Predicts 2012: Data Center Growth and the Impact of Cloud Computing on Energy Efficiency

Overview

Data center deployments are moving at different speeds in emerging and mature markets, with focus on operational efficiency to drive down cost for energy and real estate. Off-premises cloud computing not only provides more-flexible infrastructure and fewer physical network layers, but also enables organizations to conserve energy and therefore improve their environmental performance. Despite the benefits of cloud computing, the lack of IT maturity in emerging markets will slow cloud computing adoption by enterprises.

Key Findings

• Operational efficiency and its impact on the data center footprint in urban areas are often triggered by high real-estate costs, as in Brazil.
• The stability and availability of energy and the lack of broadband connections remain big challenges for data center deployments in emerging countries.
• As data centers are increasing their server and rack workloads, their power and cooling requirements are expected to push the stable energy availability of the utility grid.
• Cloud providers are challenged to optimize their energy consumption planning by mapping peak utilization and safety margins of capacity with intelligent patterns to level usage across their available infrastructure resources.
• While China's government is pushing cloud computing through initiatives to enable economic growth, enterprises are slow in adoption due to security concerns and poor business models.
• Markets with low understanding of IT maturity and affinity are slow in adopting cloud computing and instead maintain their physical data center infrastructure.
• Stakeholder, government and shareholder interest is to avoid the brand reputation of a "dirty" data center, using coal-fired power.

Recommendations

• Data center sourcing should include energy sourcing and pricing agreements. Especially as data center capacity is increasing, data center executives should plan for capacity and performance constraints to avoid potential outages.
• Managers of cloud data centers or high-performance computing (HPC) should consider low-energy servers when mapping power and cooling directly to data center footprint.
• Reporting green data center performance, especially in a cloud delivery environment, has to include an assessment framework that is based on technology, workloads and applications, as well as energy sources as key parameters.
• A successful cloud computing strategy in data centers not only must include technical requirements but also must be tied into the overall business objectives of an organization.
• As governments, such as in Brazil and China, are pushing for IT penetration, utilize the momentum to build out data center infrastructure based on some government initiatives.
• Develop security solutions or hosted security services in order to overcome the security concerns of enterprise customers assessing the cloud computing opportunity.

Table of Contents

Contents

• Analysis
  • What You Need to Know
  • Strategic Planning Assumptions
  • A Look Back

Analysis

What You Need to Know

Data center energy management and cost and availability of energy remain main trends for stakeholders in data center management. In facilities and on the IT level, the deployment of low-energy servers, as well as cloud computing, can not only provide energy cost savings, but also significantly reduce the floor space, resulting in a decrease of real estate value, especially for data centers in urban environments. Especially in emerging countries, the range of operational efficiency not only has cost components but also includes the availability and the stability of the electricity grid in a growth mode of economic development. The plans to expand data center capacity must include early adoption of new infrastructure as a service and other cloud computing models in order to remove the glass ceiling of available total power in a grid for the data center. That could painfully inhibit international offshoring to markets such as India, China and Brazil when pricing for the availability of electricity is increasing with demand. As a result, vendors need to position their ability to offer energy management as a holistic view in order to enable their customers to visualize and efficiently reduce energy usage.

