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Instead of simply viewing unused capacity as a drain on the company, why not see it as available inventory and a dynamic capital resource?
Any enterprise management team knows that data centers are expensive to build, staff and operate. For the many who have invested millions in data center infrastructure, they know a huge amount of spare capacity most likely exists, just waiting to be consumed.
Some reports point to enterprise data centers being put up for sale after only four or five years of operation because they’re running under 40% capacity. For enterprises embarking on digital transformation, are there any alternatives to dropping these assets, and risking millions of dollars in sunk capital?
In reality, most enterprises have workloads distributed across a vast range of physical and virtual platforms. Likely, a bulk reside in on-premise data centers, while others are deployed across disparate cloud and colocation facilities. Some are probably still found in server rooms or closets in branch offices.
When organizations look to consolidate such diverse infrastructure portfolios, a large scale migration to a single cloud platform is incredibly rare. Even digital transformation projects that do involve a major migration see just 40% of enterprise workloads ultimately moving to the cloud.Many legacy applications are not cloud ready and will never be cloud friendly. That still leaves the majority operating within the confines of the enterprise data center. Whether the goal for a digital transformation project at the onset is a wholesale “lift-and-shift” migration or an incremental optimization, it’s valid to address the state of the existing data centers.
When debating what to do with legacy data center assets, two goals should be top of mind: capital efficiency and operational excellence.
Instead of simply viewing unused capacity as a drain on the company, why not see the enterprise data center as available inventory and a dynamic capital resource that should be optimized?
It is possible to free up capital through flexible sale-leaseback deals, which enable enterprises to realize capital gains without losing control of their infrastructural flexibility. But not all sale-leaseback options are equal. Some offerings are inflexible and can only offer rigid turnkey arrangements following the sale with little to no optionality. Enterprises may find the benefits of a one-time capital injection through the sale of underlying physical data center capacity can quickly dissipate as they are faced with subsequent unpredictable migration costs. Furthermore, it’s difficult to forecast future rent costs as a tenant and to access new capacity within the same data center as cost-effective a manner as previously existed.
What can appear as a tempting option to generate capital can in fact render IT worse off by requiring it to sacrifice control over future infrastructure capacity options.
It’s therefore prudent to always consider the digital infrastructure sector’s shifting market dynamics that may prevent such arrangements from playing out as expected. This sentiment was echoed by Hoya Capital in a recent note, “It’s hard to predict what the competitive dynamics of the data center will look like in 2022, much less 2030.” If as a CIO you are squeezed out of what originally was and owned and operated data center, it may be impossible to know what the availability and cost of alternative colocation expansion capacity will be.
Like digital transformation itself, the future of supply and demand in the data center sector is not a fixed reality, but is one where all possible outcomes must be considered given volatile market dynamics and the full range of risk factors.
As a commercial data center developer and operator, Serverfarm understands how to create value from existing capacity drawing from its seasoned financial and engineering acumen.
Serverfarm has deep experience creating capital returns through the acquisition of enterprise data center assets and subsequently running those data centers as multi-tenant environments with vastly improved operational efficiency. This optimizes enterprises’ total cost of ownership by lowering ongoing operational expense, while sustaining operational flexibility.
Serverfarm’s operational and engineering capabilities are fully manifested through its development of InCommand: a unique cloud-based platform that ensures consistent operational excellence across its own and client data centers. InCommand provides enterprises with the ability to consume additional capacity in an elastic, scalable fashion in a cloud- like fashion.
Enterprises who achieve economic and operational transformation within their own environments stand not only to free up capital and optimize processes, but also improve control. By transforming enterprise data centers into flexible, cloud-like execution venues, Serverfarm provides a blueprint for digital transformation across the IT stack and paves the way for the realization of true business outcomes. With InCommand providing the platform, processes and tools which put the data center at the heart of digital transformation, enterprises retain control of their cloud journey.
If you own and operate a data center fleet, speak with Serverfarm about the options to accelerate your enterprise digital transformation.
Serverfarm is a unique data center company whose mission is to maximize data center and IT infrastructure efficiencies for service providers including communication, application, cloud and internal enterprise IT organizations
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