Making finance lead the way

The huge investment data centres can represent is no secret. For example, Google’s announcement of a new Singapore data centre will push its investment to over $1 billion in Asia alone. Given the scale of investment needed, every part of the organisation believes it has a stake in a data centre’s success: from the CEO, to the CFO and CIO, right down to the operations team who keep the data centre running. Yet ultimately, the data centre remains a financial asset for the business; one that is expected to provide a substantial Return on Investment (ROI), and should be treated as such.

 

Common mistakes:

 

Sadly, data centres too frequently aren’t managed as the financial assets they are. This can easily result in three common mistakes, each building on the last.

 

First, the data centre can be seen as an operational asset, with that treated as its primary purpose. As a result, IT departments will neglect its core financial role. Instead, planning and monitoring become focused purely on maintaining the data centre's operational effectiveness. While this has its benefits on a day to day basis, it cannot give the insight needed to ensure that the data centre provides value to the business. Second, even if the organisation succeeds in recognising the financial value of its data centre, financial planning and monitoring will usually sit completely separately from operational planning and monitoring; making reconciling the two areas a difficult process. Third, an operational data centre creates an enormous amount of data for teams to analyse. Teams can find it difficult, if not impossible, to quickly gather and decipher all the information they need in order to predict future data centre performance. This in turn forces operations teams to base any forecasts of future data centre performance on a number of assumptions.

 

Overarching Issues:

 

These three mistakes open the door to three overarching issues. First, organisations focus on their data centres as operational assets, the tail can very easily end up wagging the dog. Financial plans and investment decisions end up focused on supporting data centre operations, when the reverse should be the case. Second, separating operational and financial planning and monitoring creates an immediate risk for the organisation. For example, a financial decision based on incomplete insight can easily degrade a data centre’s operational capability, while the wrong operational decision at the wrong time will severely impact the value of a data centre investment. Lastly, the more data centre teams’ forecasts teams rely on assumptions, the less accurate those forecasts are likely to be. This makes any decision made a “best guess”, while the time taken to make even these forecasts means that the organisation cannot do the same for every choice it faces.

 

Balancing act:

 

In order to address these issues, organisations first need to ensure they are treating their data centre as a financial asset. This means that all decisions should be made with the ultimate aim of minimising the Total Cost of Ownership (TCO) and maximising the ROI. Operational decisions should also have this focus on TCO and ROI in mind, as this is the only way the organisation can have confidence that every action they take provides the best possible value to the business.

 

Second, financial and operational decisions alike should be made from the same data, providing the same insights into performance and costs. In order to effectively support the data centre estate, operational teams have to know exactly how their decisions and actions will impact TCO. With this knowledge, they can ensure that they are always taking the best possible course of action for the business, rather than simply providing the best short-term benefit.

 

Lastly, since the data centre estate will still produce a vast quantity of data, both financial and operational teams must be more intelligent about what data they gather and how it is analysed. While the average data centre will throw up innumerable data points that can be measured, recorded and analysed, only a fraction will be truly relevant to understanding its performance and TCO. By combining those relevant data points with the correct analytical models, organisations will no longer need to depend on forecasts based on best-guess assumptions. Instead, they can use accurate predictions that both provide guidelines for future investment, and allow the business to measure whether any changes made have the predicted effect.

 

The other benefit to using fewer data points is that, in conjunction with the correct tools, analysis can be performed much faster, and so more frequently. This increased frequency means that even relatively small decisions can be made secure in the knowledge that the business knows how it will affect the data centre’s ultimate value; whether the decision is financial or operational.

 

Essentially, the secret to success with data centres is not to see them as simply machines that must be kept operational. In fact they are factories, major financial assets that demand ongoing reinvestment, and should be treated as such.