Data Center Consolidation Projects: Benefits and Pitfalls

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1 Research Publication Date: 2 May 2011 ID Number: G Data Center Consolidation Projects: Benefits and Pitfalls David J. Cappuccio This research outlines the primary success factors in consolidation projects, as well as the most-common issues that could hinder the project's success. CIOs and project managers should be aware of the potential issues at stake before they begin such projects. Key Findings Successful projects clearly define the benefits and expected results of consolidation projects, from a business point of view. Focusing on personnel and organizational issues is often the most critical component of the project. Financial benefits may not be attained unless there is a clear understanding of the disposition of assets (both physical and staff) and which budgets are impacted. Recommendations If facilities or staff reductions are a factor in the benefits, develop a concrete plan to capture those costs at project completion. Engage with HR at project creation; the people factor will be the most critical component, both positive and negative. Develop a comprehensive communication plan as a first step, to be continued through to project completion Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity" on its website,

2 ANALYSIS There are many reasons that organizations embark on data center consolidation efforts, ranging from simple expense management to reasserting central control authority over a highly distributed environment. Regardless of the reasons, understanding the benefits, risks and hidden problems that may thwart your progress is critical to the success of the project. During the past few years, we have talked with hundreds of organizations that are undertaking consolidation efforts of all sizes. This research discusses the primary reasons for these projects, as well as the most-common issues that developed during the course of these projects. Companion research will discuss what organizations did to solve these problems, and the current best practices in the industry. The primary reasons behind consolidation projects are: Cost reduction Facilities reduction Energy management Standardization and control Business continuity and disaster recovery Cost Reduction Cost reduction is often cited as the primary objective when embarking on a consolidation project. Over the years, multiple, small data centers may have evolved for individual business units, or merger and acquisition activity may have added multiple data centers into the portfolio, often in remote locations. Although, as independent entities, these data centers may appear very efficient, and are providing valuable services to their customers, often they are delivering services locally that could be delivered just as efficiently, and much more cost-effectively, from afar. Only in situations where there are site-specific applications that are response-time-sensitive or require significant amounts of data should dedicated data centers be considered, but only to support those specific applications. One issue that often arises in these situations is function creep, where remote sites slowly begin to add more common services (that should be centralized) under the rationale that they already have the space, so why not use it. This is an easy use case to justify for individual sites (especially when budget authority is distributed), but it can quickly negate the long-term value of the consolidation project. A second pitfall that sometimes arises is overestimates of savings during the project analysis phase, especially when a third party does the analysis. Often, the savings defined are conceptual in nature or very time-bound, and the nature of organizations and consolidation projects is such that internal complexities and other projects tend to create environments in which long-term consolidation efforts may take longer than originally anticipated. Facilities Reduction Facilities reduction can also be a primary motivation for consolidation, but only in situations where the IT and facilities teams are in lockstep with their objectives. Relocating IT resources to a central site has real benefits; however, if the original site is left intact, much of the ongoing operational savings (such as energy, floor space and physical maintenance) will be negated. When a facility can be vacated and then physically shut down, or returned to its owner, the benefits of consolidation become obvious. One variation on this theme is in situations where a Publication Date: 2 May 2011/ID Number: G Page 2 of 6

3 facility is vacated and a valid use case has been created for the repurposing of the space (e.g., office growth areas). One issue that often occurs in facilities reduction projects is that IT remains focused on the physical movement of applications and equipment, and project success is viewed as being achieved when IT has completed its move. If the final phase of the project doesn't include a controlled shutdown (or redeployment) of the vacated facility, then the full benefits of the project will not be realized. Energy Management Energy management is rarely seen as a primary motivation for consolidation projects; however, when looked at from an ongoing operational expense perspective, energy savings can be one of the most significant benefits. The obvious savings is attained if the power and cooling infrastructure that was used for computing resources can be shut down, and the equipment moved into a newer data center built to be more energy efficient. Often, even greater savings can be attained just by consolidating older equipment, especially servers, onto newer, more-efficient platforms. Standardization and Control Reducing complexity is normally a primary goal in consolidation projects, and, when executed logically, IT can develop a standardized environment that allows more-efficient purchasing practices, greater negotiating leverage and reduced operations costs, as well as providing infrastructure and operations a high level of architectural control. By standardizing applications and moving everything to the same versions, support staff become more efficient, because they do not have to worry about supporting different applications providing the same functions, or supporting different versions of the same application. Business Continuity and Disaster Recovery Many organizations look at consolidation efforts as an appropriate time to re-examine business continuity and disaster recovery plans as well. Rather than having multiple, disparate plans for each site, a more cohesive plan can be developed that incorporates realistic recovery time objectives and more-consistent demonstrable benefits to the organization. What to Watch Out For When planned appropriately, consolidation projects can have an immediate, positive impact on operational efficiency and the bottom line. When planned poorly, or when the impacts and perceived benefits are not well-understood, the results can be disastrous. The primary reasons consolidation projects fail to meet expectations are: Scope and benefits HR issues Complexity Politics and communication Skills and planning Publication Date: 2 May 2011/ID Number: G Page 3 of 6

