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Navigating Data Center Costs: Tips For Budgeting And Optimization

Navigating Data Center Costs: Tips For Budgeting And Optimization


The option to lease data center infrastructure has made it much easier for businesses to leverage the power of data centers. Even so, data centers often take up a significant chunk of a business’ IT budget. With that in mind, here is a guide to navigating data center costs along with tips on budgeting and optimization.

Understanding data center costs

Data center costs can generally be placed into one of three main categories.

Hardware costs: These include servers, networking equipment, storage devices, and infrastructure components.

Software costs: These include licenses, subscriptions, and maintenance fees for operating systems, virtualization software, and other applications.

Maintenance costs: These include routine upkeep, repairs, and equipment upgrades to ensure optimal performance and reliability.

Cost-allocation strategies

Cost allocation in data center environments poses challenges due to the interconnected nature of resources. Here are three cost-allocation strategies that address this challenge effectively.

Usage-based allocation: Allocate costs based on the actual usage of resources such as CPU, storage, and network bandwidth. This method ensures that departments or projects responsible for higher resource consumption bear the corresponding costs, promoting accountability and fair distribution.

Activity-based costing (ABC): Break down costs by identifying the activities that consume resources within the data center. By attributing costs to specific activities or processes, ABC provides a more granular understanding of resource utilization and allows for targeted optimization efforts.

Virtualization-aware allocation: Take into account the dynamic nature of virtualized environments by implementing allocation methods that account for virtual machine (VM) usage and resource consumption. This approach ensures accurate cost attribution in environments where VMs can be rapidly provisioned, migrated, or decommissioned.

Monitoring resource utilization

Monitoring resource utilization is essential for optimizing data center costs and ensuring efficient operations. By continuously tracking resource usage, organizations can identify inefficiencies, underutilized resources, and potential bottlenecks that may impact performance and increase costs.

Here are three monitoring tools you can use to track resource utilization accurately.

Performance monitoring tools: Performance monitoring tools track various performance metrics such as CPU usage, memory utilization, disk I/O, and network traffic. These tools provide real-time insights into the health and performance of data center components, allowing administrators to identify bottlenecks and optimize resource allocation.

Capacity planning software: Capacity planning software analyzes historical usage data and predicts future resource requirements based on trends and patterns. By forecasting demand, organizations can proactively adjust resource provisioning to meet workload demands efficiently, avoiding both under-provisioning and over-provisioning scenarios.

Virtualization management platforms: Virtualization management platforms offer visibility into virtualized environments, including VM usage, performance metrics, and resource allocation. These tools enable administrators to optimize VM placement, adjust resource allocations dynamically, and ensure optimal utilization of virtualized infrastructure.

Improving energy efficiency

Energy costs form a significant part of data center running costs. This means that even small improvements to energy efficiency can make a meaningful difference. Here are three of the most useful measures you can implement.

Optimized cooling systems: Upgrading cooling systems to more efficient technologies, such as precision air conditioning or liquid cooling, can significantly reduce energy consumption in data centers.

Server virtualization and consolidation: Server virtualization consolidates multiple physical servers onto a single hardware platform, reducing the overall number of servers required and consequently lowering energy consumption.

Energy-efficient hardware: Deploying energy-efficient hardware components, such as processors, storage devices, and networking equipment, can significantly reduce energy consumption in data centers. Hardware vendors offer products with features like power management, low-power modes, and energy-efficient designs to minimize energy usage without compromising performance.

Negotiating with vendors

One of the best ways to keep costs down is to negotiate effectively with vendors. Here are three areas to look at.

Volume discounts and bundled services: By committing to larger quantities or comprehensive service agreements, you can often secure more favorable pricing terms and additional value-added services.

Service level agreements (SLAs) and performance guarantees: Negotiate SLAs and performance guarantees that align with your organization’s requirements and expectations. Specify key performance indicators (KPIs) related to service uptime, response times, and reliability, and include penalties for non-compliance.

Flexibility in contract terms: Negotiate contract terms that allow for scalability, customization, and technology refresh cycles without incurring excessive costs or penalties.

Budget forecasting

As data centers are long-term investments, businesses need to keep a keen eye on future considerations, especially financial ones. Here are three tips to help with budget forecasting.

Historical data analysis: Analyzing historical data on resource utilization, cost trends, and budgetary allocations provides valuable insights for forecasting future costs. By examining past patterns and identifying trends, organizations can make informed projections regarding future expenses, enabling more accurate budget forecasting and allocation.

Scenario planning and sensitivity analysis: By modeling different scenarios, such as changes in demand, technology upgrades, or market fluctuations, organizations can identify potential risks and opportunities and develop contingency plans to mitigate adverse effects on budgets.

Vendor contract optimization: Optimizing vendor contracts and agreements can help mitigate budgetary risks by ensuring favorable terms and conditions that align with organizational objectives and budget constraints. Reviewing and renegotiating vendor contracts periodically enables organizations to leverage competitive pricing, negotiate favorable payment terms, and eliminate unnecessary expenses.

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