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Retrofit, build, or go cloud/colo? Choosing your best direction

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When faced with the decision of upgrading an existing data center, building a new data center or leasing space in a third party colocation data center, there are both quantitative and qualitative differences to consider. This session reviews several key factors to help make a sound decision including a business’ sensitivity to cash flow, deployment timeframe, data center life expectancy, regulatory requirements, and other strategic factors.

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Retrofit, build, or go cloud/colo? Choosing your best direction

  1. 1. Jason Schafer, ATSDirector, Technology & Operations ManagementRetrofit, Build, or Go Colo/Cloud:Choosing Your Best Direction
  2. 2. Schneider Electric 2Objectives1. Review the evaluation criteria that goes into determiningwhether to upgrade, build new, or outsource a data center.2. Understand the financial metrics and scenarios that gointo determining the direction of the data center.3. Identify the 10 strategic, non-financial factors that go intothe decision.4. Overview of tools available to help in the decision makingprocess.
  3. 3. Schneider Electric 3• Upgrade• Build• OutsourceBusinessRequirementsITRequirementsEvaluation ofData CenterCapacityOptionsThe Tail of the Dog?
  4. 4. Schneider Electric 4The Tail of the Dog?
  5. 5. Schneider Electric 5Evaluation CriteriaUpgrade,Build orCo-locateCostCash FlowStrategicFactorsProcess to evaluate these attributes is not always clear.
  6. 6. Schneider Electric 6Challenge for Customers● Create a financial model to evaluateoptions● Create a common financial metric toeasily compare options● Create a structured approach toevaluate strategic factors
  7. 7. Schneider Electric 7Financial Metrics● Normalize costs to 10 year TCO per watt● Utilize cumulative cash outlay todetermine a break even point● Provide insight into opex versus capex
  8. 8. Schneider Electric 8Using Modeling to Evaluate OptionsBenefitsDrawbacks• Provides possibility of easy to use tools• Provides structure to decision making• Provides quick iterations to assist in planning• Not every situation matches model• Results as good as the data and assumptions
  9. 9. Schneider Electric 910 Year TCO for Co-locationWe picked assumptions we view to be typical.Baseline• Determined to be $62 per watt• Rate increase assumed to be 5% per year• “Remote Hands” fee of $225 per hour,each rack takes 1 hour per month• 4kW per rack• 3% discount rate for TCO calculationsKey Assumptions• Rack - $1,000 month/rack• Colo provides the rack at noadditional cost to customer• Power - $800 month/rack• Bandwidth - $2,000 month
  10. 10. Schneider Electric 10Upgrade Options – 3 Basic StrategiesApproach Description Assumptions ExampleIncreaseutilization ofinstalledequipmentStranded capacity mayexist that can be re-claimedData center has sufficientpower & cooling capacity,but cooling system is de-rated due to poor airflowmanagement practicesBlankingpanels, brushstrips, aislecontainmentAdd capacitywith new highdensity zonesOne or more rows ofracks can be added to alarger, low-density datacenter to increasecapacityData center has sufficientswitchgear & heat rejectioncapacity, and has available ITspaceHigh densityzone(s)Add capacitywith facilitymodulesFor larger capacityupgrades with availableIT space, facility modulesincrease bulk capacityData center is out ofswitchgear & heat rejectioncapacity, has no space inmechanical/electrical rooms,but has available IT spacePower and/orcooling facilitymodule(s)White Paper 153Implementing Hot and ColdAir Containment in ExistingData CentersWhite Paper 134Deploying High-Density Podsin a Low-Density DataCenterWhite Paper 163Containerized Power andCooling Modules for DataCenters
  11. 11. Schneider Electric 11Upgrade Options – 3 Basic StrategiesApproach Description Assumptions ExampleIncreaseutilization ofinstalledequipmentStranded capacity mayexist that can be re-claimedData center has sufficientpower & cooling capacity,but cooling system is de-rated due to poor airflowmanagement practicesBlankingpanels, brushstrips, aislecontainmentAdd capacitywith new highdensity zonesOne or more rows ofracks can be added to alarger, low-density datacenter to increasecapacityData center has sufficientswitchgear & heat rejectioncapacity, and has available ITspaceHigh densityzone(s)Add capacitywith facilitymodulesFor larger capacityupgrades with availableIT space, facility modulesincrease bulk capacityData center is out ofswitchgear & heat rejectioncapacity, has no space inmechanical/electrical rooms,but has available IT spacePower and/orcooling facilitymodule(s)Considerlow- hanging fruitConsider going tohigher densityConsider addingfacility capacityWhite Paper 153Implementing Hot and ColdAir Containment in ExistingData CentersWhite Paper 134Deploying High-Density Podsin a Low-Density DataCenterWhite Paper 163Containerized Power andCooling Modules for DataCenters
  12. 12. Schneider Electric 12Scenario #1: Low-Hanging Fruit ModelBreak even in less than 1 year.● Tier 3 1MW design load onlyutilized to 900 kW● De-rating largely due to air mixing, etc.● 10 year TCO - $17.00 per watt● Blanking panels, brush strips, cold-aislecontainment gain 100kW● First cost of $2.10 per watt● Co-lo 10 year TCO - $62.00 per watt
