Budget Challenged States, Data Center Site Selection, and the Dangers of Pay to Play

Site Selection can be a tricky thing.  You spend a ton of time upfront looking for that perfect location.   The confluence of dozens of criteria, digging through fiber maps, looking at real estate, income and other state taxes.   Even the best laid plans, and most thoughtful of approaches can be waylaid by changes in government, the emergence of new laws, and other regulatory changes which can put your selection at risk.  I was recently made aware of yet another cautionary artifact you might want to pay attention to: Pay to Play laws and budget challenged States.  

As many of my frequent readers know, I am from Chicago.  In Chicago, and Illinois at large “Pay to Play” has much different connotations than the topic I am about to bring up right now.  In fact the Chicago version broke out into an all out National and International Scandal.  There is a great book about it if you are interested, aptly entitled, Pay to Play.

The Pay to Play that I am referring to is an emerging set of regulations and litigation techniques that require companies to pay tax bills upfront (without any kind of recourse or mediation) which then forces companies to litigate to try and recover those taxes if unfair.   Increasingly I am seeing this in states where the budgets are challenged and governments are looking for additional funds and are targeting Internet based products and services.   In fact, I was surprised to learn that AOL has been going through this very challenge.  While I will not comment on the specifics of our case (its not specifically related to Data Centers anyway) it may highlight potential pitfalls and longer term items to take into effect when performing Data Center Site Selection.    You can learn more about the AOL case here, if you are interested.

For me it highlights that lack of understanding of Internet services by federal and local governments combined with a lack of inhibition in aggressively pursuing revenue despite that lack of understanding can be dangerous and impactful to companies in this space.   These can pose real dangers especially in where one site selects for their facility.    These types of challenges can come into play whether you are building your own facility, selecting a colocation facility and hosting partner, or if stretched eventually where your cloud provider may have located their facility.  

It does beg the question as to whether or not you have checked into the financial health of the States you may be hosting your data and services in.   Have you looked at the risk that this may pose to your business?  It may be something to take a look at!

 

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Live Chiller Side Chat Redux

I wanted to take a moment to thank Rich Miller of Data Center Knowledge, and all of those folks that called in and asked and submitted questions today in the Live Chiller Side Chat.   It was incredible fun for me to get a chance to answer questions directly from everyone.   My only regret is that we did not have enough time!

When you have a couple of hundred people logged in, its unrealistic and all but impossible to answer all of the questions.  However, I think Rich did a great job bouncing around to clue into key themes that he saw emerging from the questions.    One thing is for sure is that we will try to do another one of those given the amount of unanswered questions.  I have already been receiving some great ideas on how to possibly structure these moving forward.  Hopefully everyone got some value or insight out of the exercise.  As I warned before the meeting, you may not get the right answer, but you will definitely get my answer.  

One of the topics that we touched on briefly during the call, and went a bit under-discussed was regulation associated with data centers or more correctly, regulation and legislation that will affect our industry.    For those of you who are interested I recently completed an executive primer video on the subject of data center regulation.  The link can be found here:

Data Center Regulation Video.

Thanks again for spending your valuable time with me today and hope we can do it again!

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Its the Law of Unintended Consequences – Some Clarity around My thoughts on Data Center Regulation

I have gotten a lot of response from the post on my thoughts on Data Center regulation.   Many of the comments in a response to an Infoworld article focused on the disbelief of regulations particularly targeting data centers.  A Greener Computing article felt that because the current administration is very tech-savvy they wouldn’t do anything to hurt data centers.  In fact the exact quote was:

I can understand Manos’ concerns, but I think he’s on the wrong track. The federal government is very unlikely to issue strict green regulations related to data centers. And if they do regulate them in some way, the regulations will no doubt be reasonable. The current administration is very technology-savvy — after all, the current Secretary of Energy Steven Chu was recently the director of the Lawrence Berkeley National Laboratory, whose work was heavily dependent on its data center. Chu did some great work related to Green IT when at the labs. He knows what can and can’t be done — and will make sure that data centers aren’t hamstrung with unnecessary regulation.

