Monday, December 6, 2010

Capital Usage Effectiveness vs. Power Usage Effectiveness

By David Gross

The Green Grid recently proposed that data center managers add Carbon Usage Effectiveness and Water Usage Effectiveness to the already widely used Power Usage Effectiveness metric.    While I've never seen a data center that tracks too many operating metrics, I've seen plenty that lack appropriate financial measurements.

While I think some good could come out of additional energy and environmental metrics, including possible innovations in cooling architectures, they cannot overwhelm metrics important to shareholders, many of which are not tracked.   It's rare to find a data center operator who can't tell you the PUE of the building, by season, but it's also rare to find one who can tell you the IRR on the capital invested in the place.  Haphazard upgrades are sometimes required operationally, but as an investor in a building, either a self-administered or leased facility, I'd want to know what the financial returns are on that capital investment, what the alternatives are to these investments, and how much of the capital could be substituted by operating expenses, and what the return on doing such a thing would be.    But rarely can data center managers discuss these numbers like they can their PUEs.

The problem with not tracking IRR is that the number of options to build or buy continue to expand in this industry, from the facility itself, to power, to cooling, to telecom capacity.   How do you know you're making the best decision if you don't know the returns, and I don't mean costs, but the financial returns of shifting an operating cost to a captial outlay, and vice versa?   And what about the timing of expansions?  A time-sensitive financial measure like IRR, and not ROI or TCO, is needed to handle this.

It's time for the industry to start tracking a new CUE, not Carbon Usage Effectiveness, but Capital Usage Effectiveness.   Vendor TCO models, which generally originate in their marketing departments, not internal capital planning, are a poor substitute for doing this, in fact they're negative because they're arbitrary and typically exclude the opportunity costs of alternative uses of capital, as well as the time value of money.   Moreover, good capital planning can assist with good environmental planning, by eliminating unnecessary costs and capital outlays.  But it won't start happening until data center managers start tracking their capital output as closely as their environmental output.

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