Data Center Operations and Digital Transformation Strategies (1 of 2)

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Data centers and digital transformation: A two-part Serverfarm blog series.

Considering a different approach to how your existing data center is used will create opportunities to accelerate the digital transformation of your business. In the digital transformation era, it will also change how the rest of the C-Suite view the role of the CIO and the IT function.

Digital transformation raises many questions. Questions such as: Where is the value in operating an enterprise data center? Is running a data center simply a cost of business? What additional value can it provide to the business? Considering the entire physical and virtual technology stack, is the CIO role that of an IT operator or that of a business leader? Who in the organization will lead digital transformation?

Picture the scene. On a visit to their main data center, some board members look around and take in the land, the shell, technical space, power, cooling, connectivity and rack infrastructure complete with server, storage and network gear.

The CEO thinks: When did we buy it and why? Is it a competitive advantage? Is this our core competence?

The CFO thinks: How much does it really cost?  If we sell this, it can contribute directly to the bottom line.

The CIO thinks: This could be the foundation of our digital transformation where costs are predictable and tightly controlled and a revenue generator.

How will the conversation go?

Finding Value

IT is always subject to change. But how best to use IT as the business becomes digital? In technology platform terms it would appear the IT pendulum is swinging towards cloud. Some commentators insist everything should be heaved off to service providers. Their logic says rationalize the data center assets. Push it off the books. Improve the bottom line. Shift everything to pay as you go Opex.

This may prove to be an attractive proposition for some. However, in these times of digital transformation, the obvious short-term answer does not always provide the best long-term solution for large enterprises with existing data center operations.

1990s revisited – outsourcing will solve everything

Back in the 1990s, there were business arguments made for outsourcing the enterprise IT function. It went something like this:

IT is not your core business – you make great cars or steel or are good at banking. IT is too specialized and is becoming too complex for you to spend time and money managing it. A specialist outsourcing firm is your best option for running IT and getting all this proprietary technology cost off the books and transferring your IT staff out of the business.

Enterprises were told, “You will get many innovative benefits.”

However, some experienced a different reality as outsourcers wrote long term contracts with 3 or 5-year break clauses. Having to turn a profit themselves, outsourcers kept innovation low on the priority list. The cost of innovating could only be justified once the contract came up for renegotiation. So, the issue was you could only outsource once. After the initial savings were made, the internal discipline shifted to supplier and cost management.

In the end outsourcing of enterprise IT operations probably peaked at between 30 to 40% of total IT capacity. Most enterprises kept some in-house IT function – especially for critical workloads.

Today’s cloud rush has forecasters predicting $116 billion in annual enterprise IT spend per year on cloud services by 2021. But some are starting to question the long-term cost visibility of cloud solutions. Cloud risks being characterized as too opaque and multi-cloud options are beginning to emerge again.

Much of this will sound familiar to anyone listening to ‘cloud first’ points of view.

There are differences between then and now, but some parallels exist.

New CIO roles

CIO roles have always been subject to change.

In 2019, CIO’s are expected to take the reins in organizations undergoing digital transformation. But, with opportunity comes risk. Some will be relegated to that of IT operator and ultimately risk losing their role to a service provider. CIO surveys show that roles and relationships between the CIO and the rest of the C-Suite will change for those who combine IT operations and business leadership. Emerging technologies and the digitalization of business are seeing vital relationships expanding across the C-suite to include CMO, COO, CDO, CISO and ultimately to the CEO.

“The digital era gives the CIO the opportunity to step up to become a business leader who drives top line growth with many now realizing this agenda for their enterprise.“

The tone of the conversation has also shifted. Smart, progressive CIOs and CFOs are collaborating on strategies to maximize return on infrastructure capital deployed. This, combined with control of operational costs is the foundation for the digital transformation of the business. 

But before this can happen IT and DC operations must address how they are viewed within the business. It can start with a conversation with the board of directors that IT should not simply be seen as a cost item on the balance sheet. It will be important to show IT and the data center operating as a commercial, customer-first driven division within the business built on service chargeback and transparent costs. It can finish with IT being aligned and often leading the digital transformation strategy with the data center operation as the engine of change.

How can this be achieved?

Serverfarm believes the journey to digital transformation begins in the data center.

An opening tactic is to conduct an audit of existing data center assets. This is most likely to reveal a complex ecosystem of real estate and physical infrastructure and a heritage of server, storage and networked IT, a complex software stack and applications spread across owned and operated, commercial data center, as a service subscriptions and public cloud services.

The next step is to begin an alignment of data center and IT operations with the digital transformation strategy. This may require some radical thinking.

If data is the new oil, the data center is the new oil refinery

Many will not have considered a situation where data center savings can be delivered through the right sale leaseback option. An option which in addition frees stranded capacity for revenue generation while and securing data center capacity for the business to grow into.

Properly managed, a data center asset can be the platform for the digital transformation of the enterprise.

For those CIOs, data center and IT leaders within businesses which own and operate data center estates the potential to find new value from existing assets should not be dismissed.

Continuing reading the Data Centers and Digital Transformation Blog Series