Data Center Regulation Awareness Increasing, Prepare for CO2K

This week I had the pleasure of presenting at the Gartner Data Center Conference in Las Vegas, NV.  This was my first time presenting at the Gartner event and it represented an interesting departure from my usual conference experience in a few ways and I came away with some new observations and thoughts.   As always, the greatest benefit I personally get from these events is the networking opportunities with some of the smartest people across the industry.  I was surprised by both the number of attendees ( especially given the economic drag and the almost universal slow-down on corporate travel) and the quality of questions I heard in almost every session.

My talk centered around the coming Carbon Cap and Trade Regulation and its specific impact on IT organizations and the data center industry.  I started my talk with a joke about how excited I was to be addressing a room of tomorrow’s eco-terrorists.  The joke went flat and the audience definitely had a fairly serious demeanor.   This was reinforced when I asked how many people in the audience thought that regulation was a real and coming concern for IT organizations.  Their response startled me.

I was surprised because nearly 85% of the audience had raised their hands.  If I contrast that to the response to the exact same question asked three months earlier at the Tier One Research Data Center Conference where only about 5% of the audience raised their hands, its clear that this is a message that is beginning to resonate, especially in the larger organizations.  

In my talk, I went through the Carbon Reduction Commitment legislation passed in the UK and the negative effects it is having upon data center and IT industry there, as well as the negative impacts to Site Selection Activity that it is causing firms to skip investing Data Center capital in the UK by and large.   I also went through the specifics of the Waxman-Markey bill in the US House of Representatives and the most recent thought on the various Senate based initiatives on this topic.   I have talked here about these topics before, so I will not rehash those issues for this post.  Most specifically I talked about the potential cost impacts to IT organizations and Data Center Operations and the complexity of managing both carbon reporting and both direct and indirect costs resulting from these efforts.  

While I was pleasantly surprised by the increased awareness of senior IT,  business managers, and Data Center Operators around the coming regulation impacts, I was not surprised by the responses I received with regards to their level of preparedness to reacting these initiatives.   Less than 10% of the room had the technology in place to even begin to collect the needed base information for such reporting and roughly 5% had begun a search for software or initiate development efforts to aggregate and report this information.

With this broad lack of infrastructural systems in place, let alone software for reporting -  I predict we are going to see a phenomena similar to the Y2K craziness in the next 2-3 years.  As the regulatory efforts here in the United States and across the EU begin to crystallize, organizations will need to scramble to get the proper systems and infrastructure in place to ensure compliance.   I call this coming phenomena – CO2K.  Regardless what you call it, I suspect, the coming years will be good for those firms with power management infrastructure and reporting capabilities.

\Mm

The Cloud Politic – How Regulation, Taxes, and National Borders are shaping the infrastructure of the cloud

Most people think of ‘the cloud’ as a technical place defined by technology, the innovation of software leveraged across a scale of immense proportions and ultimately a belief that its decisions are guided by some kind of altruistic technical meritocracy.  At some levels that is true on others one needs to remember that the ‘cloud’ is ultimately a business.  Whether you are talking about the Google cloud, the Microsoft cloud, Amazon Cloud, or Tom and Harry’s Cloud Emporium, each is a business that ultimately wants to make money.   It never ceases to amaze me that in a perfectly solid technical or business conversation around the cloud people will begin to wax romantic and lose sight of common sense.  These are very smart technical or business savvy people but for some reason the concept of the cloud has been romanticized into something almost philosophical, a belief system,  something that actually takes on the wispy characteristics that the term actually conjures up.  

When you try to bring them down to the reality the cloud is essentially large industrial buildings full of computers, running applications that have achieved regional or even global geo-diversity and redundancy you place yourself in a tricky place that at best labels you a kill-joy and at worst a Blasphemer.

I have been reminded of late of a topic that I have been meaning to write about. As defined by my introduction above, some may find it profane, others will choose to ignore it as it will cause them to come crashing to the ground.   I am talking about the unseemly and terribly disjointed intersection of Government regulation, Taxes, and the Cloud.   This also loops in “the privacy debate” which is a separate conversation almost all to itself.   I hope to touch on privacy but only as it touches these other aspects.

