Case study - Datacentre consolidation at Ernst and Young

Ernst & Young AG  is one of Germany’s leading certified accounting companies, and is part of Ernst & Young Global operations. This is a major global organisation offering a range of services, such as tax reporting, accounting and auditing and technology and security risk in 700 locations in 140 countries around the world.

As one may imagine, the technology requirement for an organisation of this size is as complex as it is large and developments in technology were becoming harder for Ernst & Young to keep abreast of. For example, storage and backup requirements increase continually, as has the average size of a server room and the amount of energy that such a facility generates. Even though by the laws of IT servers are decreasing in physical size, the systems are often now rack-mounted. This means that they require more space, and the amount of power that was typically generated only a few years ago, perhaps 200W, has probably now more than doubled. 

The amount of investment required from supporting such an increase in power generated would, projecting forward, almost certainly have detracted from Ernst & Young’s core business. It decided to embark upon a radical act: IT decided to bring the IT servers of its national data centres in Eschborn near Frankfurt, Stuttgart and Rotterdam under one roof.

Centralisation is certainly no silver bullet; it’s actually an expensive process. Premises have to be researched, located and specified and political issues such as relocations or redundancies all have to be considered. So it was not an easy task to convince Ernst & Young’s management of the benefits.

Harold Klein, CTO Ernst & Young

The decision was made easier, nevertheless, by the fact that two of the three data centres were closing due to lease expiration. As management was already faced with this expense, it was easier for the centralisation and its related costs to be approved.

Dr Harold Klein CTO of Ernst & Young expresses confidence that, having convinced management to embark on this strategy of co-location, the benefits to the rest of the business will soon become apparent. “By outsourcing the data centre,” he says, “we have the freedom to concentrate on what is unique for Ernst & Young.”

Two steps to consolidation

This unique job entailed two steps. The first step was to centralise the data centres in an off-site location– that is, the co-location. The second was the consolidation, which, ultimately, is the part of the process that would reduce IT infrastructure costs.

Essentially, co-location is not about transferring IT departments and employees outside: these operations stay with in the firm. The process works on a pay-per-use, not investment, model and differs to ‘classical’ IT outsourcing in that is a selective outsourcing service. The basic service that Ernst & Young employed was for data centre capacity and carrier connectivity, but with the additional provision of managed services – such as backup and recovery, maintenance, security and performance management.

For an investment to achieve maximum benefit, a co-location model for a data centre should cover a 10-15 year period, but it is difficult to plan exact costing. As a result, companies tend to plan for contingency space, which can lead to oversizing or redundant space. The ongoing miniaturisation of servers and storage, however, means the temptation can also be to plan for less space.

As befitting a major global organisation that has access to and stores large volumes of highly confidential and business-critical data, Ernst & Young’s proposed consolidation was a huge undertaking. Unsurprisingly, it took more than two years to find a suitable co-location partner. The research involved lots of parameters just to search for the right location as local internet infrastructure, income tax and salary costs all had to be considered.

Frankfurt was the clear choice for location for several reasons: as well as being a central European location with excellent Internet infrastructure, and not least that it is the largest German Ernst & Young location with available space for a disaster recovery data centre in its newly built office building. 

The next step was to look at five local co-location firms and what they could provide, and on what terms. From these discussions,  TeleCity, a European co-location, data centre and managed services company, was the winner.

Flexibility of  terms was among the key items. Where other companies wanted a specified commitment from the outset, TeleCity only required a minimum commitment. In effect this means that TeleCity evaluates the space that has been used on a quarterly basis so that if Ernst & Young has used more space it pays more the following quarter, and less if it has used less space. There is a minimum payment, however, that must be paid even if use falls below this threshold.

In contractual terms, the minimum commitment is for 60 server racks for storage and backup. The TeleCity campus is 600m² and contains 200 servers, although it has capacity for 400-500, should they be required.

The investments in equipment – such as a diesel generator, UPS and air conditioning – have been made to cope with maximum capacity at the outset, which means no alterations will be necessary when the data centre runs on full capacity.

This flexibility means that Ernst & Young can upgrade or downgrade at anytime during the contract, and is key to the success of the project. Even though the basic infrastructure and data centre operations have been outsourced, it expects it will hand over some of the more complex managed services to TeleCity in time.

Moving higher up the services chain, Ernst & Young’s needs will inevitably increase and become more complex.  Internet access and storage, for example, are functions that add more value to the business, so the benefits of outsourcing must extend beyond the parameters of cost savings alone.

It took two years for Ernst & Young to decide the basic co-location model so it comes as no surprise that it will also take time to evaluate storage services, likely storage area network (SAN) and backup, in the same way. Ernst & Young has no current plans to change partners but, in another example of the flexibility offered, should it find a partner that provides a more cost-efficient and cost-effective service than TeleCity, then it is free to use them.

Downward pressure

Ernst & Young is using normal technology in 90% of the space it has taken, but 10% has been reserved by TeleCity for water-cooled storage. So, if and when Ernst & Young decide to change and use water-cooled storage, the technology is already in place to do this.

“We are really trying to think inside the customer’s head. We don’t want to provide only space,” says Dr Bela Waldhauser, managing director of TeleCity.

Bela Waldhauser, MD of TeleCity GmbH 

With the capacity for 60-80 servers in one rack, it is likely that Ernst & Young will, eventually, switch to water-cooled technology. And when that time comes, TeleCity will be prepared.

While Ernst & Young will continue to operate the network infrastructure, hardware, software, data and applications, TeleCity will provide the basic infrastructure such as security, storage, temperature control and disaster recovery.

The thorough negotiation process has kept teething problems to a bare minimum—indeed both parties say there have been no problems to date of any significance—both parties are committed to regular dialogue, to enable the swift resolution of any potential problems.

But, as with any standard outsourcing contract, it is not 100% free of risk. If a co-location partner were to shut down its business, for example, the data centre would have to be moved, which, as well as creating extra costs, this would pose a risk to Ernst & Young’s operations. With this in mind, Ernst & Young chose a partner for whom co-location partner is its core business, rather than a carrier who also runs a co-location site.

At a time when businesses are forced to respond to downward financial pressure—“less for more” is likely a common mantra uttered across boardrooms around the globe—it  is not hard to see the immediate benefits of outsourcing basic IT functions, to enable the business to concentrate on what it does best.

What is notable about the relationship between TeleCity and Ernst & Young, however, is the flexibility on both sides and the ongoing commitment to maintaining the relationship – and the agreement. Ernst & Young entered into the relationship confident that TeleCity can provide what it says it will, and without a long-term static cost commitment it knows it has the freedom to use as much, or little, space as required. It also knows that cost it pays will reflect this.