Discounting the downturn
Will regional data centre investment get hit by the economic climate?
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When the giants of Wall Street started to tumble like a chain of dominos in 2008, the world held its collective breath and the markets are still yet to exhale. News bulletins about Meryl Lynch and Lehman Brothers used to be accompanied by investment bankers in tailored suits smirking with the confidence of a firmly entrenched seven figure income - not so after September.
Six months on from the tumble of Manhattan's finest the Middle East is starting to move beyond damage control and into long-term assessment, particularly when it comes to looking over the pricey data centre strategy.
"In the last couple of weeks the market has really started moving again, which is a good sign, and the banks are being more flexible dealing with the consumers and the corporates," says Dr. Usman Zafar, managing director of Al Taqnyah Business Solutions.
The financial crisis came at an unusual time for Zafar, as he was overseeing the implementation of a new document management system. This meant that two decade's worth of data had to be processed and this had the effect of generating additional storage requirements.
Zafar explains that this put the company in a unique situation, with the crisis going on and additional storage requests landing on his desk. Despite the fact that the troubles of financial heavyweights were primetime news each evening, those storage needs still had to be filled and would not go away on their own.
"We didn't feel that bad because we have a huge backlog conversion and when we reached that stage we definitely needed to expand our storage capacity," he adds.
While the company does not run an internal data centre yet, according to Zafar the current facilities and the local infrastructure are antiquated within all the companies Al Taqnyah oversees. This has lead to a new data centre being incorporated into the company's five year strategy, with a real possibility of outsourcing the requirements.
"We have already evaluated a couple of data centres in the United Arab Emirates like eHosting DataFort. Those data centres are providing very good services but outsourcing is under consideration - depending on our future business growth," adds Zafar.
Al Taqnyah's experience merely highlights a larger trend - that the amount of data being produced is increasing and this leads to organisations needing a place to store that data irrespective of the crisis.
"There is a huge requirement for storage across all industries. As per IDC and other analysts this data growth is an average of 60%-70% year-on-year and in the Middle East we saw over 70% in several industries," explains Said Akar, technology solutions manager for the UAE, Saudi Arabia, the Arabian Gulf and Levant at EMC.
But storage is not exempt from the travails current economic climate, as EMC chairman Joe Tucci noted during his whirlwind tour of the region in April.
"Nothing is recession proof. Storage may be a little bit better than the average, but it won't be immune," he said.
Chandan Mehta, product manager at Fujitsu Technology Solutions explains that the biggest changes to existing data centre strategies is unscheduled delays to planned refreshes of technology.
"In the Middle East we have some projects in Dubai getting delayed, we see a shift in our discussions for other parts of the GCC in terms of reviewing everything that has been on the drawing board," he says.
"The only motivation for [CIOs] to purchase new infrastructure would be something that reduces their operational expenditure and gives them a return on investment within as short a time frame as possible," he adds.
Focusing on reducing costs is nothing new - data centre managers have been watching the red numbers climb and fall in the ledger column for years, though the financial crisis has made those eyes suddenly much more hawkish. It is only natural that with global economic turmoil comes fists that are wrapped tighter around each penny and will only loosen their grip for the guarantee of a quick and substantial return.
Mehta believes that costs have been an issue since time immemorial, even in periods of economic prosperity; however what CIOs are looking at now is more cost-effective storage and exploring virtualisation.
When all the whispering around the water cooler is about how much coin needs to be saved, it is no surprise that the vendors change their tunes to suit. Much of the promotional spiel is now about how much you can save instead of how great the features on their latest product are. But where do those savings come from? More specifically, is it worth ponying up the initial investment now in order to realise reduced operational costs later?
"My advice to CIOs would be to re-examine at all technologies currently available in terms of servers. Do a cost analysis in terms of how effective it would be to implement new infrastructure?" says Fujitsu's Mehta.
EMC's Akar believes the key is to focus on the long-term plan and to make sure your strategy fits in with your needs. This means approving measures that achieve cost reductions and business results in the short term, but also factoring in the long term data requirements of the business.
"The key IT words - and this is applicable to the long and short term - is to consolidate, virtualise, automate and de-duplicate whenever you can," he says.
The counter argument to this is not to consume any of the organisation's profits on new infrastructure and coast along with what you have. While this means that your operations team won't be unwrapping any fancy new server boxes any time soon, it also ensures that you are not incurring new infrastructure expenses in the short term.
This poses the question of what motivation exists to go out and purchase a shiny new array in a time when the media has cemented ‘credit crunch' and ‘economic stimulus' into the daily vocabulary.
This also opens up the outsourcing discussion, which is an attractive possibility for organisations that may not have the resources to establish internal data centre operations.
Scott MacKenzie, CEO of MEEZA, a managed IT services and solutions provider based in Qatar believes the Middle East should embrace the shift to centralised computing in the data centre conversation.
"People and businesses merely want a means to access the information they want when they want it. Some say we are entering the knowledge era, but we cannot truly grasp the next wave until we unbind ourselves from the legacy of the PC by embracing today's technologies in virtualisation and commoditising server infrastructure within the datacentre" he says.
"Having spoken recently to many CIO's across the region, I know for a fact that many have a budget surplus as they simply cannot find the experienced staff they need," claims MacKenzie.
Outsourcing always manages to find its way into the data centre discussion - like it did for Al Taqnyah Business Solutions - but chatter is cheaper than a contract. Much like the current situation for purchasing a new server, the uptake is completely subject to CIOs loosening the purse strings in an economy pressuring everyone to tighten them.
"CIOs are going to look into whether they can get more out of the existing storage capacity. Can they cut management costs, spend less on keeping applications in synch and on keeping the website secure," asks Bashar Kilani, manager of IBM's software business in the Middle East, Egypt and Pakistan.
Kilani believes this will translate into discussions about virtualisation, because most know that not every machine in the data centre is being fully utilised. It is somewhat of a cautionary tale though, as it also commonly known that not every single machine in the data centre is suitable for virtualisation.
The virtualisation principle makes sense - using underutilised resources to do more work - but it is one thing to be excited about a technology at a vendor presentation and quite another for a CIO to sign a contract.
"If you have 100 servers and they are all over three years old and you're paying maintenance on them, then if you consolidate those down to 25-30 brand new servers you're using far less servers, space and power and you are not paying the maintenance on the 100 anymore," says Andy Clark, MENA enterprise systems specialist for Sun Microsystems.
The pros and cons of virtualisation has been debated endlessly, but the pressing question in the current climate is the same for every technology in the data centre - is it worth investing money now to achieve a return on investment later?
Mohammed Halawa, enterprise marketing manager for Dell believes the answer lies in efficiency and the focus of a CIO needs to be on how to efficiently manage existing infrastructure and IT demands with less resources.
"In general you know that demand in IT is getting higher and higher every day and this is irrelevant of whether there is an economic crisis or not," says Halawa.
One of the hard truths about the economic crisis is it affects different verticals and even individual organisations in completely different ways. Some are untouched and others are reeling under the brutal assault.
For the lucky few - such as debt collectors - business has never been better and as much as they may be universally loathed they have data centre requirements too. Vendors were quick to get on board with the crisis and shift their focus over to how to save the organisation money, but all the marketing jargon in the world won't make a difference to a CIO or IT manager who is not interested in spending now to try and save later.