Fast forward to the year 2020. Hillary Clinton is running for her second term. The world is awaiting the release of the iPhone 14. You are listening to a conversation at a Wall Street & Technology CIO event.
The CIO of a major bank is chatting with one of his peers from another bank about the issues he is facing looking ahead to 2021. He says, "After the past five years of growing demand for more compute power and the advent of Big Knowledge [apparently Big Data has evolved], I need to consolidate data centers again." His colleague looks puzzled, turns to him, and says, "What is a data center?"
While this scenario obviously is a fantasy (perhaps not the part about Hillary Clinton), it may be directionally accurate. Dedicated data centers in 2012 already are a "drag" on a company's technology economics. Data center data tells the story.
The largest banks, with revenues of $30 billion and up, today have up to 2 million square feet of data center space. They may consume as much as 80 megawatts of power and cost $200 million to $400 million annually to operate, they are largely a fixed cost, and they offer limited agility in keeping up with technology change/innovation. In addition, as companies expand into emerging markets and in-country regulations evolve, the notion of large-scale data centers itself may not be workable. In turn, as scale diminishes, so do data center economics. All this does not portend well for the future economics of the data center.
[Data Center Cooling: From Seawater to Oil]
Now consider current technology directions, business needs and the vagaries of market forces. Technology directions take the form of maturing delivery models, including infrastructure as a service (IaaS), platforms as a service (PaaS) and software as a service (SaaS). Couple these with the cloud and it is evident that future options for compute capacity likely will be a mix of private cloud, managed private cloud, hosted cloud and community/public cloud resources. It is conceivable that given this mix, only 20 percent of a firm's resources need to be housed in a proprietary data center. There even are some models that suggest that 100 percent of the proprietary data center could "go away."
This makes sense if you consider the following business needs:
- An economic model based on "pay as you go" services to provide agility and user-cost transparency.
- A service model based on "on-demand" fulfillment of technology services in real time.
- A delivery model based on "user self-service" and the disintermediation of IT as a "middle man."
- A transport model based on "portability and standards" in which businesses can have their workloads processed in the optimum environment at maximum value.
And then add in market forces -- the "new normal" and the fluctuations businesses face globally as evidenced by revenue swings, transaction volume peaks and valleys, regulatory pressures, and changes in product demand, offerings and their mix.
The End of the Data Center?
Does all this mean the end of the data center? More likely, it points the way to a significant transformation of data centers. The data centers that companies have or have inherited in 2012 were born of a different computing era -- an era in which revenues were always growing; an era in which demand was always increasing; and an era in which "owning" or "outsourcing" were the dominant options.
This next era of computing is characterized by the need for agility, innovation, globalization and all-out digitization -- the manifestation of technology not just in IT but in all forms of products and services. And as such, the data center will take a new form. It may not have an address we can find on a map. The company may not own it. But it will still be out there.
Howard Rubin is founder and CEO of Rubin Worldwide, a research and advisory firm focused on the economics of business technology. Email him: Howard.Rubin@rubinworldwide.com