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It's twilight for small in-house data centers

Patrick Thibodeau | April 1, 2013
More workloads are shifting to service providers, with concern about skills playing a key role

Concern about skills was one of the reasons why Gene Berry, the CIO of insurer OneAmerica Companies, decided to transfer his data center operations to a third-party service provider.

OneAmerica's data center took up 25,000 square feet, one full-floor of its Indianapolis-based tower. By June, the firm expects to complete transfer all its services to T Systems North America. It's in-house data center will be reduced to 2,000 square-feet, mostly for networking, and will be managed by the service provider.

One of the reasons for this decision was staffing, said Berry. The company had about 65 employees in its data center and about 18 different technologies, and in some cases there was only one or two people who had the knowledge to run certain specialized technologies. "That gave us a lot of concern long-term; we didn't have the ability to hire backups for these technical platforms," he said.

Hank Seader, managing principal of the Uptime Institute, said that it takes a "certain set of legacy skills, a certain commitment to the less than glorious career fields to make data centers work, and it's hard to find people to do it."

T Systems has created a private cloud-like, variable-capacity model. If Berry uses less storage or consolidates servers, then costs go down. They plan to modernize their applications.

Most of OneAmerica's data center employees have left the company, and Berry says he has since put put much more focus on application development and working with the business.

Do in-house data centers have a future? "I think only for the really large companies that have scale; for smaller providers, for smaller companies, no," said Berry.

All firms are trying to limit the IT deployed in small data centers, said IDC's Villars. Smaller firms may be shifting more work to service providers, while larger firms are consolidating and building bigger data centers as they centralize assets, he said.

In many cases, virtualization has substantially reduced the need for in-house data centers for smaller IT operations, "and they don't seem to have any plans to expand them at all." They are either moving future work to co-location facilities or to service providers.

Vince Kellen, the senior vice provost and CIO at the University of Kentucky, also wants to shrink his data centers, which total about 15,000 square feet.

Kellen said they went through an exercise to determine what it would cost to transfer most of their services to Amazon Web Services, and he said the cost was obscenely high. The ROI didn't work, even factoring in the cost of paying for a new campus data center, he said. One building they are using for a data center dates from 1929.

 

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