Put it all in Colo and Cloud

www.romonet.com Put it all in Colo and Cloud Making the right sourcing decisions for your business

Introduction In the first two papers of this series we looked at how, instead of evolving with the business, enterprise data centers and IT have become a service monoculture disconnected from real requirements with unnecessarily high costs, and how current market forces are driving a change. Paper one discussed how the advent of virtualization and cloud technologies is bringing about a change in data centers comparable to the impact of deregulation and globalization on many industries in the 1980s and what impact this will have on how we specify, build and operate data centers if we wish to stay competitive. The second paper looked at how, in response to cost pressures, many operators have turned to instrumentation and asset databases to try and control cost, and how this fails to address the real, underlying issues while being only one small component of the solution to their cost problem. In this paper we will discuss the current misconception amongst enterprises that instead of pouring more capital into expensive enterprise data centers, their strategy should be to put all their IT in colo or public cloud instead. There are, of course, some good reasons for some organizations to do exactly this but enterprises which get real control of their data center costs and strategy can often find they're much better informed about such decisions. Many enterprise operators already have one or more data centers, frequently there are operational cost, capacity or re-investment issues and these can be the deciding factors for a decision to give up and move to the cloud. The reality for these operators is that their existing assets can, in many cases, become very cost effective solutions to at least part of their IT strategy, often with lower long-term costs than essentially helping to pay off the capital of a service provider s data center. There have been fundamental changes in data centers and management of IT equipment that have eroded many of the advantages that traditional colocation and managed service providers offer. Many colo and MSP operators are hamstrung in their ability to improve the operating cost of their data centers by their least progressive customers and their requirements, not to mention the requirement to be in locations that often have expensive real estate and energy. Public cloud providers have embraced the advantage they have in terms of such constraints to run much lower cost (capex and opex) data centers. Enterprise operators can actually do something similar using a smart strategy of ensuring that owned capacity is heavily utilised while leveraging public cloud services for peak and nonbusiness critical demand. Whilst many claim that in time all IT will become a utility and move to the cloud there are many reasons this is not the ideal future state. It is commonly said that Rational customers will buy the service with the lowest price, all other things being equal. However, in the data center and enterprise IT business, there are many cases where all other things are not equal; location, security, availability are all purchasing parameters as well as price. Furthermore, many of the customers do not behave entirely rationally due to issues within their corporate structure. So the days of the enterprise data center are not yet over. >

Owning vs. outsourcing For many years the rising operational costs of enterprise data centers, coupled with the very high capital investment and re-investment costs, have driven businesses to outsource their data center capacity in some form, especially in times of high cost of capital. In most cases this was some combination of moving the enterprise IT equipment to colocation data centers, or outsourcing of the IT to a managed service provider or enterprise IT outsourcer. Both of these options require years of commitment to the alternative costs of the service provider. Manage IT as a cost overhead and that is all it will be These allegedly cost reducing outsourcing approaches are particularly popular amongst organizations which perceive their IT services to be a centralized cost overhead. In many cases management of the IT function as well as re-allocation of the costs has been largely under the control of the finance group. However, treating IT as a cost overhead may in fact ensure that s all it will ever be, whilst competitors are deriving real differentiating business value and innovation from their use of IT platforms and applications. A recent example of this is General Motors which has realised that If we are going to win, we must turn IT into a competitive advantage and not treat it as something that is just a utility. This recognition that IT represents a competitive advantage, either for you or for your competitors, is causing many organizations to re-examine the cost-based erosion of their own IT and data center capability. Outsourcing commodity services For many operators there is a very good argument to outsource commodity infrastructure - elements which benefit little from customization and are well suited to being run cheaply and efficiently by a specialized provider at scale. The next option is the use of specialized application platforms which, due to the provider scale or integration with other services, provide greater functionality in shorter time then any internal development project or commercial software could provide. Romonet, for example, uses Salesforce. com, not simply because it was good value, but because it was faster to deploy, had greater functionality, supported mobile devices and provided integration with third party applications meaning it was better than even a free open-source platform. This is the real danger of cloud to internal IT; applications which do 90% of what the customized and expensive in-house option could do are available to be provisioned in hours or days instead of months and years and can also bring substantially reduced costs. Furthermore, the capital cost of base system software, IT hardware and data center capacity is eliminated with cloud platforms as far as the buyer is concerned. Avoiding capital investment by renting colo instead In many organizations the need for capital investments to expand data center capacity or bring existing capacity up to update are the triggers to eliminate some or the entire data center asset from the balance sheet. Reasons for this vary but include the high historic cost of the enterprise data center and the perception that capital investment in their own data center is better avoided, resulting in the use of colo space, which should represent a smaller capital burden. Commoditization of IT hardware A number of changes in the IT environment are fundamentally affecting the choices we make about data centers. Virtualization In the past applications were installed onto physical servers which had local disk storage and manually assigned network connections. Each server typically ran one application and to achieve high availability of IT services, expensive internally redundant IT hardware was used to try to avoid all failures. IT equipment typically stayed in the data center until either the entire platform was replaced or the service was discontinued. The advent of virtualization has changed this issue for most businesses. Now, even legacy applications can often be run in a virtual machine which resides somewhere on a set of physical servers. The disk storage and network connection management is also increasingly centralised and independent of the physical hardware. The new virtual servers can be moved to other physical hardware without reconfiguration or extensive testing. In some cases this can be done whilst the application is running and under load. New applications More modern applications go a few steps further and use cloud type technologies to deliver additional advantages such as rapid deployment to homogeneous infrastructure platforms, horizontal scalability and achieving availability through fault tolerance at the application level instead of hardware redundancy. >

