FOUR FORCES OF DATA CENTRE DISRUPTION

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1 Whitepaper FOUR FORCES OF DATA CENTRE DISRUPTION DATA LOCATION ENERGY MANAGEMENT PLANNING DELAYS CAPACITY ERRORS RISK COMPLIANCE BUSINESS TRANSFORMATION March 2014

2 Executive Summary Contracted strategic and tactical planning cycles Businesses across Europe are feeling the impact of seismic change in the way that technology impacts their day-to-day operations. 38% 62% Extended strategic and tactical planning cycles Globally significant macro trends driven by technology are fundamentally impacting their business operations, the services which they offer to customers and their engagement with users. Social interaction, mobility, cloud, and information (big data) combine to empower individuals as they interact with each other and their information through well-designed ubiquitous technology Gartner. Figure 1: Extended planning cycles Businesses that have experienced changes in planning cycles over the past months. Base 267 These trends are creating a shift in power (Gartner research VP Chris Howard). End users can now define how they engage with - and utilise - services. It is up to organisations to adapt to consumer demand and expectation. The user now defines they how want to work and crucially data and function are moving closer to the user out of the control of traditional enterprise. With this shift comes a phenomenal opportunity for businesses to redefine themselves in this new digital world. Forward thinking CEOs understand the significance of this shift and many have already implemented new initiatives designed to leverage the benefits of macro technology trends such as social interaction, mobility, cloud, and information. But at the same time these macro trends place increasing pressure on the CIO. Nowhere is this pressure more significant than in the data centre. Underestimated need for data capacity in terms of storage and delivery Overestimated need for data capacity in terms of storage and delivery Please select all those from the list below that have presented (planning) challenges for your business in the past months. Base % 31% Combined 63% of respondents had either overestimated or underestimated capacity. (9% doing both) Figure 2: Capacity errors The data centre is the fulcrum on which the technologydriven enterprise rests. Inefficiency in the data centre will fundamentally impact the effectiveness of social, mobility, cloud, and information (big data) implementations. This in turn directly impacts business value and bottom line profits. Worryingly, research commissioned by Colt shows that the pace of data strategy decision making is slowing down. Whilst technology deployment is getting easier, European CIOs find it harder to devise data centre strategy than they did 12 months ago. The research shows longer planning cycles for strategic and tactical information delivery and data capacity uncertainty amongst European IT Directors.

3 The research highlights Four Forces of Data Centre Disruption which challenge the pace of the data centre s ability to support organisational needs and prioritise challenging business and IT drivers. These forces can be summarised as follows: Business transformation Data location & decentralisation Energy management Risk & compliance In the survey, 62% of businesses experiencing a change in planning cycles see those cycles extending. These numbers fluctuate to some degree across regions ( 56%, 73%, 51%, Netherlands 76%). Only 38% of decision makers across Europe state that planning cycles are contracting. 63% of respondents also admit to capacity planning errors over the past months. However, these numbers remain relatively constant across each European region (66%, 63%, 64%, 56% Netherlands). The research shows that companies experiencing these strategic pressures have higher levels of exposure to the four forces of data centre decision disruption. In short, this combination of business issues serves to slow down data centre strategy and responsiveness. This comes at a crucial time when data strategy needs to be as agile and dynamic as possible. As an industry the data centre sector needs to provide the tools and information which enable end users to make data strategy decisions efficiently and effectively. The advantages offered by faster more flexible deployment capabilities are being undermined by the breadth and scale of issues requiring business and IT alignment. It is the industry s role to simplify these issues and enable transformation change to occur within the data centre. Failure to balance these converging forces will directly lead to a failure to deliver game-changing IT initiatives and lead to a reduction in business performance Research Methodology 503 Online interviews were conducted among decisionmakers for the infrastructure supporting data management and information delivery in their business. Respondents represented organisations in the,, the Netherlands and with over 500 employees and with over / 1m annual IT budget (excluding personnel and consultancy costs) across financial services, engineering, IT/telecoms, retail/wholesale/manufacturing, marketing/ media/creative services/design, utilities, business services or government. Companies seek to innovate with data strategy whilst balancing the four data forces to realise strategic goals. However, the advantage offered by faster more flexible deployment capabilities is undermined by the breadth and scale of issues requiring business and IT alignment.

