Are data centers making ‘market corrections’ on risk assessment?

Absolutely, says DCD Intelligence, as previously overestimated risk-based concerns are being reined in now that money is tighter.

A short report from DCD Intelligence, the research arm of DatacenterDyanamics, points out that data center administrators previously unconcerned about the costs associated with risk aversion are now taking such costs into consideration. As a result, they are now taking a harder look at their real risks and making budget-based decisions accordingly, in contrast to the previous common practice that probably amounted to overspending.

When announcing its short report titled “International Data Center Strategies,” DCD Intelligence quoted a major international pharmaceutical company executive as saying, “When times were good money was no object and we were extremely risk averse. If we needed to have two of everything, we had two of everything. We’re now more willing to accept risk than we ever have been.”

The researcher interviewed 30 senior personnel responsible for their organizations’ data center strategies. DCD Intelligence’s managing director Nicola Hayes said, “Since the global financial crisis, cost and budget have become new industry watchwords and particularly in the context of international data center strategy these factors are becoming increasingly important. A wide range of factors are taken into consideration when crafting a strategy, yet according to our sources cost has traditionally resided towards the bottom of a long list of considerations.”

That is changing, the researcher says, with cost moving to a far higher position on the agenda than it had been in previous years. The research conducted for the report “strongly indicates that companies are more willing to take on risk than they were before the crisis,” DCD Intelligence said. “Many are also undertaking or considering a program of consolidating existing facilities and considering alternatives to building new ‘owned’ data centers. Economics are even forcing some to consider, possibly for the first time ever, reducing the amount of available data center capacity.”

Hayes pointed out, “All of this is not to say that companies are taking unnecessary risks. Indeed it would appear that for the past decade companies have been overestimating risk-based concerns since when money was readily available this was the more cautious approach.”

To that point, the research also indicates a move away from building Tier 4 facilities across the entire data center footprint. “Now, even where a high degree of resilience is warranted, a Tier 3 facility is being looked on as sufficient to save on the significant cost of building a Tier 4 facility,” DCD Intelligence says—adding that its sources “have indicated that it can be more effective to spend less money on highly redundant data centers and build more Tier 2 facilities, while also paying more attention to the application level.”

Hayes emphasized the executives’ overall concern for applications: “There is a trend towards building-in resilience at the application layer. As most large organizations operate hundreds or thousands of applications, it would be difficult to predict how they interact with each other. Application resiliency is still in its early stages.”

The findings of this recent research were made public ahead of DCD Intelligence’s seminar titled “Leveraging International Data Center Strategies to Create a Strategic Advantage,” scheduled to take place in London on February 21. (Info here.) The seminar is set to cover the results of this research alongside presentations from data center operators. Scheduled speakers are from organizations including Barclays Bank, Tesco, Ernst and Young, Telx, Datasift, CBRE and Deutsche Bank.

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