Table of Contents

Strategic Planning Assumptions

Strategic Planning Assumption: By year-end 2012, sales of extreme-low-energy servers, offered by several server providers, will grow to 1.5% of server market revenue.
Analysis By: Errol Rasit
Key Findings:
Extreme-low-energy servers are defined as servers using processor types previously not designed to be used in server systems, rather typically found in small devices like tablets and smartphones, or small objects with embedded processors. Examples today for this type of server are Intel's Atom, ARM architecture and Tilera's TILE-Gx. The aim of using extreme-low-energy servers is to optimize data center space and reduce power and cooling costs. Optimization is achieved by rightsizing the processor to the requirement of the application thread or unit of work.
Extreme-low-energy servers are typically optimized for a limited number of workload types, unlike mainstream x86 servers that are appropriate for a broad range of workload types. Examples of suitable applications or application functions are as follows: Hadoop MapReduce, database management system searches, shared-memory servers like memcached, static Web servers performing many fetch functions, video servers running unmodified fetch functions, big data/simple logic searches, and HPC workloads in which input/output or memory is the point of constraint (e.g., specialized implementations in which thousands of nodes run one application, such as IBM's Blue Gene).
Market Implications:
Despite the number of workloads that are suitable for low-energy servers, today the technology segment is embryonic and has relatively little provider support but does show promise as a differentiated segment.
Extreme-low-energy servers are predominantly targeted at enterprise customers or those that typically buy servers in large volumes. Due to this market positioning, we expect growth in low-energy server sales will largely be targeted at mainstream x86 servers rather than purchases of non-x86 and PC-class servers.
Customers focused on the best power and cooling efficiency and organizations looking to reduce the data center footprint will stand to benefit from adoption of these servers. Energy and space-saving improvements are largest when transitioning from mainstream alternatives. We expect the relative difference between mainstream and extreme-low-energy servers will remain largely stable, with small incremental improvements as extreme-low-energy server technology evolves further.
Customer segments that have a workload bias toward applicable low-energy server workloads (for example, cloud data center providers or HPC customers) are obviously a natural target for low-energy servers. The profile of the workloads that can be addressed by these types of server, being typically broad — like Web or database search — means that potential adoption isn't limited to any particular customer vertical, but rather is limited by the attitude of the IT organization to invest in alternative solutions.
In order to gain a broad footprint, there will be ecosystems of energy efficiency in the energy stack of the data center, which needs to include the OS and software applications engineered to really leverage low-energy-server approaches effectively.
Recommendations:

• Benchmark to verify fit, and engineer the production environment in enough detail to understand the resulting expansion of server images, network and storage connections, and their effects on operational processes.
• Move work from traditional to extreme-low-energy servers when the net benefit, factoring in all the consequences and project costs, is sufficient to justify some added risk and the switching costs involved.
• Verify the key attributes of extreme-low-energy servers — relatively light CPU demands and excellent scaling — and benchmark them on real machines before committing to any purchases.
• Apply all traditional and mature approaches to increasing energy efficiency to solve short-term tactical constraints (such as imminent exhaustion of spare energy or space in an existing data center) before undertaking a move to extreme-low-energy solutions as a quick fix.

Related Research:
"Hype Cycle for Server Technologies, 2011"
"SWOT: SeaMicro, Servers, Worldwide"
"Market Insight: The Top Five x86 Server Workloads for the Optimal Data Center Strategy"
"Introducing Extreme Low-Energy Servers"
Strategic Planning Assumption: By 2013, 15% of enterprises investing in off-premises cloud computing will rate green measures among their top three priorities.
Analysis By: Errol Rasit
Key Findings:
In 2010, a global survey of organizations with more than 1,000 employees revealed that 33% of organizations planning cloud investment cited "green" as a driver, and 27% cited social responsibility as a driver. These drivers, however, ranked sixth and seventh on the list of priorities. The top three drivers for cloud investment were "improve business agility," "provide capital expenditure (capex) savings" and "part of our data center transformation strategy."
We believe that a number of factors will drive customers to increase the importance of green as a driver to invest in cloud computing:

