C&W Perspectives

Cost per kW pa (£ Thousand) 14 12 10 8 6 4 2 0 Year 1 Year 2 Year 3 Year 4 Year 5 Energy cost(£ pa) Opex & Capex cost (£ pa) IT utilisation (kW) PUE 2000 KW 1300 KW 1000 KW 700 KW 300 KW 1.8 PUE 2.2 PUE 3.3 PUE 3.3 PUE 6.3 PUE 2.6 PUE Is there a solution? We do not envisage Cloud fully replacing the in-house data centre. Finding a solution to the revised utilisation of an in-house data centre (post Cloud) will be a challenge for in-house real estate teams. This has financial implications that impact Op- Ex, Cap-Ex and the Balance Sheet. A potential strategy maybe a sale of the asset for a capital receipt. However, reassessment of the true realisable Market Value will be required as the Net Book Value held on the balance sheet (most likely linked to the historic cost of the data centres’ initial construction) will be very different. In some instances a sale of the asset may not be the best solution. As land, power and connectivity are deemed a long term scarce resource, the potential value of these assets could rise, meaning a transaction could be structured that allows returns to be compounded, rather than traded-off. Sale-and-leaseback structures (mid-term or long-term) with dedicated specialist FM/IT operators can recapture a significant amount of value and, with potential revenue sharing, can drive positive cash flows from a once problematic data centre. Whilst Cloud may cause the demise of the in-house data centre, we do see opportunities for the real estate: • The world’s population is becoming more urban and more connected, demanding faster access to data content • Emerging ‘Edge’ players (born from 5G, the internet of things/ the industrial internet of things) seek to service this urban market and require data centre capacity on the edge of urban areas • The Cloud/ web giants will continue to build large scale facilities but are increasingly looking at how to secure their place in the Edge market; With power, land and connectivity still driving site selection, in-house data centres are often in locations where there is fast time-to-market opportunities for those looking to secure capacity close to urban areas. The redundant in-house data centre may provide the solution to this deployment providing an exit opportunity and a ‘win’ for the business. THE REAL COST PER KW OF I.T LOAD WITH FALLING UTILISATION CUSHMAN & WAKEFIELD 17 DATA CENTRE What is the target IT state of business over the next 5-10 years i.e. size, scale, scalability and agility; 1. 2. 3. 4. 5. 6. What CFOs and heads of real estate should know about their data centre estate: Capex and opex budgets for the next 10 years (it could take up to 5 to fully migrate away from existing physical state); Actual built and available IT load (or contracted within 3rd party) against current and estimated IT load utilisation for next 5 years; Current power usage efficiency (or ‘effectiveness’) – PUE; Estimated IT migration costs, to include people and organisational structure not just the obvious IT costs, to an alternative; and Asset value v Net Book Value.