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New Server Spending (CapEx) and Power & Cooling Cost – Parity?

International Data Corporation (IDC) is a provider of market intelligence and advisory services for the information technology, telecommunications, and consumer technology markets. A recent presentation titled “Beyond Organisational Boundaries: Answering the Enterprise Computing Challenge” analyzed world-wide spending on Servers, Power & Cooling, and Management Administration. As noted the “Second Critical Challenge” is controlling Management and Administration cost. On the near horizon, as hardware cost rise slowly or even decline, is cost parity between New Server Spending and Power & Cooling. Over the decade Power & Cooling has gone from 10% of spend to nearly 75%.

Energy cost is trending higher as seen in this EIA data “U.S. Electric Utility Sales, Revenue and Average Retail Price of Electricity “. The following shows Average Retail Price for the Industrial Sector, by State, over the last two decades. Relative price stability has been replaced with sharper state-by-state disparities and rising cost.

The trend is clearly towards increasing cost of electricity needed to power and cool the data center. The economic cycles and associated increases and decreases in demand are modulating the upward trend. Embedded within the cost are renewable energy requirements and regulation. A recent ieee spectrum article “Trouble Brewing for Wind?” notes that operation and maintenance (O&M) cost are increasing sharply, two or three times higher than initially projected. The referenced Wind Energy Operations & Maintenance Report estimates world O&M cost at 27 U.S. cents per kWh with credits offsetting 20 c/kWh. The cost of the credits must be financed by other means, ultimately driving up the average retail cost of electricity. Unsubsidized, this form of alternative energy would most likely quintuple cost and force significant increases in Power & Cooling, placing P&C on par with Management/Administration cost. Overall this highlights the importance of pro-active data center planning, from capacity through adoption of new technologies, with complementary facilities and IT strategies. The life cycle of a data center places you directly in the path of higher P&C cost.

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