As many of you know my roles past and present have focused around the actual technical delivery and execution of the cloud.    The place where pure software developers fear to tread.  The world of large scale design, construction and operations specifically targeted at a global infrastructure deployment and its continued existence into perpetuity.   Perpetuity you say?  That sounds a bit to grandiose doesn’t it?  My take is that once you have this kind of infrastructure deployed it will become an integral part of how we as a species will continue to evolve in our communications and our technological advances.  Something this cool is powerful.  Something this cool is a game changer.  Something this cool will never escape the watchful eyes of the world governments and in fact it hasn’t. 

There was a recent article at Data Center Knowledge regarding Microsoft’s decision remove its Azure Cloud platform out of the State of Washington and relocate them (whether virtually or physically) to be run in the state of Texas.  Other articles have highlighted similar conversations with Yahoo and the state of Washington, or Google and the state of  North Carolina.   These decisions all have to do with state level taxes and their potential impact on the upfront capital costs or long term operating costs of the cloud.   You are essentially seeing the beginning of a cat and mouse game that will last for some time on a global basis.  States and governments are currently using their blunt, imprecise instruments of rule (regulations and taxes) to try and regulate something they do not yet understand but know they need to play apart of.   Its no secret that technology is advancing faster than our society can gauge its overall impact or its potential effects and the cloud is no different.

In my career I have been responsible for the creation of at least 3 different site selection programs.  Upon these programs were based the criteria and decisions of where to place cloud and data center infrastructure would reside.  Through example and practice,  I have been able to deconstruct other competitors criteria and their relative weightings at least in comparison to my own and a couple of things jump out very quickly at anyone truly studying this space.   While most people can guess the need for adequate power and communications infrastructure, many are surprised that tax and regulation play such a significant role in even the initial sighting of a facility.   The reason is pure economics over the total lifetime of an installation. 

I cannot tell you how often I have economic development councils or business development firms come to me to tell me about the next ‘great’ data center location.  Rich in both power infrastructure and telecommunications, its proximities to institutions of higher learning, etc.   Indeed there are some really great places that would seem ideal for data centers if one allowed them to dwell in the “romanticized cloud”.   What they fail to note, or understand is that there may be legislation or regulation already on the books, or perhaps legislation currently winding its way through the system that could make it an inhospitable place or at least slightly less welcoming to a data center.    As someone responsible for tens of millions or hundreds of millions, or even billions of dollars worth of investment you find yourself in a role where you are reading and researching legislation often.  Many have noted my commentary on the Carbon Reduction Commitment in the UK, or my most recent talks about the current progress and data center impacts of the Waxman-Markey bill in the US House of Representatives.  You pay attention because you have to pay attention.   Your initial site selection is supremely important because you not only need to look for the “easy stuff” like power and fiber, but you need to look longer term, you need to look at the overall commitment of a region or an area to support this kind of infrastructure.   Very large business decisions are being made against these “bets” so you better get them right.  

To be fair the management infrastructure in many of these cloud companies are learning as they go as well.   Most of these firms are software companies who have now been presented with the dilemma of managing large scale capital assets.  Its no longer about Intellectual Property, its about physical property and there are some significant learning curves associated with that.   Add to the mix that this is whole cloud thing is something entirely new.    

One must also keep in mind that even with the best site selection program and the most robust up front due diligence, people change, governments change, rules change and when that happens it can and will have very large impacts on the cloud.   This is not something cloud providers are ignoring either.  Whether its through their software, through infrastructure, through a more modular approach they are trying to solve for the eventuality that things will change.   Think about the potential impacts from a business perspective.

Lets pretend you own a cloud and have just sunk 100M dollars into a facility to house part of your cloud infrastructure.   You spent lots of money in your site selection and up front due diligence to find the very best place to put a data center.   Everything is going great, after 5 years you have a healthy population of servers in that facility, you have found a model to monetize your service, so things are going great, but then the locale where your data center lives changes the game a bit.   They pass a law that states that servers engaged in the delivery of a service are a taxable entity.  Suddenly that place becomes very inhospitable to your business model.   You now have to worry about what that does to your business.   It could be quite disastrous.   Additionally if you rule that such a law would instantly impact your business negatively, you have the small matter of a 100M asset sitting in a region where you cannot use it.   Again a very bad situation.  So how do you architect around this?  Its a challenge that many people are trying to solve.   Whether you want to face it or not, the ‘Cloud’ will ultimately need to be mobile in its design.  Just like its vapory cousins in the sky, the cloud will need to be on the move, even if its a slow move.  Because just as there are forces looking to regulate and control the cloud, there are also forces in play where locales are interested in attracting and cultivating the cloud.  It will be a cycle that repeats itself over and over again.

