In a time of economic uncertainty (like the one caused by the Covid-19 pandemic) it's too often that IT managers are asked to cut costs while continuing the digital transformation of the company. It's a particularly difficult position to be in because cuts made today could stifle future progress if your IT can't keep up with company growth.
You can't make any cuts or roll backs that would impact the productivity of the company, which severely reduces your options since you need to maintain your current capacity. However, there is a way to leave your existing system and applications running, while saving money by changing the infrastructure that supports them.
What is colocation and how can it help?
Data centres offer colocation services, where they host your existing servers. They provide the physical location that hosts your servers, and all of the power, cooling and connectivity infrastructure that they require. This means your servers will be supported by cutting-edge technologies and you no longer need to maintain your in-office setup.
The regular fee you pay to your colocation provider covers:
- Space for servers
- Power costs (including for running cooling systems)
- Network costs
Maintaining IT in the office, whether you have a dedicated server room or another setup, has significant costs attached to cover all of your hardware's requirements:
- Increased electricity bill to power servers and cooling systems
- Space for servers requires a larger office and higher rent
- Your office requires additional security processes to protect your servers
- Maintenance on infrastructure either takes up the time of your IT team, or you're paying for engineers to come in
It's impossible to calculate exactly how much your in-office IT is costing you (you can't know exactly how many man-hours have been spent on maintenance, or what your rent could be in a smaller office), but colocation consolidates all of these costs into one fee that you pay to your provider. This also removes the risk of unexpected costs attached to unplanned maintenance (to fix breaks). Both of these are valuable advantages during a time of economic uncertainty and make it easier to balance the budget.
How colocation saves you money
In addition to the fact that colocation clarifies the state of your accounts, you should also find that after migrating to a data centre, the IT department will be spending less. Data centres are highly efficient, protect your systems from downtime and grant your company more flexibility, all adding up to save your business money:
1. Reducing day-to-day costs
Thanks to the large-scale operations of data centres, they are able to deploy highly efficient technologies for their energy-supply and cooling. For example: adiabatic cooling towers massively reduce a data centres energy consumption without reducing their cooling capacity. This means their cost-per-server is lower than the server-room of a company, and they pass that saving onto their customers. Sherweb estimate that a company can save 58% of their IT operating costs by getting rid of their in-office servers.
2. Capex to Opex
Setting up and operating the supporting infrastructure for your IT is a significant capital expenditure and requires you to make a large investment when you want to expand. Colocation can turn all of your infrastructure capital expenditures into an operational cost. Gartner points out that, while it is possible to cut back on capex, increasing the share of your spend that's opex will make it easier to control (and limit) spending in the future. The average IT department spends only 25% of its budget on capital.
Additionally, being able to expand without a large upfront investment will futureproof your company's IT and make expansion easier during times when finances are tight.
3. Facilitates an office downsize
With more people than ever working from home after the Coronavirus pandemic, and the difficult economic situation that pandemic has created, a lot of exec teams are currently reviewing the roll the office plays in running the company.
According to Instant Offices, 1 square foot of office space can cost up to £207 per year when all costs are factored in, so how much space does your server room take up?
If a company can downsize or get rid of their office it will save a significant amount of money, and if you are hosting your IT in a data centre, then this office move will be a lot easier.
4. Reducing the risk of downtime
Data centres are equipped with specialist infrastructure, like UPSs, to protect your IT from going down, even in extreme situations like power cuts. The cost of downtime is incalculable, and having a more resilient IT system will save you money:
- Downtime means lost productivity, and the value attached to that
- Damage to your reputation will make it harder to win business
- Missing deadlines or otherwise breaching Service Level Agreements as a result of IT downtime can lead to costly pay outs
How to pitch this to the exec team
During times of uncertainty people tend to be averse to change, and executive teams are no exception, so they might try and push the IT department towards a solution that is a scaled down (and cheaper) version of what you currently have. But they'll be receptive to what you have to say when you let them know the headline of working with a data centre is: hosting in a data centre will reduce the running costs of our IT, while making it more secure and resilient, reducing downtime.
You need to demonstrate that leaving your IT as it is will be a riskier strategy than working with a data centre. Your exec team don't need to understand the technical details of your colocation plan, so the main talking points they'll be interested in are:
- Reduced operating costs – Your IT expenses are converted from capex to opex, and the fee you pay the data centre will be less than all of the expenses attached to running an in-office server room.
- More resilient system – Avoid unplanned maintenance and the costs attached when something breaks. In addition, protect your reputation and avoid disruption to productivity by avoiding downtime.
- Greater flexibility – Have much greater freedom to downsize or get rid of the office once your IT is in a data centre. At the very least, the space taken up by servers can now be used by desks, delaying the need to expand the office. Working with a data centre will also make it easier and cheaper to expand your IT system.
- Free up the IT team – With support from the data centre’s engineers, your company’s IT team are freed up to work on more business-critical projects, like software upgrades and other way of progressing your digital transformation.
Your next steps
An exec team wants to make the best decision for the business with the most effective plan that minimises unnecessary costs, and you can deliver that to them. Pitching a new project can be daunting but you can learn about colocation here, and 4D are happy to help with advice on determining the best managed infrastructure for your company.
When you’ve won them over, you can impress the exec team further by finding the best possible data centre.