Datacenter Dollars Seen as Steady Spend

Finally, some good news in a sea of bad economic news lately.

AFCOM, an association supporting the data center industry, polled 312 members representing major datacenters around the world in private industry and government. The results: Spending will hold steady and, in many cases, will go up in 2009.

One big caveat needs to be noted. The survey, titled “The Current Economy and its Impact on the Data Center,” was done in May. The stock market has oscillated wildly since then. But during its Data Center World conference in Orlando earlier this week, AFCOM founder and past president Len Eckhaus did a survey of attendees and very few said their budgets had changed.

“The single biggest thing that jumped out is that the datacenter, in terms of how it’s perceived at the very highest levels of the company, has risen dramatically in importance,” Eckhaus told

While the majority of companies are lowering budgets in most of their departments, the hit in the datacenter is much less than the rest of the company, he added. “I think companies [are] recognizing that if the datacenter goes down, the business goes down,” said Eckhaus.

AFCOM picked four major indicators of what’s going on in the datacenter and what to watch in the future.

  • The downturn in the economy will spur a major growth in greening efforts because they have a payoff in savings.

  • The impact of datacenter budget cuts will reduce overall efficiency of operations in the entire company. When budgets are cut, new technologies don’t come into play. Firms need to expand or adopt new technologies and won’t be able to.

  • The downturn may spur increases in purchases when companies realize increases in their datacenter’s effectiveness affects their company’s survival.

  • A company’s ability to survive in this economy is more than ever before dependent on the datacenter’s performance.

The key issue of the current economic crisis will be the lack of credit, and how long that problem persists. “The costs for purchasing and building datacenters is money that is generally borrowed money,” said Eckhaus. “So the length of this will be the key.” The longer credit stays tight, the worse things will get.

Survey says.

The survey found that only 36.9 percent of those surveyed have been asked to cut their 2009 budgets, and 43 percent said their budget would go up in 2009. Another 38.2 percent said their budget would hold steady while 18.8 percent said their budget would decline in 2009.

In addition, 61.7 percent reported involvement in greening initiatives and 78.5 percent said they would be increasing their greening initiatives in 2009. All total, 86.5 said power and cooling issues will play a greater factor in their future buying decisions and 78.5 percent said increases will be due to green initiatives.

However, that’s not out of environmentalism. That goofy IBM
(NYSE: IBM) commercial where unsmiling board members are suddenly dancing around a tree when they learn a green initiative can cut energy costs by 40 percent is closer to reality.

“When asking datacenter manager their definition of green, their definition is specifically saving money on power and cooling,” said Eckhaus.
“CEOs may like to say it’s altruistic but the bottom line is their definition is saving money on power and cooling and they are going to be doing a lot more of that.”

Among those areas being cut, travel budgets are taking the biggest hit, which some weary travelers will be happy to hear, followed by training, staffing increases and education and training. Eckhaus also said that new datacenters, or major expansions of existing centers, would likely take a hit. So budgets will be going up, but not a lot.

Datacenter fire sales

In recent months, two large financial firms, Bear Stearns and Lehman Bros, have sold for pennies of their prior market values. The final value was estimated to be for the real estate they held in New York City and their massive datacenters.

But Eckhaus doesn’t think datacenter fire sales as firms get bought up will have much impact. It won’t slow hardware sales, since hardware is an asset that loses value daily.

“Those prices may well include the data that’s stored there, and data is becoming and may have achieved the state as the largest asset of any company today,” he said. “The datacenter is where data is housed, kept and processed. With that in mind, the datacenter’s value is huge.”

Even though J.P. Morgan inherited huge datacenters from Bear Stearns and Barclays plc is in the same boat with Lehman’s hardware, the lifespan of that hardware is short. “The data is of the most value in the datacenter.
The equipment has a value, but the least value because it has to be replaced on a regular basis.”

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