The Swedish Government’s recent suggestion of cutting tax on electricity for data centres by up to 97% will have made ears prick up in the IT industry and beyond.
In particular, for CFOs keen to make the maximum return on any business investment, the idea of moving data centre operations to Scandinavia could start to look very attractive. However, the majority of CFOs did not get to where they are by making decisions based on first impressions.
To know whether and when to invest, the CFO needs to know they are making the best possible financial choice for the business. The CIO’s role is to give the CFO the insight, knowledge and ultimately the confidence they need to either invest or not. So how do you do it?
Compare the market
Quite simply, the CIO’s role here is to compare the available options and demonstrate which provides the best value for the business. Therefore the first step is to understand just what those options are, and what other factors might influence cost.
For instance, if Sweden introduces its electricity tax cut, will it become a default region for data centres? Or are other territories offering equally attractive incentives? What about the pre-tax cost of energy itself? How does the climate affect the cost of cooling? What will be the initial cost of building or purchasing data centre infrastructure in the region? Does the organisation want to move more services into colocation or the cloud? And what will happen to any existing infrastructure if the business does make the move?
Look to the future
Once you know the options, the next step is to understand the precise cost of each. To do this, you need to be able to predict exactly what effect any changes to the current situation will have on data centre performance and cost.
The more different scenarios the CIO can plan out at this stage, the better, as the CIO can be sure that they are definitely picking the most advantageous option rather than just the best of a limited bunch.
This means that any predictions made must be both accurate and fast; so that the CIO can alter variables in order to find the optimum course of action, and have complete confidence that their recommendation will provide the results promised.
For instance, the CIO may find that, given costs already sunken in an organisation’s current data centre, relocating operations to a location with an attractive tax regime doesn’t make financial sense at present.
By predicting how the costs of the data centre will change over its lifetime, the CIO can determine when a relocation would make sense, or indeed whether the organisation will still be best serviced by keeping operations where they are.
Once the CIO has reviewed the options open to the business, predicted the costs of each, and identified those that will provide the best value to the business, they need to ensure that they present their advice in a way the CFO understands.
For most CFOs, this will be in terms of cold, hard cash: which option will result in the lowest cost to the organisation over its lifetime.
This means that many of the measures used for calculating data centre value are of no use here. For instance, Power Usage Efficiency (PUE), often seen as the gold standard for data centres, is of relatively little use for a CFO.
After all, what use is a data centre that uses its power effectively if a large proportion of its infrastructure sits unused costing the business money for nothing? Conversely a data centre with poor PUE, but with a low financial footprint that meets all of the business’s needs perfectly, could be the more intelligent option.
In this environment, Total Cost of Ownership becomes a far more valuable measure. If the CIO can demonstrate precisely what each option will cost the business over its lifetime when all factors are considered, the CFO will have a much easier time deciding where their investment will best be spent.
This needn’t be a complex calculation: modern data centre analytics tools can quickly and accurately predict costs using relatively few points of data. This, in turn, means that CIOs can help the CFO prevent the risk of funding a move that ultimately proves costly to the business.
One example of where this type of insight might have helped is General Motors, which invested heavily in outsourcing IT services only to later discover it was far more efficient for the business to have their IT services in-house.
Understanding the exact savings outsourcing could provide, as well as the costs of any existing in-house infrastructure now running at reduced capacity, could well have saved General Motors considerable time and expense not only in the initial outsourcing, but also in returning services to internal control.
As IT becomes an integral part of most businesses, the CIO is an increasingly valuable member of the board. By using their expertise to support and guide other members, they can ensure that board decisions will always benefit the business.
Sourced from Zahl Limbuwala, CEO, Romonet