Gabe Lowy of Mizuho Securities offers a compelling perspective on the increasing strategic importance of energy costs to IT. I spoke to him yesterday about cloud as the greatest story ever sold and we quickly focused on the increasing role of electricity for the enterprise and higher rates of change and innovation in the data center resulting from virtualization and the rebirth of the mainframe in the form of the great cloud story.
Here is a highlight from Gabe’s “TechTonics” paper (Mizuho Securities US Equity Research, April 6, 2011) on the increasing importance of energy consumption (with my select bold):
Energy Consumption Tilts the Costs Analysis:
Many enterprises that are building out cloud computing platforms have gravitated to x86-based distributed architectures due to the high cost of mainframe hardware, licensing costs and shortage of IT professionals with mainframe skills. As enterprises increasingly model cost of service against usage to include electricity consumption, cooling, building/facilities costs and required manpower to maintain systems uptime, the granular reporting of mainframe resource usage compares favorably to standards-based x86 servers. Past total cost of ownership (TCO) assessments that only covered systems and software acquisition and maintenance costs, which were then averaged across the user base, are giving way to a broader set of metrics that include the sizable contribution of energy costs to opex.
Last week I heard Sun Microsystems Cloud CTO Lew Tucker predict that IT expenses would increasingly track to the cost of electricity. “Lew’s Law” (as described to a room of thought leaders) is a brilliant theorem that weaves a microcosm of IT trends and recent reports into a single and powerful concept.
This is why data centers are likely to get caught up in the next wave of IT innovation and why accelerating innovation will likely drive enterprises into leasing (from colo to wholesale data centers) in order to avoid the upfront data center build costs, plus risks and delays inherent with trying to keep up with the pace of critical innovation and the growing importance of power and cooling costs.
The physical data center -tricked out with innovations like airside economization, high efficiency UPS units, dedicated substations (wholesale power rates) and ever increasing electrical, mechanical and architectural innovations- becomes as strategic to the delivery of applications, services, platforms as multi-billion categories of routers/switches, firewalls, application delivery controllers and even dare I say… the cloud itself.
The cloud has grown so big (in events, on websites and in press releases) that it has acquired dotcom-era proportions. Like the late 1990s, business case took a backseat within many firms realizing that a major transformation in IT was underway but unsure of how they could properly capitalize on it.