Shocking power costs spark accounting debate

Summary:Cloud computing may offer organisations some great savings, but ancient accounting practices are making it almost impossible for many CIOs to calculate exactly how much their servers are costing.

Cloud computing may offer organisations some great savings, but ancient accounting practices are making it almost impossible for many CIOs to calculate exactly how much their servers are costing ... and that could lead to some nasty shocks in the future.

Green IT was the topic du jour in Singapore but in Sydney, panellists at the 27 July IT Priorities Roundtable event couldn't get enough of the cloud.

Cloud computing relies heavily on big datacentres along with fast, reliable connectivity. So I was surprised nobody mentioned the NBN, which featured prominently in the Melbourne discussion the following day — look out for the video from that event, which will be published here very soon.

Panellists in Sydney did, however, express concerns about the costs of running these increasingly dense and power-hungry datacentres.

However much vendors like to hype green computing, there can be no escaping the fact that we are using more electricity and, according to Jens Butler, principal analyst at Ovum Research, the cost of electricity is expected to increase significantly over the coming years.

"In New South Wales, electricity costs are going to increase by at least 22 to 30 per cent a year, over the next three to five years," he said.

When chief financial officers start realising that over a three-year period, the cost of powering a blade server will cost around the same amount as purchasing the hardware, some CIOs will have some explaining to do, Butler said.

This extra cost is hidden from the IT budget for most companies because they generally share the electricity bill over all departments equally, according to David Scott, managing director of Emerson Network Power Australia.

I asked him how many of his customers monitored the power usage of their IT department.

"I would say very few," replied Scott, explaining that it was mainly co-location and hosting specialists, like Equinix — who did this as standard practice because it was part of their revenue model.

"They have to separate them because they then have to charge that on to a particular customer, so that is measured down to the watt," added Scott.

So if CIOs want to know exactly how much their new hardware is costing them — including hardware and power — this practice of lumping all powers costs together needs to evolve.

The problem is, according to Ovum's Butler, prehistoric accounting practices.

"It is a lot easier for the CIO to account for an individual server that will save them 25 per cent in energy savings than the overall datacentre components that are associated with that. Traditionally, accounting costs have been focused on the datacentre but don't absorb a fair proportion of electricity usage.

"So very often [the CIO] is fighting over traditional accounting standards which to some extent were set over 100 or 150 years ago. You can start to see where there is a potential conflict there," added Butler.

Does your organisation know exactly how much it spends on powering its IT department compared to the rest of the company? Is there another solution? Use Talkback below or start a conversation with me on Twitter @mkotadia.

Topics: IT Priorities, Hardware, Servers


Munir first became involved with online publishing in 1998 when he joined ZDNet UK and later moved into print publishing as Chief Reporter for IT Week, part of ZDNet UK, a weekly trade newspaper targeted at Enterprise IT managers. He later moved back into online publishing as Senior News Reporter for ZDNet UK.Munir was recognised as Austr... Full Bio

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