February 7th, 2008
Multinationals have led the way in outsourcing their data centres to specialised third parties. The argument for the rest to follow is now compelling, argues Steve Boyle of Sutherland Consulting.
In the past five years there has been growing recognition across the global financial services markets that they should rid themselves of non-core activities. This means that being a global leader in the world of investment banking, asset management and insurance is challenging enough, without having to create a world-class technology organisation and own all the assets, too.
Outsourcing these functions and responsibilities to a global technology specialist means the outsource supplier carries the risks and not the client – giving financial services companies the support they need to focus on the important activities in hand.
Global companies have understood for years that managing the complexities of running a global IT organisation is hard – without needing to become experts on real estate, infrastructure management and security at the same time.
Since 2000 they have wrestled with data centre outsourcing with varying degrees of success. Typically the problem has consisted of a number of issues.
Capital costs and the drive for cost flexibility
Building impregnable data centres places severe strain on limited resources. Worse still, is that when they are finally built, power and cooling demands have increased so much that a new facility can be obsolete before it even goes into production.
There are also very long lead times between identifying the requirement, through to acquiring a suitable facility and getting the data centre ready for full operation.
Predicting your processing needs and the resulting space, power and cooling demands over a three-year period is near to impossible. So the attraction of handing the capital cost and obsolescence problem to a specialist such as IBM or CSC starts to look very attractive indeed.
Staying on the leading edge of technology
Staying current with your technology is another challenge all companies face. At any one time parts of the organisation are budget-constrained and the obvious cutback is on renewing and refreshing the infrastructure.
Deutsche Bank got around the problem in 2004 by deciding that only infrastructure that was fully roadmap-compliant would be allowed over the threshold of the two brand-new data centres that IBM built for it under the widely lauded Summer contract.
By executing this initiative, Professor Clemens Jochum, the CTO, was clearly after reductions in the firm’s IT intensity and a corresponding increase in stability and flexibility. The commonly held general opinion is that he has managed to exceed his original aims.
How green is your data centre?
Consideration of environmental issues has started to shape some inspired thinking in company strategy.
For example, data centre managers continually battle with the challenges of power and cooling.
Western companies have long tended to build a production data centre and its sister disaster-recovery facility within a short distance of each other to deliver an acceptable network connection speed.
However, after the 9/11 attacks, the Federal Reserve in the US issued guidelines proposing a minimum distance separation of 200 to 300 miles between data centres under its disaster-recovery directive. With the rapid advances in fibre-optic technology over the past five years, network latency is becoming a lower consideration and a world of possibilities is opening up.
And this is where the inspired green thinking comes in. Why build a data centre in a warm, Western location where we will incur massive expenses to generate heat and CO2? What if our partners built data centres for us in Alaska, Iceland, Finland, Northern Canada and even Scotland where green power flows freely? Inspiring the challenge – could we run a facility without any cooling at all?
Companies’ IT facilities could become nomadic, moving around the globe to respond to their demand, driven by technological advances, countries’ tax incentives and a far better deal. They will no longer be locked into owning their own obsolete facilities.
A company’s ability to move quickly to take advantage of the latest data centre technology and developments in the industry will be key.
Major IT disasters are well-documented in the press and even a significant outage can destroy a hard-earned reputation in a heartbeat.
But how do I manage the risks to get there?
The risks of outsourcing are constant. How can an organisation disengage and move out from its current IT facility without significantly disrupting its day-to-day business? Major IT disasters are well-documented and even a significant outage can destroy a hard-earned reputation in a heartbeat.
The answers lie in the strategy and execution of your migration plan.
From the early development of company policy, engaging the full support of your business community is key. Every IT and business area involved must be brought into the fold, their views and advice sought actively and built into a plan.
Finally, the one factor that decides ultimate success or failure of such a complicated undertaking is risk management.
It will take every ounce of skill, experience, intellect and bravery to succeed. However, creating a nomadic, flexible and highly cost-effective data centre operation is something that every great company will attempt in the next five years.
Entry Filed under: Why Outsource?