Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
So that means re-examining how you develop applications and systems.
Brill: This gets back to basic strategy issues about what platforms to run applications on. Historically, facility costs were not considered in these decisions. Because of the change in energy consumption per dollar of spend, all the old rules need to be re-examined. People talk about the power crisis or the heat-density crisis, but fundamentally, it's an economic crisis.
Why do you think people haven't realized that?
Brill: I don't know. All the big 10 financial services companies have half-billion to billion-dollar data-center construction programs. These costs are going to hit their profit-and-loss statements. When they do, it will change the economics of IT.
People think that this half-billion dollar to billion-dollar construction program is a one-time catch-up event, so they're budgeting for it that way. I'm saying that they will be repeating it again within four to five years--and again four to five years after that. If they adopted some of the things we're talking about, that would extend the length of time between construction cycles--maybe stretch it out to eight years.
How many organizations have shifted the budgeting of data-center costs to IT?
Brill: Morgan Stanley made the shift recently. It's still rare, but it's beginning to happen.
Does the government have a role in this, and are they doing what they should be doing?
Brill: The Environmental Protection Agency, the European Union and the Chinese equivalent of our EPA are all talking to one another. Historically, IT's energy consumption was below their radar screen. Now, since data-center consumption as a percentage of total consumption has been rising at a 100 percent rate every five years and is projected to continue, it has reached their radar screen.
Government has been trying to educate and establish measurements. Energy Star will come out later this year with an Energy Star rating for servers, which will allow buyers to understand the energy efficiency of various servers--and there are significant differences.
One of our member companies, which buys 100,000 workstations a year, looked at the energy efficiency of the power supplies included in those workstations. They bought from a vendor that didn't even advertise that its power supply was efficient. And the payback was in less than nine months. Since the life of the asset was 36 months, it was a very good investment.
Should government be more proactive in establishing rules governing power usage in data centers?
Brill: My fear is that they're going to get forced into it and that they will not be very subtle. The dynamics of our economy are such that whatever is true today will be obsolete within three to five years, but regulations tend to get cast in concrete and are very difficult to change. I don't see the need for regulation because the economics are so compelling: It's in people's own best interests to be more energy efficient.
Would it be in the best interests of the vendors to manufacture more energy-efficient IT?
Brill: Absolutely. They've done this, but those products are languishing in their inventory because users don't realize it's in their best interests to buy more energy-efficient products.
How about the impact of rising fuel costs?
Brill: Most electricity is produced on long-term contracts that won't be affected by the rise in fuel prices for many years. Even when those fuel prices catch up, they won't have much effect because fuel is a small percentage of the cost of producing electricity. Most of the cost of producing electricity is in the CapEx investment: the power plant, along with the transmission and distribution lines. Even so, it's prudent business to eliminate waste.
We need to throttle back the demand for IT by having the true cost of ownership reflected in the cost of applications. It's in our own best interests to know what's paying off and what's not.
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