The demand for
data centre capacity worldwide has led to a sharp rise in IT
costs and a steady increase in
carbon emissions. A new efficiency metric provides companies
with a clear yardstick for measuring progress, writes William
Forrest, James M Kapland and Noah Kindler.
The modern corporation runs on data. Data centres house the
thousands of servers that power applications, provide information,
and automate a range of processes. There has been no letup in the
demand for data centre capacity, and the power consumed as
thousands of servers churn away is responsible for rising operating
costs and steady growth in worldwide greenhouse gases.
Our work suggests that companies can double the energy
efficiency of their data centres through more disciplined
management, reducing both costs and greenhouse gas emissions. In
particular, companies need to manage technology assets more
aggressively so existing servers can work at much higher usage
levels they also need to improve forecasting of how business demand
drives application, server, and data centre-facility capacity so
they can curb unnecessary capital and operating spending.
Data centre efficiency is a strategic issue. Building and
operating these centres consumes ever-larger portions of corporate
IT budgets, leaving less available for high-priority technology
projects. Data centre build programs are board level decisions. At
the same time, regulators and external stakeholders are taking keen
interest in how companies manage their carbon footprints. Adopting
best practices will not only help companies reduce pollution but
could also enhance their image as good corporate citizens.
A costly problem
Companies are performing more complex analyses, customers are
demanding real-time access to accounts, and employees are finding
new, technology-intensive ways to collaborate. As a result, demand
for computing, storage, and networking capacity continues to
increase even as the economy slows. To cope, IT departments are
adding more computing resources, with the number of servers in data
centres in the United States growing by about 10 per cent a
year.
At the same time, the number of data centres is rising even more
swiftly in emerging markets such as China and India, where
organisations are becoming more complex and automating more
operations and where, increasingly, outsourced data operations are
located. This inexorable demand for computing resources has led to
the steady rise of data centre capacity worldwide. The growth shows
no sign of ending soon, and typically it only moderates during
economic down cycles.
This growth has led to a sharp rise in IT costs (Exhibit 1).
Data centres typically account for 25 per cent of total corporate
IT budgets when the costs of facilities, storage devices, servers,
and staffing are included. That share will only increase as the
number of servers grows and the price of electricity continues its
climb faster than revenues and other IT costs. The cost of running
these facilities is rising by as much as 20 per cent a year, far
outpacing overall IT spending, which is increasing at a rate of 6
per cent.
Economics
Spending increases on data centres are reshaping the economics
of many businesses, particularly those that are intensive users of
information, such as finance, information services, media, and
telecoms. The investment required to launch a large-enterprise data
centre has risen to $500m, from $150m, over the past five years.
The price tag for the biggest facilities at IT-intensive businesses
is approaching $1bn. This spending is diverting capital from new
product development, making some data-intensive products
uneconomic, and squeezing margins. The environmental consequences
are also stark, as rising power consumption creates a large and
expanding carbon footprint. For most service sectors, data centres
are a business's number-one source of greenhouse gas emissions.
Between 2000 and 2006, the amount of energy used to store and
handle data doubled, with the average data facility using as much
energy as 25,000 households.
Already, the world's 44 million servers consume 0.5 percent of
all electricity produced, with data centre emissions now
approaching levels of those of entire countries such as Argentina
or the Netherlands. In the United States alone, growth in
electricity used by data centres between now and 2010 will be the
equivalent of 10 new power plants. Without efforts to curb demand,
current projections show worldwide carbon emissions from data
centres will quadruple by 2020.
Regulators have taken note of these developments and are
pressing companies for solutions. In the United States, the
Environmental Protection Agency (EPA) has proposed that large data
centres use energy meters as a first step toward creating
operating-efficiency standards. The European Union, meanwhile, has
issued a voluntary code of conduct laying out best practices for
running data centres at higher levels of energy efficiency.
Government pressure to reduce emissions will likely increase as
data centre emissions continue to rise.
Far-reaching challenges
In information-intensive organisations, decisions affecting the
efficiency of data centre operations are made at many levels.
Financial traders choose to run complex Monte Carlo analyses, while
pharmaceutical researchers decide how much imaging data from
clinical trials they want to store. Managers who develop
applications decide on how much programming it will take to meet
these demands. Those managing server infrastructure decide on
equipment purchases. Facilities directors decide on data centre
locations, power supplies, and the time frame for installing
equipment ahead of predicted demand
A longer version of this article can be found
here
William Forrest is an associate principal in McKinsey's
Chicago office. James Kaplan, a principal in the New York office,
leads the technology infrastructure practice for the global IT
group. Noah Kindler is a consultant in the New York
office.
• The authors would like to recognise the important
contributions of Kenneth Brill and The Uptime Institute to the
development of this article and its recommendations. The Institute
provided insight based on many years of experience, as well as
proprietary data and analysis.