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Using chargeback to reduce data center power consumption: Five steps

Data center managers can use chargeback to reduce data center power consumption and save money during the current economic downturn.

There's a not-so-hidden and poorly controlled expense in the data center these days -- power. It certainly receives a great deal of press, especially when the conversation turns to green IT. Unfortunately, it's mostly talk, and very little action. This is a significant problem because in many situations, the cost of power (including cooling) may be the largest expense in the data center.

In general, consumption is only limited or restrained when it is associated with a factor such as cost or when it is measured and managed. Recent rises and declines in the per-gallon price of automotive fuel is a great example of this. The best way to limit a business consumable is to measure its use and compensate an employee on a related, objective metric.

Power is uniquely measured and managed. The data center consumes it, facilities provide it and finance pays for it. There are very few organizations that stray from this operational model and, not ironically, these three groups are not typically known for their close interaction with one another. The problem is that the three groups are generally unaware of the needs of the others and if they share the same business goals or impacts. The result is disorganized management of enterprise power consumption. (Missing from these groups is the business user, for whom this power-consuming activity and cost takes place to begin with.

The key objective is to include power as an IT service delivery cost component paid by the business user. This is challenging in and of itself when most organizations are struggling just to get hardware costs allocated. Part of the challenge is the limited breadth of most chargeback tools and the lack of reporting of actual power consumption.

Rising data center power costs: A problem with no end in sight
IDC estimates that power costs will equal server capital costs by 2012. Some companies have likely already reached this threshold. The high, and rising, cost of power means that as assets extend beyond their typical book value, power becomes the largest related expense.

This is a very critical issue. In 2007, IDC stated that 30% of the cost of a data center is spent on power, and that figure has doubled in the last five years. Looking five years ahead, worldwide data center power and cooling costs will grow at a rate four times that of new server spending -- while Microsoft projects the rate of power growth to be eight times.

And many data centers are falling short in addressing this issue with data- and fact-based solutions. Basic economics demonstrate that this current rate of spending and growth must be stopped, as organizations are throwing money out the window.

Measure consumption for better power management
With power quickly exceeding capital costs, one would think that chargeback tools would make this a key function. But this is clearly not the case. The savvy data center manager will install power-monitoring tools and equipment to be able to start making fact-based decisions and passing power costs onto the business user.

In its report to Congress, the EPA identifies data center power metering and chargeback systems as one of the Policy Recommendations and Strategies to reducing data center power.

To help measure server power consumption and efficiency, a defined metric needs to be established. This metric should be an MPG-like measurement that, like MPG, can be easily tracked. An effective metric for measuring server efficiency is "watts per logical image," which gives a solid, trackable metric around the power required to deliver an operating system environment.

One of the standard measurements data center managers should use is power usage effectiveness (PUE). This metrics is a ratio of total data center power consumption versus total server power consumption. In its report to Congress, the Environmental Protection Agency (EPA) found an average PUE of 2.0. In other words, for every watt of power consumed, another watt is required to support the surrounding infrastructure. This is unacceptable. Google, in a recent IEEE Spectrum story, claims to have a data center with a PUE of 1.15.

Without setting consumption and efficiency ratios, IT managers cannot establish credibility with the business user by demonstrating power reduction achievements to date.

While there aren't any silver bullets to solve the power problem -- or green ones for that matter -- there are a number of simple and logical steps that organizations can take today.

Power chargeback: Steps to success

  • Step 1a: Implement some type of chargeback process supported by data collection tools, even if it is just a single technology, such as virtualization. Part of the chargeback challenge is that there aren't products that span all data center categories and operating environments. From this point forward, expanding the processes and tools to cover as much of the data center operations should be established as part of an ongoing initiative. A best practice is to establish a program management office (PMO) to focus on delivering a comprehensive chargeback solution to enterprise.
  • Step 1b: Initiate conversations and interaction among data center management, facilities management, and finance. Create an energy governance board with participation from the three groups so they can better understand power requirements from an enterprise point of view. Calculate the energy costs for IT service delivery and start to allocate it among business users. This will be a challenge because in most cases this will at least double the IT charges where power was not previously included. Determine a power consumption baseline and start tracking improvements in monthly reduction. .
  • Step 2: Identify and roll out appropriate power monitoring tools to more accurately identify power consumption for specific data center products and components. Set performance targets so data center and facilities management are jointly accountable for energy consumption. Closely align business user billing with actual consumption. Expand technical usage data to additional data center components.
  • Step 3: Collect, assimilate and consolidate disparate data sources and elements into a single database. Integrate procurement data (including utility costs) with equipment usage (including power consumption) information and determine actual per unit (varying by item) cost. Adjust cost levels with all chargeback tools. In most cases, moving from projected or estimated costs to actual costs will reduce the rates charged to the business users.
  • Step 4: Transition from component-based chargebacks to business services-based billing. The result is a charge that resonates with the business consumer. Experience shows that business users understand and are clear on what it means to pay for a specific business activity (such as performing a mark-to-market calculation on a portfolio in the financial services industry) rather than presenting a bill for CPU, network, storage, power and other technical components for the same business processing.
  • Step 5: At this point, data collection should be in place and accountability should be established so that consumers of IT services are requesting – or demanding -- improved energy efficiency, which will lower service delivery costs. An even better position is for the data center and for facilities to proactively improve power efficiency.

Of course there are also some "hidden benefits" of including power in chargeback calculations. Many organizations face objections to moving production systems to virtualization platforms. Such moves help defer new data center construction and dramatically reduce asset and operational costs. By charging the business user for the actual costs of hosting applications on dedicated platforms (by including power) the migration to virtual servers can become user-driven. The need to reduce power pass-through means that data center managers need to reduce waste through efficiency improvements. In many cases, these activities could result in deferring or mitigating the need for considerable capital expenses.

The choice to measure, monitor and track data center power consumption has passed. Because it is one of the most significant data center expenses, business users must be charged for power. Data center management, facilities management and financial needs must align and be measured on common objectives around power usage and consumption reduction. The best way to drive to this end is to include business users by charging for power in the chargeback process.

ABOUT THE AUTHOR: Lucian Lipinsky de Orlov is Director of Business Strategy for VIRTERA, an independent IT professional services and consulting firm that delivers virtualization technologies and services to companies across the U.S. VIRTERA's proven vSpectrum consulting method helps clients in the successful and rapid adoption of virtualization and green IT technologies while delivering optimum ROI. For additional information on how to reduce power consumption and costs in a virtual environment, please visit

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

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