4 Scope and Benefits The scope and benefits of consolidation projects are often outlined strictly from a financial point of view, and, in many cases, the primary financial benefits are reduction in maintenance costs for the older sites and reduction in staffing costs after consolidation is completed. Only in rare instances have we seen these benefits fully realized, primarily because the true costs of running a distributed environment cannot be identified to the point where those costs can be either reclaimed or returned to a budget pool once the project is complete. A secondary issue is that, often, the facilities that are freed up at project completion are reallocated for other uses, absorbed by the local resource managers, or left idle until a lease expires or another use case is developed. From a staffing perspective, in many cases, the remote sites have developed during the years using unofficial IT staff or partial full-time equivalents (FTEs) to support individual functions, often as an adjunct to the official functions of that personnel. Once consolidation happens, these people will revert to their full positions, and the partial FTE designation will disappear, along with the cost. This becomes a virtual savings for consolidation projects and is rarely seen as a true benefit. Also, many times, the unofficial IT staff was not included in the original IT budget and, when the workload is centralized, the extra cost may be moved into the IT budget to support that "unofficial" workload. Overall, there may actually be a staffing cost reduction, but that reduction will not be reflected in future IT budgets. Although actual staff reductions (i.e., layoffs) may not occur and personnel budgets will not be reduced, the overall cost of data center operations will be. HR Issues HR issues are an integral part of all consolidation projects, especially failed ones; however, most often, the HR team doesn't get involved until it's too late, or for the wrong reasons. In the most successful consolidation projects, the HR team is one of the first to get involved, and does so very early in the planning stages. The HR team understands that, first and foremost, a consolidation project affects people's jobs, and the sooner the people affected understand what their options are, and what their eventual roles will be, the smoother the project will run. No matter how secretive a team tries to be in the early planning stages, word of a consolidation initiative will spread like wildfire. If the HR team isn't involved quickly, rumors will spread and the risk of a disgruntled employee causing problems (either at his or her site, or with the project) can increase dramatically. When employees are fully aware of the end-state objective, and how it impacts them, they are more likely to help the project succeed, rather than find methods to slow it down and negate its overall benefits. Complexity Often, consolidation plans talk about the benefits of a conceptual end state, where the environment is consistent, everything has relocated and the operation is stabilized. However, the process of getting there becomes a nightmare scenario in which each business unit has developed device- or vendor-dependent solutions and want their "to be" operating environment to be the same. Relocating these environments "as is" can be efficient; however, without a well-planned end state in mind, many of these projects result in a consolidated environment with a variety of types of equipment and applications that have been physically moved from one location to another, without thought to the longer-term consolidated state. These environments often become individual islands of automation within the same room, which, in turn, remain expensive to maintain and difficult to migrate into a standardized architecture. Publication Date: 2 May 2011/ID Number: G Page 4 of 6

5 Politics and Communication Politics and communication are often the Achilles' heel of consolidation projects, in that they are often assumed to be an annoyance (e.g., politics) or a minor inconvenience (e.g., communication), when, in fact, without the proper focus on both of these as primary success factors, the project can quickly devolve into a chaotic state. As mentioned previously, the HR component is critical to the success of a project, and the political environment is part and parcel of the same issue. When diverse departments learn that a consolidation project is imminent, there are generally those that embrace (or understand) the need for change, and those that immediately push back against it. Those that push back often are motivated by a fear of losing job security or a loss of departmental control (or importance). Roadblocks will quickly be thrown up, defending the status quo based on operational costs (many costs are hidden, so the perception is that expenses are low), performance of local versus consolidated applications, network speeds and the motto, "If it's not broken, why fix it?" Communication becomes the key enabler to solving the political problem. Organizational dynamics have shown that, in situations where little or no factual information is available about a project's goal or objectives, the disenfranchised will quickly begin to provide their own rationales, and unfounded rumors will begin to spread. A well-thought-out communication plan can stop this before it becomes an issue, and should be developed as one of the first initiatives of the project. Skills and Planning Skills and planning are the last critical components of a consolidation project. Although the project management office (PMO) should be tasked with developing an overall project plan, in many cases, the plan is treated as a special project and given to senior IT personnel. In some cases, this works, assuming that these people have strong project management skills, and not just strong technical know-how. However, often, the well-defined project and process management methodologies of the PMO are not used effectively, which forces consolidation leaders to invent their own process or rely on the ad hoc skills they develop as the project progresses. Without strong support from the PMO and senior executives, these projects can easily degrade into glorified move events, where the end result is simply an asset relocation exercise and not a true consolidation. The costs and benefits will, in many cases, be determined by how effectively the project is managed. Publication Date: 2 May 2011/ID Number: G Page 5 of 6

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