Is Consolidation Right for Every Enterprise?

Arthur Cole
Slide Show

Agile Federal Data Centers: The Drive to Thrive

Is the data center industry on the verge of a massive wave of consolidation, one that will make past efforts look tame by comparison?

Quite probably, as virtualization, cloud computing, Flash storage and a host of other technologies rewrite the economic rules regarding the care, maintenance and utilization of data resources.

Last week, I highlighted some of the efforts the U.S. federal government has taken to trim down its gargantuan data infrastructure. The effort has already slashed the IT budget by about $1 billion, although lack of reporting mechanisms and benchmarking could put the actual savings closer to $3 billion. As the world’s largest employer, the federal government can undoubtedly trim a lot of fat from its data infrastructure, and many agencies are sorely in need of an upgrade to their computing capabilities in general and should therefore benefit from a good dose of the cloud.

But the question facing many enterprises today is whether consolidation makes sense on a smaller scale. Even the largest private enterprise pales in comparison to the government, and while the Fortune 500 has implemented consolidation projects from time to time, do the economics make sense farther down the chain?

Truth be told, the question may become moot sooner rather than later as cloud computing assumes a greater share of the enterprise load. With many small firms likely to find the cost and convenience of the cloud more compelling than in-house infrastructure, issues like consolidation and resource utilization will become someone else’s problem. But this, in turn, will likely lead to massive consolidation within the cloud and colocation industries, says Zahl Lumbuwala of modeling software developer Romonet. This is likely to produce mergers of both data center infrastructure and the providers themselves as economies of scale drive costs down and produce margins that can only be sustained by the largest providers.

This is already playing out in key industry verticals like banking and finance. A recent survey by TABB Group revealed that the vast majority of trading activity around the world is run through 10 data centers located at key hubs like New York, London and Singapore. According to study author Paul Rowady, the situation is akin to a velvet rope at a fancy nightclub, with top providers getting preferential access to the most critical data loads and the rest of the industry scrounging for the non-critical crumbs. And as long as the top providers prove themselves worthy and reliable, the more they act as a magnet for even more of the trading data load.

Cloud Strategy

What do you do, then, if you find yourself with too much infrastructure? The worst word in any consolidation project is “disruption,” according to Greenhouse Data’s Shawn Mills. Above all else, the transition from old systems to new must go smoothly, which requires a fair bit of planning up front. This should include not only the selection of a reputable third-party provider if you choose to outsource, but also the buy-in of all affected stakeholders. Indeed, the biggest headaches in the consolidation are not technical, but political as different units vie for optimal treatment for their treasured applications and processes.

Is a consolidated enterprise infrastructure necessarily a better one, though? From a purely budgetary perspective, it is hard to argue against consolidation, as long as ongoing opex and capex expenses can be shown to outweigh the upfront costs. But beyond that, are there any intangibles that might cause IT to rethink consolidation?

The only things that trump cost in the enterprise are security and availability. Pushing loads onto fewer and fewer pieces of hardware may be cheaper, but is there an inherent risk in reducing the number of physical points of failure in the enterprise? The careful CIO might want to ponder that one for a little while before signing off on a consolidation plan.

Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata, Carpathia and NetMagic.

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