Is data center consolidation a fast path to cost savings?

Rosy savings forecasts don't tell the whole story

A new MeriTalk survey of IT managers in civilian agencies suggests that they can save nearly one-third of their $45 billion IT budget – $14.6 billion -- through data center consolidation. This figure is based on 32 percent of the total civilian IT spending for fiscal year 2010, which was $45.7 billion.

The survey is typical of rosy forecasts projecting major savings from consolidation, but the top-line number leaves a lot unsaid. “In terms of projected cost savings from data center consolidation, the logic is sound, but the specific numbers should be examined very closely,” said Bob Otto, executive vice president for IT Advisory Services at Agilex, an IT professional services company.

There are several complicating factors, one of which is that many federal managers had not even completed their data center consolidation plans when the survey was conducted in September, Otto said.

The “Federal Data Center Addiction: The Road to Recovery” report is based on an online survey of 200 federal IT managers MeriTalk conducted the survey, underwritten by Riverbed, a developer of wide-area network optimization and IT consolidation technology.


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Successful data center consolidation requires much more than just reducing the number of servers, Otto said. As a former CIO and CTO of the U.S. Postal Service, Otto helped the agency reduce 20 data centers down to two.

Based on that experience, he said agencies need to go beyond data center consolidation. If their processes are inherently inefficient, merely consolidating machines and data centers will save much less than managers might expect. To really make the most of the effort, agencies have to standardize, modernize and automate every aspect of their IT operations, he said.

Many agencies "are grossly underestimating the effort that it will take to get to this level of efficiency,” he said.

Confidence appears to be growing among some agency managers that they can successfully consolidate data centers. Thirty-three percent of federal IT managers responding to the survey said consolidation goals are attainable – up from 12 percent when MeriTalk and NetApp surveyed federal IT managers in May.

At that time, 74 percent said the objectives of the FDCCI would not be achieved by the end of the third quarter of fiscal year 2011, 37 percent weren’t sure there would be a data center reduction and 86 percent said government culture was the top obstacle to consolidation, according to the Federal Data Center Demolition Report released by MeriTalk in June.

Still, two-thirds or 67 percent of those surveyed in the new Data Center Addiction report either are not sure or don’t believe that OMB’s FDCCI goals are achievable by third quarter fiscal 2011.

The confidence level could be rising in some agencies because managers now have a better picture of data center assets since they were required to do an inventory of those assets and submit that information to OMB, said Brian Wallenhorst, FDCCI program mangaer with Knight Point systems, an integrator working with agencies on consolidation projects.

When FDCCI was first announced, agencies had not budgeted for consolidation, so they poached off other contracts to conduct inventory assessments to get a more complete picture, Wallenhorst said. Now that that there is less uncertainty about what they have in their data centers, they can budget better, he said.

However, they will have to come up with creative ways to fund their consolidation efforts, as the MeriTalk and other reports point out. The Senate Appropriations Committee did not approve additional funding for data center consolidation and wants to reduce existing funding due to the lack of federal guidance regarding consolidation efforts.

With a better understanding of assets and which systems can be virtualized, agencies can start shifting budgets from other areas rather than wait for incremental funding, said William Hartwell, general manager and senior director of federal markets for Riverbed.

For example, an agency might have 18 data centers with 600 servers spread across the country. The aim might be to reduce them to two or three data centers. After determining server utilization, they might be able to address the needs of the enterprise with 200 servers, which will save on power, maintenance and support.

There will be different telecommunication demands. Agency managers might be able to shift funding from telecom since they won’t have to upgrade as many wide-area network links or they can use WAN acceleration or optimization technology to boost bandwidth, Wallenhorst said.

It is important for agencies to commit to a phased approach in which incremental cost savings are used to fund subsequent investments, Agilex’s Otto said. “Obviously, this approach will take longer than the green field approaches used by Google and Amazon to build their data centers, but it also minimizes the need for huge upfront investments,” he said.

Lack of trained staff and leadership commitment may be slowing consolidation progress.

Just 50 percent of those surveyed think their IT department is staffed to manage consolidation and 48 percent say their agencies’ leadership places a high priority on consolidation initiatives.

The report emphasizes the need for IT managers to build support groups and to learn from other agencies successes. Agencies with leadership support are more likely to have finalized consolidation plans and incorporated them into the FY2012 budget and have budgeted to complete consolidation efforts.

About the Author

Rutrell Yasin is is a freelance technology writer for GCN.

Reader Comments

Fri, Nov 19, 2010 M Reston

Naysayers strike again. They are quite comfortable with the status quo. But how is that working for us? Data center consolidation is a definitie positive, but more is needed. Maybe we need less government management of the consolidation. After all, it's more complicated than a one car funeral. The rest that we need is procedure consolidation, application consolidation, and data consolidation would save billions more. For example, how many FAR interpretations and apps do we need just to buy stuff? Attack that first! We have a government that is too fat. How do I know? Our grandchildren are in hock to keep it going! Good enough measure? Time to wake up and get moving. Now, what do we do with that block named Congress and its incredibly unskilled staff of non-practicing lawyers? I simply cannot believe people could be happy with the status quo. Fire them first. They are the bureaucrats in the way. They live for unneccesary complexity and a stovepipe for every chicken. That game should be over.

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