discussion on financial models for shared it services csg 5/14/09 notes by jerry grochow
TRANSCRIPT
Discussion on Financial Models for
Shared IT Services
CSG 5/14/09
Notes by Jerry Grochow
Participating in the discussion…• Berkeley• Chicago• Michigan• Minnesota• MIT• NYU• Princeton• UT-Austin• Wisconsin
General considerations
• We focused on data center hosting, but many considerations apply to a variety of shared services:– Cost model– Price model– Sustainability model (provided by a university vs.
general non-profit vs. “for purpose” non-profit)
General financial model: Cost
• Full cost– Costs charged to the IT organization– Costs to the university– Treatment of capital expenditures
• Marginal (incremental) cost– Different for different volume increments– Different costs over different time frames
Components of data center “full cost”
• Capital expenditures (depreciation and interest)• Rent• Renovation costs (d+i)• Infrastructure costs (d+i)
– Power distribution– Cooling equipment or architecture– Generators and UPS
• Utilities (electric, heat, cooling)• Network
– To the facility, in the facility• Software licensing• Personnel
Factors affecting costs
• Size/Volume– Construction costs go down with size– Purchasing power increases with volume– Economy of scale for other costs• Ability to hire talent
– But what is the shape of the cost curve (how can we find out?)
• Location (electric costs)
General financial model: Price
• Seller wants to recover (some portion) “cost” (however defined)
• Differential pricing based on time commitment• Buyer decision whether to subsidize local users• Issue on institutional decision making• Possibility of bartering as a way to pay• Government A110 issues
Price vs. cost issues: do we need to at least break-even?
• Factor for both buyer and seller• Is some revenue better than no revenue?• What level of cost savings (if any) is necessary
to attract buyers over DIY?
Financial model: Issues
• How to deal with capital intensive services (services with big start-up costs)
• How to sell the idea of shared services when not part of the “mission”– Way to recover some of our costs
• Creating a separate entity to handle shared services– Attracting funding
Current services and pricesCo-lo/rack/yr Server Mgmt. VM
Berkeley $3800 going to $5800
Yes Yes
Chicago Based on faceplate KW
No $600-1500
Michigan $3000 + elec No Yes
Minnesota Yes Yes Yes (“free”)
MIT $4750 $6000-12,000 $2000-3500
NYU Yes Yes Yes
Princeton $2000 $3500 $2250
UT Austin Soon
Wisconsin $3200 $1000-2800
• Numbers based on published prices; not “apples to apples” (needs more detailed analysis)• Full cost estimated (by NYU and MIT) at $24,000-30,000+/year
Discussion notes
• Berkeley –– Sells all types of services– Each type of service is costed as a separate line of
business– IT not paying for space, part electricity– Network costs not included– $8/U/month for raw rack (but will go up to $12 to
eliminate subsidies– “Recharge committee” (university wide)
Discussion notes
• Chicago – – New data center will charge Co-lo by “faceplate
watt” x .8 as a proxy of intensity of usage = $.06/fpw/yr
– But does not include electricity ($.08/KWH)– Doesn’t offer fully managed service– VM service for $600/yr with no management;
$1500/yr managed– Not fully loaded costs
Discussion notes• Michigan – – 10K sq ft/4MW Tier 3 facility used for co-lo– User brings in rack and pays $3K/yr for using up to 4-
6KW (which is charged directly via on-rack metering) and 1Gb network
– Charged for space by Facilities Dept. which is included in rates (but doesn’t recover $18M construction cost)
– Factors in PUE of facility is taken into account (currently 3 because facility only 30% full)
– No server management service– VM service may be free to encourage people to move
out of their current locations
Discussion notes
• Minnesota – – Rack charge is direct cost of buying racks (no
charge for facility)– Price list (subsidized) for additional services– No charge for space or power (but would pass
through)– VM service is free to users– Total cost of IT allocated out to schools in
overhead
• MIT –– Co-lo service: $4750/yr/rack ($6K with some
management)– Server management: “point system” yielding $6K-
12K/year– VM service (similar to managed service but
without hardware costs): $2-3K/yr
Discussion notes
• NYU – – Similar to others– New data center will be fully costed– NYSERNet Center in Syracuse• Rack space $2K/month ($24K/yr) to recover cost of
construction, including “standard amount” of electricity for 4-6KW rack
Discussion notes
• Princeton – – $2k/yr/rack (rarely may go up based on ports) for
raw racks– $3.5k/yr for server management (department
pays network, backup, and hardware as additional charge)
– VM “true cost” is $2250/yr bundled (but $1K/yr charged during startup period)
– IT not charged for space and electric
Discussion notes
• UT Austin –– Not yet offering co-lo but will in a year– Won’t charge people moving servers in from local
computer rooms to encourage use– Almost all administrative services
Discussion notes
• Wisconsin – – Managed service $3200/yr for “typical server”
(not full rack) (buy your own hardware)– VM Managed $2800/yr (including mirror)– VM Unmanaged $1000/yr – Recharge for all services– Not including space, electricity, nor fringe benefits
on staff but do include overhead for CIO office, etc.