Most IT hardware is now a commodity The impact of these changes is that IT hardware is now almost entirely commoditized. IT departments now rarely test their builds against specific vendor server or storage hardware because the physical equipment is masked by a layer of virtualization software. Breaking the dependencies between the IT hardware and applications has allowed for both much more rapid IT equipment refresh and an elimination of the need for task specific hardware. These changes are rapidly impacting the IT hardware landscape. Vendors are finding it increasingly hard to put forward any credible differentiation as to why customers should pay more for their specific branded hardware which is resulting in plummeting margins. The problem for IT vendors is not isolated to servers - storage and network equipment are also being heavily commoditized. The days of the expensive enterprise Storage Area Network with multi-site redundancies storing every bit of data are rapidly disappearing as enterprises learn to use software for smart storage the same way Google and others have demonstrated. Network equipment will be the next to be fully commoditized with the rise of both new vendors and software defined networking. The first impact of this commoditization of IT hardware is that many operators are now able to purchase hardware directly from the ODMs, differentiated only by the cost of the box the processor chip comes in. Many large-scale operators now purchase and deploy this IT equipment by the rack or even by the container. The impact of this is that the IT hardware in the data center should no longer be treated as a priceless museum exhibit. The close-control environmental requirements are largely gone - 2N redundant power and in some cases even UPS protection, are now bring replaced by fault tolerant, distributed software. The type and cost of the data center required for this new class of commodity equipment is quite different from the enterprise data centers we ve seen in the past. Cloud is not unbreakable what influence do you have? One of the common myths about cloud services is that the distribution across multiple data centers and multiple machines means the service is so reliable you can forget about failures. This view is, of course, completely wrong. As demonstrated by decades of experience in overpriced high availability hardware and Tier III / Tier IV enterprise data centers, the majority of failures come from human error in the configuration or operation of complex systems. In the case of cloud this means that whilst it is indeed unlikely that your cloud operator will lose enough data centers to take them out completely, the complexity of their software and network designs mean that they are very likely to have a software, configuration or human intervention event which takes out your service for some period. Moving it to the cloud means that you are trading your data center power event for a leap year bug or some other, new and unpredicted issue. Unfortunately, when somebody else controls the data center or the service platforms and there is a failure within it, you are unlikely to be able to influence the order of service recovery, because the provider will be panicking to restore service to everyone. Their focus is unlikely to be on your favourite application. Public cloud failures tend to be big - big enough to make the press. No secret sauce any more TCO is predictable for everyone A major problem for many enterprise operators justifying investment in data center capacity is the perceived lack of predictability of total cost, so colocation and cloud are frequently seen as more predictable cost alternatives to a more unknown total investment in internal data center capacity. For the first time, proven tools now allow any competent data center designer or operator to assess and track the overall cost performance of a data center with accuracy and confidence from the early stages of design through construction, commissioning and operation. As in so many other sectors, the anecdotal knowledge gleaned from decades of experience across many sites has been superseded by computer aided simulation systems which produce quantitative analysis in hours or days. TCO control is now a purchasable option. > 1 A horizontally scalable application can increase scale or performance through the addition of more nodes rather than needing single instances of expensive larger hardware.