• Gartner inquiries reflect that most organizations overprovision their infrastructure resources, such as server or storage, by provisioning based on peak utilization. In some cases, safety margins are added on top. Collectively, a public cloud provider has the potential to be extremely resource-efficient due to a high level of standardization that may result in better sharing and optimization of resources across a larger infrastructure base. While this is resulting in operating expenditure savings, it also offers more sustainable usage of infrastructure.
• Work by organizations such as Greenpeace has increased industry and customer interest around cloud provider power sources. Greenpeace published a report titled "How Dirty Is Your Data?" that judged several providers' data centers on the amount of coal used in powering data centers, the transparency of this information to the public domain, infrastructure location and mitigation strategy. In addition, financial benchmarks, such as the Dow Jones Sustainability Index, are rating green IT efficiency and the utilization of the cloud for a more sustainable performance, giving thrust for CFOs to ask questions about sustainable business operations.
• Carbon tax schemes, aimed at penalizing the use of fossil fuels as a power source, are being implemented by many governments around the world, largely in response to the treaty set out by the United Nations Framework Convention on Climate Change (UNFCCC or FCCC). The treaty is commonly referred to by its most famous legally binding agreement to reduce greenhouse gases, the Kyoto Protocol. Due to legally binding initiatives like the Kyoto Protocol, enterprises should expect that governments will increasingly seek to penalize consumers of fossil-fuel-based power.

Market Implications:
Greening of any service is an end-to-end process, such as selection of technology, implementation, waste management or power production source. There are a number of alliances that are focused on providing standards or references for green computing, all of which are still evolving. Examples are the EU, Energy Star and the Green Grid.
Many of the current reference frameworks focus on measuring the technology that delivers the service. Although some providers are focusing on providing some measurements on green cloud services, green visibility varies wildly from provider to provider; some of them do not share information, because they consider the design and management of the data center to be a competitive differentiator and therefore a closely guarded secret. The responsibility of measuring the green credentials of a provider will likely stay with the customer in the near term until providers improve the visibility of their green credentials.
As it stands, green frameworks and standards are not all-encompassing, so there is no single standard to adhere to. There is significant scope for providers to improve their participation in standards adoption and investment. Gartner believes that the likelihood of an all-encompassing or recognized singular green cloud standard in the near future is low.
Recommendations:

• Monitor the development of green standards, such as Energy Star or the Code of Conduct of the EU; in particular, assess the implication of laws or taxes that may come into effect in locations where your IT resides.
• Before signing a commercial agreement, test your cloud computing provider's ability to share data that commonly used green metrics, frameworks and ratings require.
• Apply the same amount of stringency and detail of your internal IT infrastructure to your off-premises IT infrastructure in order to measure the end-to-end greenness of IT services independent of responsibility or ownership of infrastructure.

Related Research:
"Greening the Cloud: Location Is Critical for the Sustainable Future of Outsourced Data Storage and Services"
"Data Center Decisions: Build, Retrofit or Colocate; Why Not a Hybrid Approach?"
Strategic Planning Assumption: By 2016, data centers in India will reach limitations in power supply by utilities, which will gravely impact business operations.
Analysis By: Naresh Singh
Key Findings:
Data center capacities in India are expanding at a 20%-to-30% annual rate and are expected to touch a raised-floor supply of 5.5 million square feet by 2016. While service provider space will grow at a higher rate, captive data centers owned and managed by users will also see a healthy growth in the forecast period. For more details, see "Emerging Market Analysis: Future Outlook of Indian Data Center Market."
With growing adoption of high-density multicore servers and more-powerful network and storage devices, the energy use by data centers has become a big challenge for the IT organization among Indian users. Users are realizing the need to design and upgrade their data center power and cooling facilities to meet the current requirement, as well as future requirements. As users try to increase their server workload and rack equipment load, users are planning for an ever-higher energy "footprint" for their data centers. Planning for a modular data center, users are typically segmenting their data centers into racks with high-density usage, normal usage and low-density usage to be able to optimally meet the composite current and future requirements. These designs also essentially factor the cooling requirement implications that are different for different zones with varying IT loads.
Assuming that users will go for a mix of data center zones with typical rack loads of 4 kilowatts (kW), 10 kW and 20 kW, the total energy required, including the load necessary to cool all the data centers in India, will reach 4,397 megawatts (MW) by the end of 2016. This energy use equates to over 2% of the 218,209 MW projected demand of the country in the same period, according to the 17th Electric Power Survey of India published by Central Electricity Authority in 2007. This is an extraordinarily high task for an emerging country that is already challenged to meet its current public- and private-sector obligations. Power blackouts and unavailability are a persisting common problem even in the commercial capital of India, Mumbai — which has the largest concentration of data centers in India.
Market Implications:

• Both users and service providers stand a significant risk of their data center energy sourcing strategy becoming unsustainable. They need to address this risk by securing their future requirement through long-term commitments from local utilities. They also need to closely work with the utilities, sharing their forecast plans, etc., so that their future requirement can be met adequately and on time.
• Data centers in India will continue to see the need for relatively higher power generation backups than their global counterparts, because they are less likely to rely on their utility providers for an uninterrupted supply of electricity. The consequent greater use of captive generators will also mean higher capex and cost of operations.
• Energy-efficient IT equipment, technologies and data center designs will see growing demand in India, as the challenges escalate upward. Also, energy monitoring and management tools will have higher adoption in the coming years.
• India is unlikely to reduce or remove the negative perception of being an infrastructure-challenged location for the purpose of setting up data centers for a regional and global requirement. This not only can seriously impact India's ambitions of emerging as a preferred regional location for data center hosting, but also could impede the overall IT and business outsourcing opportunities for India.

Recommendations:

• Data center technology providers: Encourage and educate users to adopt energy-efficient solutions and designs, even if they mean an apparently higher capex at the onset — especially if it will give the customer a sustainable data center strategy and also help achieve a lower total cost of ownership in the long run.
• Data center hosting service providers: Monitor the energy requirement mix of your existing as well as potential customers, and conduct scenario planning for low, medium and high energy demand. Shape your data center planning based on the most likely scenario, while having a Plan B for either of the other scenarios getting more realistic in the future.
• Users and hosting service providers: Make facility planning a board-level priority — with the stakes translated out adequately to the key business leaders. Initiate or support an energy-efficient culture among internal and external users of your data center.
• Users and hosting service providers: While planning your data centers, seriously evaluate locations that are not necessarily business hubs but have adequate current and future supplies of power, like major electricity grid sources, in addition to other necessary factors, like telecommunications facilities, water supply and disaster implications.
• Users: Create adequate power source backups and redundancies, like multiple grid providers. Maintain enough captive power generation capacities (along with redundancy designs) and adequate fuel to keep the data center running in the event of a long period of power blackouts, which are not uncommon in India.

Related Research:
"Emerging Market Analysis: Future Outlook of Indian Data Center Market"
"How to Build a World-Class Data Center in India"
Strategic Planning Assumption: By 2012, Brazil will surpass Canada and become the No. 7 country in the server market in terms of revenue.
Analysis By: Kiyomi Yamada
Key Findings:
Emerging markets have been increasing their presence in the server market as many organizations in these regions have been trying to build new IT infrastructure. By 2012, Brazil will become the new No. 7 country by surpassing Canada in terms of server revenue. The outlook for data center spending in Brazil is robust because its economy is expected to continue a growth spurt for the next five years. Brazil's data center business has been also supported by the government's commitment to push IT modernization throughout the country, as well as preparation for worldwide events, such as the Olympics (2016) and the World Cup (2014).
Market Implications:
The Brazilian server market has been steadily growing, and more providers are focusing on this market. We believe that the market is still undersaturated and has potential to grow further. In comparison with other technologies, such as PCs, the No. 7 ranking is not impressive for Brazil. It often is the case that consumer-related technologies (e.g., PCs or mobile phones) take off first and enterprise technology adoption follows. Brazil is the No. 4 country in the PC market in 2011 (in end-user spending).
The Brazilian server market outlook is bright, but the country needs to work more on the following points:

• IT infrastructure modernization projects have been done mainly in the metropolitan areas, although they are spreading to smaller cities.
• Few small and midsize businesses (SMBs) embrace data center functions.
• A shortage of trained IT personnel has been a big issue.
• Cloud services are still in an infancy stage because of unstable broadband connections and limited applications.
• Although many organizations have strong interests in cloud services, broadband coverage is still sketchy and expensive due to lack of infrastructure. Better broadband coverage and service will create additional data center demand, as the country can provide offshore services for other countries in addition to domestic service.