4 Four Forces: Data Disruption Influences The four forces of data centre disruption impact the ability for the business to plan efficiently [time delays] and plan effectively [capacity errors]. As shown in Figure 3, factors surrounding energy management, data location, business transformation and risk & compliance are more prevalent in companies that have made capacity errors. Whilst each of the four forces is considered a challenge by the majority of businesses as a standalone issue, in combination they have a tangible impact on decision making, planning and responsiveness. Businesses experiencing capacity challenge are more likely to: Have considered data relocation in the past 12 months (79% vs. 59%), Have energy management initiatives influencing IT decisions (51% vs. 26%) Currently be in a state of strategic or operational transition (70% vs. 60%). State risk and compliance roles and initiatives are influencing IT decisions (71% vs. 55%) Energy management and risk & compliance initiatives are also factors connected to planning cycle extensions and delays. Whilst each of the four forces represents an opportunity to innovate or deliver benefits to the business, they also add complexity and uncertainty to future data needs. Energy Management 26% 60% 51% Selected energy efficiency as a job role or initiative shaping data strategy in the organisation Business Transformation 70% Currently in a state of strategic operational transition within our business Data Location 59% 55% 79% Considered the option of locating data away from HQ or strategically central locations Risk & Compilance 71% Energy efficiency as a job role or initiative shaping data strategy in the organisation For the majority of respondents in the survey, the four forces of datacentre disruption are concurrent business needs, all impacting the fundamentals of data strategy. In pursuit of innovation, the requirement is for CIOs to balance these drivers of IT change and avoid unforced capacity errors or planning delays. This can be achieved by accounting for and planning against changes in the business caused by business transformation, data location, energy management and risk & compliance. Capacity planning challenges. 63% respondents overall Others Figure 3: Four Forces impact on capacity planning issues

5 Force 1: Business Transformation Data strategy faces continual organisational change 79% of respondents have experienced major business change which impacted IT in the last three years 66% are currently in a state of strategic / operational transition 69% state that business-wide transformational change drives CIO thinking The research underlines the prevalence of organisational change within a business and its perennial impact on technology decision making. Businesses never stand still, making a conventional view of IT and business alignment difficult to realise. In reality, infrastructure is either lagging behind or paving the way for business strategy and rarely moves in harmony with the organisation, especially larger businesses. 66% 74% 66% 61% Figure 4: Business transformation 58% We are currently in a state of strategic operational transition within our business. (Agree/Strongly Agree) As stated below, the CIO is pivotal in reconciling business transformation: 29% of respondents believed the CIO to be the most important figure in terms of supporting and driving business change. This was the highest amongst the C-suite responsibilities, including CEO (24%) and CTO. 80% of [business transformation] work and activity falls under the role of the CIO, so a strong role for a CIO is a given (Forrester Research, CIO Forum 2013 source cio.co.uk) Pragmatic alignment is achieved by setting parameters for lag and lead. Critically, CIOs must be aware of the business cycle in order to synchronise IT strategy, factoring in external drivers of change, such as regulations and competitor activity alongside internal issues (M&A, or large-scale infrastructure innovations) driven by workforce mobility, BYOD and changes in IT delivery for the business. 69% 81% 66% 64% 54% Figure 5: Business transformation: CIO influence Transformational change has a significant impact on CIO thinking. (Important/Very important)

6 Force 2: Data Location The advantage of data decentralisation heavily influences IT decision-making 72% of respondents have considered locating data away from HQ in the last year 72% 77% 62% 78% 64% 86% state that data location and proximity to the business increasingly influence CIO strategy 90% say that the proximity and importance of their data are related to regulation and risk mitigation The majority of businesses will have a strategy today that mixes in-house and external management alongside centralised and distributed data and infrastructure. One notable influence on data location is the appetite for cloudbased delivery models. 65% of respondents in the survey intend to utilise cloud to greater effect in the future. Figure 6: Data relocation Considering locating data away from HQ or strategically central locations. (In the past 12 months) CIOs are looking for a clear direction on location in order to achieve possible cost savings. To avoid wasting time in this process, the IT organisation should agree on the general direction of data location for the business, taking into account the drivers and benefits of change. As stated below, regional cost variations, combined with an appetite for cloud services, are clear drivers for the degree of data relocation considerations in the research. The traditional base of data centres has been the key economic centres such as London and Amsterdam, but with the majority of data centre applications being for storage with reduced latency demands, the argument is that, subject to regulatory controls, the data centre can technically go anywhere. Cushman Data Centre Risk Index 2012 source Data Centre Research) 72% 78% < 10m 71% 10m to % > 100m Figure 7: Data relocation: IT spend Considered locating data away from HQ or strategically central locations. (In the last 12 months by IT spend per annum)

