How CFOs can assess the efficiency of data centres

By Danny Reeves | 24 October 2017

Due to fast evolving technology many companies are pushed to improve their agility and ability to quickly adjust to emerging market trends. To ensure their survival and growth in a hypercompetitive digital economy organisations have to constantly strive to find new ways of getting more done with less resources.

Under these circumstances Chief Financial Officers (CFOs) become pivotal players in the quest for increased revenue and innovative strategies that enhance organisational competitiveness and agility without disrupting business operations and processes.

And as businesses transform their organisations to meet increasing customer demands for always-available online and mobile services, data centres become a critical element in a CFO’s growth strategy.

Costs and investments

An increasing number of businesses are investing large lumps of money in building and upgrading data centres to support the huge amounts of data their workforce and customers generate every day.

Besides core building and maintenance costs, companies also have to consider energy and water consumption, and CO2 emissions.

Analysts estimate that the data centre industry consumes between 3% to 5% of the total global electricity supply and accounts for about 2% of total greenhouse gas emissions. At the same time, an average data centre can use up to 130 million gallons of water annually – the same amount of water three hospitals would use in the same period.

When it comes to energy costs, according to Gartner Research, data centres consume 30 to 80 times more energy per square metre than traditional office space. The Environmental Information Agency predicts that energy costs will continue to rise by 10 to 25 percent in the next few years, so data centres and the energy they consume should be a primary area of concern for CFOs.

This is not just a concern for companies that operate data centres. Industry analysts suggest that industries such as banking, healthcare, retail and government agencies have data centres that make up 15 to 25 percent of their total energy costs.

Efficiency barometer

Under these circumstances it becomes of paramount importance for CFOs to understand how the data centre works and if it’s running at maximum efficiency.

When assessing the data centre’s effectiveness CFOs should look into the following critical areas:

Monetary efficiency translated into ROI capacity How fast can the company achieve financial payback for the required investment.

Data processing efficiency Work units per cost to perform.

Engineering efficiency It can take many forms depending on the data centre design and location, but the most common metrics are: annual average PUE (Power Usage Effectiveness), water consumption, CO2 emissions and energy costs.

Corporate Social Responsibility potential and challenges As data centres are under the intense scrutiny of governmental and regulatory bodies, the environmental and sustainability aspects of data centres have become critical elements for many investors who would refuse to back companies that don’t reach their environmental targets. For this reason any investment in the data centre that has a strong CSR component is a high priority for CFOs even if sometimes the return on investment is slower compared to other investments.

Business value

When combining all these components the CFO is looking for the overall business value of the data centre and what each required investment is bringing to the organisation.

A CFO compares each expense with the profit and business value he would get if the respective sum would be invested in a different area of the business or a new growth opportunity.

As a result CFOs are looking for solutions that would help the data centre to increase efficiency, decrease energy and water consumption, automate as many processes as possible to decrease the number of employees and reduce overall costs.

Another crucial aspect that CFOs should keep in mind when assessing the efficiency of a data centre is the depreciation rate – some pieces of equipment could be more expensive initially but the depreciation rate is slower and ROI faster.

Conducting a thorough economic analysis of a data centre’s infrastructure options is not a simple task, but CFOs must understand the impact of their investment decisions, not just at point of purchase but throughout the lifespan of every equipment investment and software deployment. To do this they must assess at the same time:

The Total Cost (capital and operating expenses) for procuring, installing and managing the solution (hardware, platform, software) over time. This includes labour costs (based on time) for ongoing maintenance, management and optimisation - including any system changes required to support new workloads. Given the goal of creating a dynamic, adaptable environment, this calculation should also play out “what if” scenarios for scaling applications and storage, changes in business needs, availability of new technologies, and so forth.

The Net Business Value by considering each solution’s relative impact (positive or negative) on business outcomes. Different infrastructure technologies and products deliver different and measurable levels of performance, speed and availability. Such parameters can measurably affect application performance and business agility.

Decisions and technology

One of the most difficult tasks a CFO faces is deciding which equipment or software is best for the data centre while considering the company’s need for flexibility and agility. 

Thankfully, there are many smart analytics and Machine Learning platforms that can clearly show what savings a data centre can make with specific designs and equipment, and how each decision shapes the facility’s development.

In this way CFOs can access razor-sharp intelligence that empowers them to make the best decisions for the organisation’s current and future needs.

While many CFOs have doubts around investing in software - as in many cases implementating a new system can cause significant disruption and even losses for the business - the reality is that with the latest evolution in technology and the IoT,  manually tracking each sensor and element in the data centre is near impossible. Even more so when you combine the need to assess which infrastructure model delivers the greatest value in the long-term.

Again, a good analytics platform is crucial in tracking and predicting the value, costs and savings a data centre can generate for the business.

Businesses have never had more technology options from which to choose as they do nowadays. And, as each choice can have a powerful impact on overall business success, decision makers have to look beyond top-line costs and understand the costs and benefits associated with each choice.

Each CFO’s mission is to ensure that every investment provides maximum value to the business and while there is no bulletproof recipe to ensure long-term success, with the right tools and insight CFOs are well-poised to make optimal decisions and increase a data centre’s efficiency with speed.