Recommendations:

• Understand the characteristics for the Brazilian data center market. The interest in energy efficiency is relatively low compared with other countries because the country has abundant oil supplies and alternative energy resources (the country is a top global producer of ethanol and hydroelectricity). Instead, demand for small-footprint data centers is high, as the country's real estate prices are rising.
• Keep monitoring cloud service adoption in Brazil. Although interest in cloud services is very high, currently many organizations prefer to have their own data centers. In addition to immature infrastructure environments, conservative attitudes toward new technologies hinder further cloud adoption. This could, however, change dramatically once these services start being accepted.
• Work closely with government. The Brazilian government is very aggressive in promoting IT development.
• Try to expand market reach to smaller organizations and smaller cities via channels.

Related Research:
"Market Trends: Brazil's Emerging Middle-Class Consumer Subsegment Shines With IT Opportunities"
"Emerging Market Analysis: Brazil, a Growing IT Frontier"
Strategic Planning Assumption: By 2015, China's cloud computing will make up more than 25% of the Chinese data center market.
Analysis By: Jennifer Wu
Key Findings:
In 2010, the number of servers used in China's public cloud computing was estimated to be 10% of all servers sold. Gartner estimates that by 2015 this number will reach 20%. Given that servers are the main components of a data center, this projected growth indicates a healthy future of cloud in China (see "Market Trends: Opportunities for Server Providers in China's Public Cloud").
In mid-2010, Gartner conducted a survey of large enterprises in China to analyze the growth of private clouds in the country. Fifty-eight percent of Chinese respondents indicated they had already invested in cloud computing or planned to do so in 2011 (see "User Survey Analysis: China's Data Centers Accelerating Adoption of Storage Technologies and Cloud Computing").
In addition, in 2010, China's government vowed to support the five "cloud city" projects, serving as a signal of the government's incentives for enterprises to push the cloud throughout the country. Data centers and cloud infrastructure are seen as the foundation for future industrial growth and services (see "China Plans to Advance Its Economy by Exploiting Cloud Computing").
Market Implications:
Cloud computing has drawn the attention of the Chinese government and is seen as one of the ways in which the country can leapfrog over technologically more advanced economies. Given the government's long involvement and role as a catalyst to industrial innovation, its adoption of cloud computing as part of its Five-Year Plan indicates the importance that this will have in the market. The government is also directly investing in the development of a cloud-based environment both at the national and provincial levels. Enterprises generally follow the government's lead, hoping to emulate the success of mobile technologies that helped China skip the further spread of landlines to move directly into mobile telecommunications some 20 years ago.
Notably in 2011, China bypassed Japan, becoming the second-largest data center market in the world. That year, data centers in China accounted for about 8.3% of the world market. Gartner predicts that growth will continue into 2015 and rise to more than 11% of the global data center market. Cloud computing, both private and public, will be a significant factor in such growth. At the moment, many companies are being held back by concerns for security and stability. Gartner, however, believes that by 2013, these will become less of a problem due to the improvement of security technology and government endorsement of public cloud, and more than 30% of large companies will deploy private cloud computing solutions.
Successful cloud computing calls for more than just the technical infrastructure, as it also needs the support of management to be tied closely to overall business objectives. For now, it seems that Chinese enterprises still are weak in integrating the cloud into clear overall business plans and extracting the best usage for competitive ends.
Recommendations:

• Cloud technology providers have to build cloud teams capable of providing wider services than the physical components of clouds — integrating the cloud into the overall objectives of the enterprise and providing clear lines to successful business solutions.
• Cloud technology providers should use pilot and service trials for potential clients to facilitate commitment and broad implementation.
• Technology providers should be prepared to adjust product development priorities and market strategy to address China's unique characteristics. In particular, providers should explore market opportunities in security as a service and platform as a service in China. Cloud computing service suppliers should leverage the government's support to invest in China's cloud computing market.