I guess for clarity sake I should state unequivocally that I do not believe that Data Centers will specifically be targeted or singled out for regulation.   Domestically here in the United States the EPA has kicked off its Energy Star Data Center evaluation which looks to study data centers as a sector, and something may come out of that, but in all honesty that wont be for some time.  I think the more immediate threat is in the efforts around Carbon Cap and Trade.  As the Greener Computing Article calls out, it was front and center at the G8 meetings.   With the UK leading the charge and the only real legislation on the books in this space, it would be hard for the other countries not to use it as the base for their programs.   My previous post focuses specifically on the fact that Data Centers will end up being significant contributing factors to Carbon metrics for companies.  Data Center Managers just aren’t thinking about it, and wont be until its far too late.  

While I am hopeful that leaders like Steven Chu and the Obama administration will weigh all possible aspects in a Carbon Cap and Trade program, the fact remains that they will need to legislate to the least common denominator and data centers are unlikely to be called out unless there is a group specifically calling attention to it.  Ergo my call for an industry wide group lobbying on its behalf.     I have doubts they will altruistically incorporate all possible sub cases into the mix without that kind of pressure.   President Obama frankly has bigger problems to be thinking about in my opinion.   

I am reminded of a quote from another excellent communicator and activist president, Ronald Reagan:

"The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’"

Its those times more than any other that you should put your guard up even higher.  I guess only time will tell, but one thing is certain Data Centers and IT departments will have a role to play in Carbon Reporting. 

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Coming Soon to a Data Center near you, Regulation.

As an industry, we have been talking about it for some time.  Some claimed it would never come and it was just a bunch of fear mongering. Others like me said it was the inevitable outcome of the intensifying focus on energy consumption.   Whether you view this to be a good thing or bad thing its something that you and your company are going to have to start planning for very shortly.  This is no longer a drill.

CRC – its not just a cycle redundancy check

I have been tracking the energy efficiency work being done in the United Kingdom for quite some time and developments in the Carbon Reduction Commitment (CRC).  My recent trip to London afforded me the opportunity to drive significantly harder into the draft and discuss it with a user community (at the Digital Realty Round table event) who will likely be the first impacted by such legislation. For those of you unfamiliar with the initiative let me give a quick overview of the CRC and how it will work. 

The main purpose of the CRC is a mandatory carbon reduction and energy efficiency scheme aimed at changing energy use behaviors and further incent the adoption of technology and infrastructure.  While not specifically aimed at Data Centers (its aimed at everyone) you can see that by its definition Data Centers will be significantly affected.  It was introduced as part of the Climate Change Act 2008.

In effect it is an auction based carbon emissions trading scheme designed to operate under a Cap and Trade mechanism.  While its base claim says that it will be revenue neutral to the government (except of course for penalties resulting from non-compliance), it provides a very handy vehicle for future taxation and revenue.  This is important, because as data center managers you are now placed in a position where you have primary regulatory reporting responsibilities for your company.  No more hiding under the radar, your roles will now be front and center.                             

All organizations including governmental agencies who consume more than 6000 MWh in 2008 are required to participate.  The mechanism is expected to go live in April 2010.  Please keep in mind that this consumption requirement is called out as MWh and not Megawatts.  What’s the difference? Its energy use over time for your whole company.  If you as a data center manager run a 500 kilowatt facility you account for almost 11% of the total energy consumption.  You can bet you will be front and center on that issue. Especially when the proposed introductory price is £12/tCO2 (or $19.48/tCO2).  Its real money.  Again, while not specifically focused on data centers you can see that they will be an active contributor and participant in the process.  For those firms with larger facilities, lets say 5MW of data center space – dont forget to add in your annual average PUE – the data centers will qualify all to themselves.

 

 

For more information of the CRC you can check out the links below:

• A Good Deck with a high level overview can be found here
• The wikipedia definition
• For alot of additional detail the CRC user guide is a great tool

While many of you may be reading this and feel poorly for your brothers and sisters in Great Britain while sighing in relief that its not you, keep in mind that there are already other mechanisms being put in place.  The EU has the ETS, and the Obama Administration has been very public about a similar cap and trade program here in the United States.  You can bet that the US and other countries will be closely watching the success and performance of the CRC initiative in the UK. They are likely to model their own versions after the CRC (why invent the wheel over again, when you can just localize to your country or region).  SO it might be a good idea to read through it and start preparing how you and your organization will respond and/or collect.

