How will data centers weather the economic downturn?

IT operations will be under increasing pressure in the current economic downturn. Data center professionals and experts offer advice for weathering this financial crunch.

How will data centers weather the current economic downturn? It is the No. 1 question facing data center operators going into 2009. asked our Data Center Advisory Board to weigh in on the topic.

The advisory board is made up of a diverse group of data center professionals -- facilities executives, mainframe programmers, CIOs and systems administration experts -- and their responses to the current economic crisis are as diverse as their areas of expertise.

Data centers make do with what they have
Take a look around you. What you have now is likely what you are going to have to work with going forward, at least until the economy picks up.

The data center world has already lived through a very difficult economic crisis from 2001 through 2004. Those of us who survived already know how to survive: Conserve cash, watch expenditures, conserve cash, keep projects on a short leash, conserve cash, shed operations and projects that are draining resources, and oh yeah … conserve cash.

If facility or operations staff have grandiose plans in process, expect them to get scaled back or shelved. Even projects in progress are at risk. The people holding the purses won't fund projects that don't have immediate (or very short term) return on investment. Since this economic crisis is banking-centered, outside financing in the form of debt will be almost impossible to find. We're mostly going to have to make do with what we have for a while.

Ironically, demand for data center services is not going to change that much. In my 15 years in the business, data center demand has remained on a steady ramp and hardly ever wavered. Smart, established companies know that downturns are the time to invest. So for every startup that evaporates, the Going Concern will grow to consume the resources made available.

Sure, there will be some short-term pain here and there, but the sky is not falling.

--Chuck Goolsbee, data center executive, Digital Forest

Projects on hold; Server hardware refresh cycles stretched
For the next few months, I think most data center managers will be planning for reduced budgets for next year. This year's money is pretty much obligated by now -- there will be some cuts through the end of the year, but based on my conversations they will be a minority.

Next year, however, I believe data center managers will see significantly lower budgets. Cost containment will be the priority. New projects will be put on hold or delayed. Only mandatory buys will go on (in order to meet regulatory compliance, storage demand).

I think we'll see server life cycles stretched. Even the government will cut back. We're on a Continuing Resolution which keeps budgets at the same level, but since there are cost-of-living increases, it effectively cuts the budget for everything else.

The drop in oil prices may help the energy costs some, but it looks like 2009 will be a very constrained year. I hope I'm wrong, but that's what I'm hearing from peers.

--Robert Rosen, CIO and past president of the mainframe user group Share

Data centers lean toward server consolidation, cloud computing to pinch pennies
While not every industry will be severely impacted by the economic downturn, I think you will see companies postpone major new IT expenditures and hold current projects under a new level of scrutiny at least for a quarter or two. The belt-tightening frugal mentality that people have rediscovered at home is going to influence a similar mentality in operations budgets, which means operations groups will try to make due with what equipment and technologies they have, at least in the short term.

I think the projects that focus on server consolidation and greater energy efficiency in the data center will continue as they have been due to the cost benefits in the long run.

Virtualization technologies will be just as important and some groups might start eyeing cloud computing as a way to temporarily augment their current infrastructures without extra capital expense. Finally, I think penny pinching will cause more groups to lean toward free, open source alternatives.

--Kyle Rankin, senior systems architect at Quinstreet and Linux author

Open source systems management tools could edge out expensive incumbents
For data centers, tough economic times mean keeping the existing IT services up and running without additional budget allocations and even figuring out how to create new IT services with little to no money. Hence, the cliché of "doing more with less." Tight spending often drives IT to consider other options it wouldn't take the time to think about when the wine and bread is flowing.

This time around, my eye is on companies looking at the new crop of open source offerings, those IT management tools and platforms above the Linux and infrastructure layers that have already spread in the data center. These tools make promises of at least the same functionality of traditional closed source, higher-priced offerings, but at lower prices. Of course, they also promise new and better ways of managing IT, but here, cost can be the ice pick for breaking up a frozen short-list of the usual incumbents.

Even if IT managers don't want to switch to these platforms, they'd do well to educate themselves on these open source, cheaper tools if only to use them as leverage to drive better deals from incumbents. If times get tough, you have to consider changing to options you'd previously written off or haven't spent the time to consider.

--Michael Coté, analyst, RedMonk

Energy-efficient operations could make the difference between a profitable year versus a loss
I think if people didn't take efficiency seriously before, they will now. One of my frustrations over the years has been how slowly our industry has been adopting best practices or, more specifically, adopting efficiency metrics. When profits are high, it may be hard for some organizations to justify spending much time on driving efficiency. In environments with little or no profits, the efficiency of your operations could make the difference between a profitable year versus a loss.