You don t have to pay for their compromises, you can be smarter A relatively recent change is that the smart enterprise operator can run a cheaper and more energy efficient data center than the majority of the colocation operators, wholesale suppliers and managed service providers, although most don t know it. There are two major changes in the market which have brought about this inversion. The first, described in the previous section, is the development of modern data center design tools which allow you to develop the best solution at minimum TCO for your requirements and within your constraints. The second change is that the majority of the retail colocation providers are still forced to run their data centers to the requirements of the least modernized customer in the building. This means that many are saddled with:- legacy environmental control ranges, requiring unnecessarily costly mechanical plant to provide temperature and humidity controls not required by the majority of the customers or equipment high levels of resilience in power and cooling systems to meet the requirements of the most fragile IT platforms installed low power densities due to inconsistency in customer occupation and management of the space leading to unnecessarily large buildings that drive up both the build and land costs expensively fitted, impressive looking facilities which assure customers of the quality of the data center when taken on a tour but add no real operational benefit and are thus just a cost overhead locations where land, power or both is expensive in order to be close enough to the population of server-hugging customers A smart enterprise operator can build what they actually need. Examples of how an enterprise can optimize what they need in a way many of the providers currently do not include:- operating to wider environmental ranges for some or all of the IT equipment by eliminating or confining the few museum pieces holding every-thing else back. This allows substantial capital cost savings through reduction or complete elimination of mechanical cooling within sensible limits build more than one resilience level in the same building (like ebay) so that only the critical platforms have critical platform cost and put everything else in less expensive space enforce air flow containment and space efficiency to operate at much higher kw / m 2. Less IT space means less land and smaller, cheaper buildings and the M&E support equipment is commonly sited outside the building now bringing more savings don t spend money of shiny raised floors and other expensive fittings - the data center is a factory, it should look like one Whatever you do, don t run it half full Many of the most expensive data centers are so expensive because they are not full. The idea that available capacity is a good thing should to go the same way as the dinosaurs. Even in new, energy efficient sites which achieve the target PUE range at low load, this doesn t help with regard to the expended huge capital and fixed operational costs. In new builds it is now possible, using modular build-outs, to deploy capacity in increments of 500kW or less, so deferring capital cost commitments without substantial increases in overall cost. An instance that is most frustrating to the informed observer is an enterprise operator trying to save money by moving IT capacity out to other data centers and reducing the load in an older site. The small reductions in operational cost simply don t add up to the cost of renting or building the replacement capacity. If you are going to pull load out of a data center, go the whole hog - get out and then turn it off or sell it, just don t keep running it half-full. Finding the right mix For an enterprise there are many factors in the decision of which parts of their IT to keep internal in enterprise data centers, where to use colo and where to use cloud services. Finding the right balance of these is the key and many will probably need a mixed strategy. Such a strategy is often the cause of breaking the service mono-culture that we explored in the first whitepaper in this series. The factors in deciding where to put any particular service or platform should include:- is the utilization of enterprise owned data center and IT capacity appropriately high to keep the unit costs under control? what legal restrictions are there on where the data may be stored or processed? services should simply be put in the cheapest location; nobody managing applications needs to hug their servers any more >

based on the real business requirements of the service, what tier of data center, IT environmental range and IT hardware resilience is required? is the amount of IT capacity required by this platform likely to change substantially over time? is the service a commodity which can be cheaply farmed out - such as email? is this service suitable for flexible cloud deployment or are the applications tied to legacy infrastructure? Once the requirements of the service are understood and the cost and available capacity of internal and external deployment options examined, a decision can be made on where to put the service. Many enterprises will wish to keep their critical line of business services and their innovative, differentiating business value in their own data centers where they can exert maximum influence over them, ensure that they are fixed first if anything goes wrong, that the data is under their control and that they won t be the victim of somebody else s mistakes. Those service platforms, such as email services, are suitable to be outsourced to specialist cloud service providers. This is likely to deliver the multiple benefits of reducing cost commitment, rapid scaling and low unit cost. There may be a subset of services which can justify being run on enterprise owned IT hardware but which cannot be run in enterprise data center capacity, either because the capacity is unavailable or because the equipment has a physical requirement to be in a particular location. Much as enterprises used to standardize on a certain vendor s IT hardware, the new game is to select and manage an appropriate mix of services; from well specified, modular enterprise data center capacity though infrastructure cloud to managed cloud service providers. This catalog of managed resources of known cost, location, regulatory region, availability and compatibility can form the basis of a much more flexible strategy, driving your TCO down while enhancing business value. Other key service platforms will be found suitable to be deployed in some sort of cloud service. This may be because they need to be distributed around the world to serve customers or because they require rapid changes in scale. The increasing power of virtualization management tools suites will allow much of the legacy enterprise applications to be managed in this way in the next few years. Romonet UK Corinthian House 17 Lansdowne Road Croydon CR0 2BX T: +44 (0)208 256 0250 Romonet USA (East Coast) 350 Fifth Ave, 59th Floor New York, NY 10118 T +1 917 397 0603 Romonet USA (West Coast) 2121 N. California Blvd. Suite 290, Walnut Creek, CA 94596 T: +1.415.658.5763 info@ romonet.com www.romonet.com