivity and reduced costs. DC outsourcing will become further popular in India. There is also an ever felt need to match computing resources to current business needs and with issues of space, cooling and complex applications on the rise data center outsourcing is here to stay.

abhinav.singh@expressindia.com