We’re in the early stages of the second great transformation in business computing – a shift from the reigning client/server model (in which individual companies own and maintain their own IT “power plants”) to the utility model (in which outside utilities will run the plants). The change is going to take a while, not just because utility computing’s underlying technologies, like virtualization, are far from mature but also because managers naturally fear losing control over the IT assets that have become so essential to their operations. Few executives enjoy having to run their own IT plants (Lord knows, it’s not their core business), but most of them have at least a little bit of the “box hugger” in them.
What will spur companies to make the leap will in many cases be a crisis. We’ve already seen an example with the imposition of regulatory regimes such as Sarbanes-Oxley or, in health care, HIPAA that require firms to meet tough standards for data security, disaster recovery, and so forth. Faced with having to invest heavily in modernizing their IT infrastructures, policies, and staffs to meet the new requirements, some businesses have opted to unload much of their infrastructure onto utility providers running secure, state-of-the-art data centers. They find it makes economic sense to offload the capital investments and labor costs to an outsider, and, equally important, they like the fact that it gives them a way to get the risk and liability off their own shoulders. (It’s kind of like keeping a get-out-of-jail-free card in your back pocket.)
Now, companies suddenly have another good reason to jump to the utility model: electricity costs. Corporate data centers are power hogs, and their gluttony gets worse every year. Earlier this week, TechTarget reported on a new survey by AFCOM, one of the leading IT professional societies, that showed the amount of electricity used by the average data center is increasing at an 8% annual clip, and for some centers the growth rate is as high as 20%. Up until now, though, the increases haven’t been severe enough to attract the attention of most business executives. But that’s about to change. The spike in oil and natural gas prices is pushing the cost of electricity up dramatically as well. Boston’s Beth Israel Deaconess Medical Center, for instance, has just been told by its electric companies that rates are going up 27%. Combine that kind of rate jump with the ongoing increase in consumption, and you’ve got a problem that’s going to get noticed. As the hospital’s data center manager, Bob Doherty, notes, “If I told my boss that my staff wanted a 27% increase [in pay], I’d be downstairs on the carpet.”
If energy prices stay high, expect to see another wave of companies embrace the utility model and start to close down their data centers. It looks like box-hugging is about to get considerably more expensive.