I would bet that you as a Data Center Manager have not been thinking of this, that your CIO has not thought about this, the head of your facilities group has not thought about this.  First you need to start driving awareness to this issue.    Next we should heed to a call to arms.

One of the items that came out during the Roundtable discussions was how generally disconnected government regulators are to the complexities of the data center.   They want to view Data Centers as big bad energy using boxes that are all the same.  When the differences in what is achievable from small data centers to mega-scale facilities are great.  Achieving PUEs of 1.2x might be achievable for large scale Internet firms who control the entire stack from physical cabling to application development,  banks and financial insitutions are mandated to redundancy requirements which force them to maintain scores of 2.0. 

Someone once decried to me that data centers are actually extremely efficient as they have to integrate themselves into the grid, they generally purchase and procure the most energy efficient technologies, and are incented from an operating budget perspective to keep costs low.  Why would the government go after them before they went after the end users who typically do not have the most energy efficient servers or perhaps the OEMs that manufacture them.  The simple answer is that data centers are easy high energy concentration targets.   Politically going after users is a dicey affair and as such DCs will bear the initial brunt.

As an industry we need to start involving ourselves in educating and representing  the government  and regulatory agencies in our space.   While the Green Grid charter specifically forbids this kind of activity, having a Data Center industry lobby group to ensure dumb things wont happen is a must in my opinion.  

Would love to get your thoughts on that.

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Dinner and fireworks

Last night I attended my first Digital Realty Round Table Discussion in London and it was a fantastic treat and topper for my trip to the UK.   For those of you not familiar with these events, its an opportunity to discuss the challenges and issues facing the industry in an informal setting.  The events are hosted by Bernard Geoghegan, who is the General Manager for European Region who does a great job  of MC’ing the dinner and ensuring that conversation flows.    As the dinner begins attendees introduce themselves but are not required to mention the firms they work at.   The purpose of this meeting is real unfiltered conversation.  Selling and product positioning is not strictly not allowed, most especially from Digital attendees. 

As I sat around the largest round table in London (literally!) and scanned across the 25 or so attendees I really did not know what to expect.  I was pretty confident that if no-one bothered to offer any conversation points up,  Jim Smith (who also attended) and I could probably find some aspect of technology to argue and debate about.  But It didn’t take long for the fireworks to come out.   In fact the first person to introduce himself also listed out some of the things concerning him and that process flowed on to each participant.   By the time we got around the table of introductions we had healthy list of issues, challenges, and topics to talk about.  So much so, that there was absolutely no hope of getting to all of them.

After introductions I kicked off the conversation by diving into Data Center Management measurements.   Currency per kilowatt.  It was a great conversation with those that agreed that this was a good metric and those that did not.  I am not going to go into the topics we discussed in this post. They ranged from data center metrics, data center industry challenges, PUE, Data Center Tiering, Cloud Services, Managed Services, and a host of others. There is way too much to cover, and each will likely end up being its own post.   Lets just say there was no lack of opinion or fervor behind most topics.    Most interesting to me was the variation and representation of the firms around the table.  While many did not identify their specific firms, they did mention that they worked for a bank, a hosting provider, a large retail chain, etc.   It really highlighted to me how diverse our industry is and the technology applications we need to solve for.   The pervading thought as I left was that the current regulatory attempts to govern this space are going to be downright disastrous or ineffectual unless those agencies began to start reaching out to our industry in specific.   I have a whole post in mind on this, but fair warning – IT IS COMING (its already here), IT WILL AFFECT YOU – and YOU CANNOT IGNORE IT ANY MORE.

More on that to come.   I would strongly suggest that if you havent attended one of these events you think about doing so.   Quite a few of the attendees shared that they learned a great deal through this kind of group therapy.  It was a blast.

 

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