I have spoken in the past about the fact that efficient IT and operations are a competitive advantage in a growing economy, but in a down economy it is crucial for survival. Justifying new data centers will be much harder as executives will now be squeezing efficiency out of every part of their business and especially data centers, which are typically a sizable investment. As has been the case at Microsoft for years, I believe all executives will need to understand the language of PUE, data center utilization, server utilization, etc. and drive their businesses to get more out of what they have.

But even that is not enough. Microsoft (as well as some others) have been very open about our operations, best practices and technology developments in the data center, so you can argue that the information is out there to make this an easy transition. However, it all boils down to execution. The companies that execute well during this down period will end up on top when things turn around. Again, I see this as a great opportunity for everyone.

--Christian Belady, Principal Power and Cooling Architect, Microsoft

As capital dries up, outsourcing data center infrastructure looks more appealing
We have not seen any of our deals cancelled or postponed. Our customers see us as cost-reduction enablers. As a colocation/managed services provider, we provide the opportunity for a company to outsource its data center, either by relocating it to our facility and thereby averting any need to expand/refresh its existing data center, or by moving its content off of aging and possibly obsolete computing infrastructure onto our virtualized managed services platform.

We represent an opportunity to get out of the data center business, which for most of our customers is not one of their core business competencies. And over the last number of years, applications have become even more mission critical, and trusting them to anything other than a state-of-the-art high-availability facility is not tolerated. Our customers' ability to attain and maintain that kind of availability in their own legacy facilities is not something they have the talent, capital or desire to absorb.

We are seeing the design/build of data centers slowing for two reasons:

  • The ability to secure the requisite capital is very difficult; and
  • Companies that have the requisite capital on their books are thinking twice about expending that capital right now because replacing it may not be so easy.

    CAPEX dollars are being doled out very cautiously. I don't think we will see a change in this trend until the capital markets begin to loosen, and this could lead to a future shortage of data center space. The net result of that could be much higher data center square footage pricing until the supply can correct according to the demand.

    But for the most part, from our perspective, IT spending has not slowed, as we have not seen any customers cancel or postpone their projects with us.

    --Ben Stewart, vice president of facilities engineering at data center colocation company Terremark Worldwide Inc.,

    IT shops get a double dose of stress in a shrinking economy

    A shrinking economy stresses everyone in an enterprise, but IT gets a double dose. When revenues shrink, a company must cut back while at the same time requiring IT to process current business and get new customers. So the question becomes: How much IT can be cut without strangling the business entirely?

    This leads to the classic "do more with less" situation where IT delays hardware and software purchases and puts off hiring the new guy out of college. Major software development projects, even strategic ones, may be delayed or canceled. It may also put green computing on the backburner because, after all, green computing is an investment some companies may be willing to forestall.

    Fortunately, there are a lot of strategies for dealing with this:

  • Virtualization, which has already made significant progress in some shops, will become more important.
  • An elongated hardware and software life cycle. Why replace something that works just because it's old?
  • A new willingness to tolerate some performance problems or even outages.
  • A drive to find redundant or obsolete purchased software. This may also lead to getting rid of "nice to have" productivity tools.
  • Small modifications to existing enterprise applications instead of sweeping rewrites. Note that this is a time when consultants may be let go instead of employees. This means more work for the survivors, but at least they get to keep their jobs.
  • Overtime.

    On a bigger scale, the bad economy also means companies will fail and merge. The IT people who survive will be stuck trying to paste disparate systems together and adding new tasks to an already overfull day. In the case of merging data centers, there will be a steep learning curve with little time or money for training.

    This may not necessarily result in shipping more jobs overseas for a couple of reasons. First, I think the bloom is off of the offshore rose for many companies due to some of the difficulties inherent in remote outsourcing. Second, is a period of turmoil and stress really the best time to think about relocating the IT services that drive a company?

    Finally, on a personal level, those lucky enough to remain employed may see shrinking pay or benefits. They will also be working more overtime and dealing with the reorganizations that always seem to accompany downturns. Training budgets will disappear and conference hosts will have to plan accordingly. A significant segment of the workforce will have to put off retirement due to smaller retirement accounts. This may be good news for companies using mainframes, while at the same time it means fewer positions will be open for the newly unemployed and college graduates.

    --Robert Crawford, lead systems programmer, mainframe columnist

    Spending flat, but budgets aren't being cut
    The economy has definitely had an effect on IT operations and spending, but not as much as what happened in 2001. I've seen outsourcing operations brought back in-house, but budgets aren't being cut. They're tending to stay flat from year to year. There's a huge push toward virtualization using VMware and Microsoft products in order to reduce data center power and cooling costs, as well as reduce the need for new hardware in a lot of cases. Companies are still hiring new employees and buying or upgrading to new hardware, they're just being a lot more cautious about it.

    --Bill Bradford, senior systems administrator, SunHELP.ORG

    What did you think of this feature? Write to's Matt Stansberry about your data center concerns at [email protected].

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