Despite Rise in IT Budgets, Data Center Spending Remains Unchanged

A study released last week brings disappointing news for data center managers.  The vast majority of managers claim that their budgets won't be rising in 2011 despite a rise in overall IT spending reported in another study.

The AFCOM study, released at its Data Center World conference, reports that although over one-third (37 percent) of data center managers will increase their budgets this year, that's down from 43 percent just 18 months ago. Despite the decline, only 18 percent are lowering their budgets, with the remainder expecting spending will stay flat.

Overall, AFCOM said the outlook for those managing large enterprise data centers is promising. "Despite the economy, data centers are spending money," said Jill Yaoz, AFCOM's CEO, speaking on a teleconference to disclose the results of the study. "We found that to be interesting because if you look at the economy, a lot of organizations aren't spending money and, in fact, they are cutting budgets."

Of the 37 percent with increasing budgets, 41 percent are doing so by 6 to 10 percent, and 16 percent are increasing their budgets by more than 20 percent from the same period last year. AFCOM, a trade group of 4,000 data center managers, surveyed 358 CIOs and high-level IT directors in December.

Meanwhile, overall tech spending appears to be on the rise. Forrester Research upped its forecast for IT spending this year from 7.4 percent in January to 8 percent, with a 10.3 percent boost projected for next year, up from the 9.3 percent forecast earlier. Despite high energy costs, supply chain disruptions in Japan, and government layoffs, "U.S. economic growth still looks solid," said Forrester analyst Andrew Bartels in a blog post.

With Accenture and Oracle raising their forecasts, the broader market for IT services and goods is looking stronger than earlier indications suggested, according to Bartels. "I think we will see other vendors re-setting their own bars for their revenue growth in 2011 to higher levels," Bartels noted.

AFCOM's Yaoz said in an e-mail that there are a number of factors contributing to the fact that most budgets are either flat or down in large data centers.

"The things contributing to keeping many data centers flat and not having to spend more in their budgets has been the savings data center managers have brought through taking advantage of newer technologies such as more cost-efficient cooling equipment, more power-efficient servers, the increased use of virtualization (lowering power and server acquisition costs), embracing the cloud in increasing numbers and the trend over the last few years towards data center consolidation," she said.

Among other findings in the AFCOM report:

  • One-third of managers have eliminated at least one mainframe over the past three years; nearly three-quarters have increased the number of servers in their data centers

  • Nearly half of respondents are either in the process or planning to expand their data centers, while 44.2 percent are already occupying more space than they did three years ago

  • 36 percent have implemented some form of cloud computing, up from 15 percent a year ago; another 35 percent are seriously considering cloud computing

  • More than 15 percent of data centers have no plan for backup and recovery

  • Half have no plan to replace equipment damaged following a disaster

  • Two-thirds have no policy to address cyber crime

  • 8.7 percent have no disaster recovery or business interruption plan

  • More than half monitor server utilization, cooling efficiencies and power-usage effectiveness (PUE), while 27 percent have received energy-efficiency incentive rebates

Yaoz was particularly concerned about the lack of disaster recovery and business continuity planning. "Disaster recovery plans are simply not up to par," she said. "This to me is something we've got to deal with in this industry. It's something we need to overcome because if you look at all the disasters that have happened recently, you see that it could happen to you. You need to be prepared."

Tom Roberts, manager of data center facility management at Trinity Information Services and an AFCOM board member, said many data center managers are in denial about the risks they face. "You don't see it happening to you until it happens to you," he said.

Even those that have disaster recovery plans need to revisit them, Yaoz said. "If you haven't updated it for five years, you're going to be in trouble because you do have a wider base of customers on the Internet. You have wireless applications. There's so much more data out there."

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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