Crisis Consolidating - Or Not

consolidation: from Latin consolidationem, from consolidare.The act or process of consolidating, making firm, or uniting; the state of being consolidated; solidification

Nearly every customer I speak to has a plan or is underway with some degree of IT consolidation.

Now what? How will the global economic turmoil impact consolidation trends?

What does your intuition predict?

How does that fit with history?

How are you at predicting the future?

Yogi Berra wisdom: "The future isn't what it used to be." 

Earlier this year, IDC updated their report on the digital universe with a projection of continued data growth at about 60% annually through 2011. They included a backward look, tracing growth over the ten years from 1996 to 2006.

Dave Donatelli, president of our storage division, noted recently that during that ten year span, we had the internet bubble, Y2K, the burst of the bubble, 9/11, and a recession. All of that turmoil and the data growth line continued steadily up and to the right.

The investment promos always caution that past performance doesn’t guarantee the future … but still…

Last Wednesday, the investment firm Morgan Keegan published an industry note highlighting the views of its own CTO, John Threadgill. He offers an interesting perspective on EMC and for the IT business overall. He sees more pressure for IT “to deliver during difficult economic periods”.

While acknowledging the “need to cautiously assess all spending” Threadgill doesn’t expect broad cuts in IT spending, citing some key trends that include environmental issues, virtualization and storage growth driven by compliance requirements.

When asked what IT budget items would be the last he’d cut, Threadgill’s answer was people, security and storage – in that order.

It’s understandable. Data growth and compliance issues have already been driving data storage needs. Now, with the widespread talk of more regulation, that need is likely to be even more pressing.

“Regulation” is probably the most popular word in the economic news of the last several weeks - after “meltdown” and “bailout” and “really?”.

That means more IT not less. So now the questions will be how to make it the most efficient IT possible.

EMC has been promoting “efficient IT” as a primary motivation for competitive advantage, for cost containment, for greater flexibility, for virtualization fluidity, and oh yeah, energy efficiency. This turn of events would seem to make that more important, not less.

The Mogan Keegan note goes on to outline a generally positive IT picture driven by continued data growth, M&A activity, investment in greener technologies to save energy and virtualization investments for both energy and overall cost reductions from fewer physical assets in fewer and smaller and more efficient data centers.

All of that sounds hopeful for EMC and VMWare. How about our customers?

My guess is that the efficiency objective will continue to drive all sorts of consolidations. However, they want us to do more.  In a customer discussion today, the question was raised as to why / how EMC could do more to eliminate unneeded data or to prevent its creation to begin with. 

That's a challenge.

In the meantime, what is likely for consolidation? 

Shifts in the market, including mergers and acquisitions, are likely to speed the trend. Cost motivations and greater efficiency objectives don’t go away.
They just get considered more carefully than ever.

Consolidation scale varies a lot. Sometimes its inside the four walls of a single data center. Sometimes two or three facilities get an update. Some plans are huge.

I’ve spoken to multi-national companies and far flung government agencies already on the road to consolidating – sometimes from dozens of data centers to just a few and sometimes from hundreds of data centers to just a few dozen.

The combination of challenge and opportunity, of cost containment and efficiency is even more compelling now.

And all of it must still temper IT in growth mode with financial realities.

But opportunities include becoming more efficient now and gaining a competitive edge and positioning for when the crisis passes.

Fundamental drivers are likely to continue as well - data growth, storage growth, growth in servers, networks, applications all combined to strain resources. Some data centers have run out of space. Some have run out of power. Few have unlimited staff and capital resources and nearly all are called upon to accelerate the business but still do more with less.

The economic crisis hasn’t changed this, just made it more challenging to resolve.

Cautions:

We know there are risks here as well as opportunities. Any move will have an impact on the business. There are possibilities of outages, delays, unforeseen technical complications etc.

So, planning is most critical and has to have support from multiple disciplines, technologies and to draw on a depth of implementation expertise.

Yes, there will be capital outlays – spend to save.

I spoke with one of our government customers last week. They’re getting ready for a major consolidation and data center refresh – something they haven’t done for a very long time. We talked about the need to make advance operational and process changes so they don’t just move old problems into new space. They know they need to do this but they also know they need help.

EMC has been doing a lot of this for a long time. We recently helped a financial company that had a huge environment and through acquisition had acquired two smaller data centers with different applications and operating technology. All of it needed integration.

We helped them migrate data from outside London to mid-America. We helped them keep all the applications up and running and avoided any down-time. We helped them, by their own calculation, reduce energy costs by $250, 000 annually. We helped them to become more flexible, competitive, successful, economic and energy efficient.

Not bad for “just a data center consolidation”.

Now if the market would just recover...

Comments

[Dick Sullivan]

A supporting perspective from Computerworld: “Storage projects still a priority for IT despite economic problems”

October 15, 2008

By Todd R. Weiss

http://computerworld.com/action/article.do?command=viewArticleBasic&articleId=9117276&intsrc=hm_list

The economy may be in a recession, and the stock market may be going through convulsions — prompting talk of possible hiring freezes and layoffs within IT departments. But at this point, data storage doesn't appear to be an area that many companies or other organizations are targeting for budget cuts.