  13. 13. Schneider Electric 13Scenario #2: Implement Higher DensityBreak even in less than 2 years.● Key Assumptions● Add 40kW zone @ 4 kW per rack● Pod includes 2N UPS, 2N Inrowcooling● Discounted bandwidth cost due toexisting bandwidth available● PUE for data center of 1.35● 10 year TCO - $22.00 per watt● First Cost to upgrade - $4.80 per watt● Co-lo 10 year TCO - $62.00 per watt
  14. 14. Schneider Electric 14Scenario #3: Add to Facility CapacityBreak even in about 2 years.● Key Assumptions● Add 500kW power and chilled watermodules, 450kW of IT load● Discounted bandwidth cost due toexisting bandwidth available● PUE of 1.35● 10 year TCO - $27.00 per watt● First Cost to upgrade - $8.45 per watt● Co-lo 10 year TCO - $62.00 per watt
  15. 15. Schneider Electric 15Scenario #4: Build New FacilityBreak even in about 3 ½ years● Key Assumptions● 1 MW capacity, $12/watt*● 4kW per rack● Lease - $5/sq. ft./month● One battery refresh in Year 7● PUE of 1.33● Opex increases 3% per year● Bandwidth - $5,000/month● 10 year TCO - $42.00 per watt● Co-lo 10 year TCO - $62.00 per watt* Schneider Electric Capitalized Cost Trade-off Tool, Tier 3, St. Louis, Air Chillers
  16. 16. Schneider Electric 16But is it really about the money?The 10 factors that may trump any financial discussion.
  17. 17. Schneider Electric 17„Soft‟ Issues to ConsiderCompany Culture● Sometimes the server huggers winComfort with IT Equipment in Shared Space● Does one colo have better security than another?● Will my neighbors negatively impact my equipment?IT Accessibility to the Data Center● Can my guys get there if they need to be there?Comfort with Dependence on Contract Terms● If I call with a problem will anyone answer?
  18. 18. Schneider Electric 18Quantitative Issues to ConsiderCritical Facilities Expertise● If you have no staff, the decision is easy● Confidence in ability to operate a data centerRegulatory Compliance● HIPAA for exampleLife Expectancy● Cloud computing wins for temporary useDeployment Timeframe● If I need it next week, the decision is easy
  19. 19. Schneider Electric 19Financial Model PreferencesPerceived size of capital investment● Is $200k a lot or a little?● Depends on relative size – relatively little for a companylike Schneider Electric but for a start up…Cash flow model preference0 1 2 3 4 5 6 7 8 9 10Opex CapexYear 0 1 2 3 4 5 6 7 8 9 10Opex CapexYearBUILD CO-LOCATIONLower TCO but highercapital expense modelHigher TCO butsmoother Opex model
  20. 20. Schneider Electric 20StrategicFactorsRating Guide ScoreCompany Culture1 = Strong company culture to keep direct control & avoid outsourcing any business function10 = Company is open to outsourcing business functionsComfort with ITEquipment inShared Space1 = Data center must be in company owned space10 = Data center can be in shared IT spaceIT Accessibility tothe Data Center1 = IT staff must be located in same facility as data center10= IT staff can be remote to data centerComfort withDependence onContract Terms1 = Low degree of comfort with contract dependence10 = High degree of comfort with contract dependenceCritical FacilitiesExpertise1 = Strong critical facilities expertise exists within the company10= Little to no critical facilities expertise exists within the companyRegulatoryRequirements1 = Business has very specific regulatory compliance issues10 = Business has no specific regulatory compliance issuesLife Expectancy1 = Data center will be utilized for >10 years10 = Data center requirement is temporaryDeploymentTimeframe1 = Business requirement for deployment in years10 = Business requirement for deployment in weeksPerceived Size ofCapital Investment1 = Nominal capital expense is not viewed as significant to company10 = Nominal capital expense is viewed as significant to companyCash Flow ModelPreference1 = Comfortable with spikes in capital expense10= Prefer smooth predictable operating expensesTOTAL SCORE ** The total score will range from 10 to 100 based on the relative scales from 1 to 10 for each of the 10 considerations.Evaluation ScorecardThese issues will sometimes dominate the decision.
  21. 21. Schneider Electric 21SummaryUse model to evaluate financial options with a common language● 10 year TCO is less for doing it yourself and is almost alwayscheaper than co-location● Break even time and capital preservation may be more importantthan TCO● Using the right financial metric is criticalCultural issues sometimes can dominate the conversation – createan objective way to discuss these● Scorecard or weighted scorecard● Are there Filtering Criteria?Use tools to help facilitate the conversation and allow for rapidevaluation of options***
  22. 22. Schneider Electric 22New TradeOff Tool™● Simple, automated tools tosupport specific planningdecisions● Models complex interactionsof systems based on dataand science● One-screen, standardizeduser interface● Instant output allows for rapidcreation of “what if” scenariosTry it yourself: http://j.mp/sebvb
  23. 23. Schneider Electric 23Questions?Links for:Considerations for Owning versus Outsourcing Data Center Physical Infrastructurehttp://www.apc.com/whitepaper/?wp=171Data Center Build vs. Colocation TCO Calculatorhttp://www.apc.com/tool/?tt=13 -or- http://j.mp/sebvb

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