So far we have looked at this mostly from a taxation perspective.   But there are other regulatory forces in play.    I will use the example of Canada. The friendly frosty neighbors to the great white north of the United States.  Its safe to say that Canada and US have had historically wonderful relations with one another.   However when one looks through the ‘Cloud’ colored looking glass there are some things that jump out to the fore. 

In response to the Patriot Act legislation after 9-11, the Canadian government became concerned with the rights given to the US government with regards to the seizure of online information.  They in turn passed a series of Safe-Harbor-like laws that stated that no personally identifiable information of Canadian citizens could be housed outside of the Canadian borders.    Other countries have done, or are in process with similar laws.   This means that at least some aspects of the cloud will need to be anchored regionally or within specific countries.    A boat can drift even if its anchored and so must components of the cloud, its infrastructure and design will need to accommodate for this.  This touches on the privacy issue I talked about before.   I don’t want to get into the more esoteric conversations of Information and where its allowed to live and not live, I try to stay grounded in the fact that whether my romantic friends like it or not, this type of thing is going to happen and the cloud will need to adapt.

Its important to note that none of the legislation focuses on ‘the cloud’ or ‘data centers’ just yet.   Just as the Waxman-Markey bill or CRC in the UK doesn’t specifically call out data centers, those laws will have significant impacts on the infrastructure and shape of the cloud itself. 

There is an interesting chess board developing between technology versus regulation.   They are inexorably intertwined with one another and each will shape the form of the other in many ways.   A giant cat an mouse game on a global level.   Almost certainly, this evolution wont be  the most “technically superior” solution.  In fact, these complications will make the cloud a confusing place at times.   If you desired to build your own application using only cloud technology, would you subscribe to a service to allow the cloud providers to handle these complications?  Would you and your application  be liable for regulatory failures in the storage of  Azerbaijani-nationals?  Its going to be an interesting time for the cloud moving forward. 

One can easily imagine personally identifiable information housed in countries of origin, but the technology evolving so that their actions on the web are held elsewhere, perhaps even regionally where the actions take place.  You would see new legislation emerging to potentially combat even that strategy and so the cycle will continue.  Likewise you might see certain types of load compute or transaction work moving around the planet to align with more technically savvy or advantageous locales.  Just as the concept of Follow the Moon has emerged for a potential energy savings strategy to move load around based on the lowest cost energy, it might someday be followed with a program similarly move information or work to more “friendly” locales.     The modularity movement of data center design will likely grow as well trying to reduce the overall exposure the cloud firms have in any given market or region.   

On this last note, I am reminded of one of my previous posts. I am firm in my belief that Data Centers will ultimately become the Sub-Stations of the information utility.  In that evolution they will become more industrial, more commoditized, with more intelligence at the software layer to account for all these complexities.  As my own thoughts and views evolve around this I have come to my own strange epiphany.  

Ultimately the large cloud providers should care less and less about the data centers they live in.  These will be software layer attributes to program against.  Business level modifiers on code distribution.   Data Centers should be immaterial components for the Cloud providers.  Nothing more than containers or folders in which to drop their operational code.  Today they are burning through tremendous amounts of capital believing that these facilities will ultimately give them strategic advantage.   Ultimately these advantages will be fleeting and short-lived.  They will soon find themselves in a place where these facilities themselves will become a drag on their balance sheets or cause them to invest more in these aging assets. 

Please don’t get me wrong, the cloud providers have been instrumental in pushing this lethargic industry into thinking differently and evolving.   For that you need give them appropriate accolades.  At some point however, this is bound to turn into a losing proposition for them.  

How’s that for Blasphemy?

\Mm

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. 

\Mm

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.

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

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.

/Mm