The Benefits of Cost Management in Data Centers
Data centers are essential to the smooth operation of many businesses, from small startups to large corporations. Data centers provide organizations with cloud based services the opportunity to compete in the market, with disaster recovery and storage capabilities to ensure business continuity.
However, a traditional data center is extremely costly to build, use and maintain. Some estimates say it can cost between $600 to $1,1000 per square foot to build a data center and that global data center spending will reach $222 billion in 2023.
If services or equipment are overallocated or underutilized, expensive overheads and wastage can cost a business its competitive edge.
In this article, we’ll explore the pros of leveraging cost management in your data center assets and why having a cost manager on each data center construction project is essential.
Why Cost Management Is Key
Cost management in data centers can be highly complex. The cost of owning a data center includes facilities, server technology, networking and bandwidth fees, and hiring technical staff. It’s important to size things properly upfront to avoid wasting investment. Predicting and designing for ultimate utilization is crucial in determining the total cost of ownership. Other relevant factors include electricity, engineering and installation staffing, power and server equipment, facility space, service and maintenance, HVAC equipment, servers, energy costs, project management, rack hardware, and system monitoring. All of these factors need to be taken into account while budgeting.
Engineering staffing, facilities, and utility-related costs make up most of the capital required to run and operate a data center. Sizing the data center design correctly can save nearly 60% in total cost, and leveraging modularity, scalability, and virtualization is crucial for significant savings and profits.
A procurement and cost manager can help the organization acquire the proper infrastructure at the right price to increase efficiency and optimize existing physical infrastructure and resources to reduce costs. Here are just a few of the benefits of involving a cost manager when building or running a data center facility for your organization:
Cost overruns are a common problem in construction projects, and data centers are no exception. There are many reasons why cost overruns occur, including poor planning, inadequate budgeting, unforeseen complications, and changes in project scope. A cost manager can help to reduce the risk of cost overruns through careful planning and budgeting.
In assessing the total cost of a data center, there are five main factors to consider.
- The first is the cost of constructing the physical data center facility, which accounts for around 45% of total data center costs on average.
- The second is the cost of acquiring IT infrastructure, such as servers and networking equipment, which can vary widely depending on the specific equipment needed.
- The third factor is the energy and utility cost required to power and cool the data center, which depends on the energy consumption of the IT equipment and the cost of electricity.
- The fourth is data center utilization, which can affect costs positively (by increasing efficiency) and negatively (by requiring more infrastructure and energy).
- Finally, staffing costs are a significant factor to consider, with smaller data centers requiring fewer employees and more automation leading to lower staffing costs.
Cost managers can work with the project team to develop a detailed cost estimate, considering all potential costs, including equipment, materials, labor, and operational costs. This estimate is regularly updated throughout the project to ensure actual costs are tracked to the forecast.
Risk management is another critical component of cost management. By identifying potential risks, such as unforeseen complications, changes in project scope, or unexpected delays, cost managers can develop contingency plans to mitigate the impact of these risks on the project’s budget.
Cost management and cost allocation are critical factors in ensuring that data center projects are completed on time and within budget. A cost manager can identify and manage potential risks that may delay the project, create contingency plans, and ensure that the project stays on track.
A cost manager can also implement cost-saving measures that can reduce the likelihood of delays and cost overruns. For example, they can identify opportunities to use prefabricated or pre-engineered components, significantly reducing construction time and costs, or suggest potential uses of existing resources or legacy infrastructure. They can also work with suppliers to negotiate favorable pricing for materials and equipment, reducing costs and delays.
By managing costs effectively, a cost manager can ensure that data center projects are completed on time and within budget, minimizing the risk of delays and cost overruns. This helps to ensure that the data center network can be up and running as quickly as possible, providing the necessary infrastructure to support the organization’s operations.
A cost manager can provide regular financial reports to the project team and stakeholders, keeping everyone informed of the project’s financial status. This transparency allows for early identification of any potential budgetary issues and allows for swift action to be taken to keep the project on track.
Data centers require a significant amount of resources, including equipment, materials, and personnel. Effective cost management ensures that resources are allocated efficiently and effectively so the right resources are used at the right time and in the right place. A cost manager can help to ensure that resources are used effectively, leading to lower costs and improved performance.
By involving a cost manager early in the design process, potential cost savings can be identified and integrated into the design. The cost manager can work with the design team to find the most cost-effective solutions, such as using more efficient equipment, optimizing the layout of the facility, and selecting appropriate materials. This may lead to the teams uncovering additional capacity or additional efficiencies, saving money in the long run.
Data centers have ongoing operational costs, such as electricity, cooling, and maintenance. Effective cost management can help to minimize these costs by identifying opportunities for energy efficiency, optimizing cooling systems, and reducing maintenance costs.
Implementing cost-saving measures, such as server consolidation, virtualization, and energy-efficient practices, can significantly reduce operating costs, while effective ongoing cost management techniques can increase the efficiency of data center operations, leading to improved performance and productivity. This, in turn, can translate to faster service delivery and higher customer satisfaction, which can improve the data center’s reputation and attract more business.
During construction, capital expenses can represent a significant investment for data center operators. By implementing effective cost management practices, data center managers can optimize their capital expenses, reduce the costs associated with equipment acquisition, and ensure that capital investments provide a maximum return on investment.
Without effective cost management, data center projects can easily exceed their budgets, leading to delays and other issues that can impact the organization’s operations. By working with a cost manager, organizations can ensure that their data center projects are completed successfully, on time, and within budget, maximizing their investment in every way from start to finish.
Get in touch with Churchill Cost Consultants if you would like more information.