7 Force 3: Energy Management Increasing network efficiency (e.g. Virtualisation) 71% 83% 68% 67% 54% Energy Management is connected to cost saving and the environment 67% of respondents see energy management as either important or very important in achieving cost saving IT goals - 83% in businesses with more than 50m IT spend per annum 91% of respondents would consider changing data location in order to access natural power resources (offshore, or overseas) Energy Management Power Reduction Cloud / hosting delivery models 68% 67% 54% 67% 83% 64% 72% 66% 56% 62% 65% 71% 61% 68% 50% 64% of respondents see energy consumption becoming increasingly important as a factor influencing IT strategy Figure 9: Strategic IT Cost Saving Energy Management On a scale of 1 5, where 1 is not important and 5 is very important, please rate the following strategic IT goals relating to cost saving. (4&5 ratings shown) Closely connected to data location is the issue of energy management. Once the domain of solely high energy consuming businesses, the issue is now a top priority for IT strategy. In the survey Energy Management was second only to network efficiency as a strategic cost saving goal for IT. Energy is becoming more expensive in all forms, with electricity price growth clearly increasing: 64% 75% 64% 57% 52% Figure 8: Energy consumption is becoming increasingly important as a factor influencing IT strategy. (Important/Very important) Eurostat shows an average year on year increase for industrial electricity unit cost of 5.2%. Moreover, exponential data consumption by the enterprise increases energy use. (Source: Eurostat EUR IND per kwh ) A smart energy strategy tackles the issue of efficiency from both ends of the spectrum: reduce the cost of energy used and increase the energy efficiency of the data estate to mitigate growing demands in the business. Whilst virtualisation models and good (end user) governance are good practice in the general direction of energy management, fundamental differences to power consumption are realised through state-of-the-art data infrastructure.

8 Force 4: Risk & Compliance Compliance continues to influence IT goals auditing and reporting are authored and generally led by finance and legal professionals. Knowing where to lead compliance and where to follow creates clarity and avoids internal bottlenecks. In a survey of compliance professionals undertaken by Thomson Reuters in 2013, 80% of respondents believed that the focus on managing regulatory risk would increase during the year. (Source: Thompson Reuters Cost of Compliance Survey 2013) 82% of respondents believe that red tape has impacted the IT function s ability to respond to commercial needs 71% state that responding to compliance and regulatory demands is a strategic IT goal 68% of respondents state that compliance is an increasingly important driver for IT decision-making 75% in larger organisations large businesses now see life through a regulatory lens. The industry specifics of regulation and compliance are complex and manifold, but there are consistencies that help to structure an IT approach to regulation. Red tape, generally understood as excessive regulation surrounding conformity to formal rules that hinders action or decision-making, is a cause of frustration for IT decision makers. One key challenge for IT is the degree to which IT is empowered to make decisions around compliance. 82% 76% 91% 79% 78% Figure 10: Bureaucracy impacts IT performance To what extent does red tape and bureaucracy impact the ability of the IT function to respond to commercial needs within the business? (Significat/Notable degree.) Data from PWCs State of Compliance Survey 2013 states: [The report] continues to raise concerns that compliance committees may not be optimally equipped to fully understand and assess the full range of compliance risks that the company might be exposed to. The same study shows only 41% of compliance decision-making units have IT representation. (Source: pwc.com) The CIO must understand the difference in what constitutes a business issue driving an IT need and conversely an IT requirement that impacts business performance. For example, security measures for customer data are heavily influenced by IT strategy and input, whilst 82% 73% 84% 86% < 10m 10m to 100 > 100m Figure 11: Bureaucracy impacts IT performance: Company size To what extent does red tape and bureaucracy impact the ability of the IT function to respond to commercial needs within the business? (Significant / Notable degree)

9 About Colt Colt is the information delivery platform, enabling its customers to deliver, share, process and store their vital business information. An established leader in delivering integrated computing and network services to major organisations, midsized businesses and wholesale customers. Colt operates in 22 European countries and the US with a 46,000km European network and transatlantic network capacity. Colt has metropolitan area networks in 41 major European cities with direct fibre connections into 19,800 buildings and 20 carrier-neutral Colt data centres. In addition to its direct sales capability, Colt has four indirect channels to market; Agent, Franchise, Distributor and Wholesale which includes Carriers, Service Providers, VARs and Voice Resellers. Colt is listed on the London Stock Exchange (COLT). Find out more To find out more about Colt data centre services go to or us on dcsinfo@colt.net.

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