Whether clients are looking to outsource their data-centre needs, build and run their own facility or acquire the real estate to do so, JLL draws upon its wealth of experience to assist them. Alex Tilley, director of the specialist EMEA data-centre team at the global real-estate advisory company, addresses the importance of clients identifying the correct solution and why banks are advised to employ the services of data-centre specialists.
It is widely recognised that banks should focus on their core competency – being a bank – rather than running their own data-centre infrastructure, as has been popular in recent years.
This is the message from Alex Tilley, director of JLL’s data-centre advisory business. The company’s specialist team has a niche focus on data-centre advisory services, covering everything from co-location acquisition to corporate M&A advisory. The team was formed in January 2016, with Tilley and Martin Carroll as the founding partners.
JLL Data Centres has been seeing an increased amount of data-centre activity from the financial services sector as firms implement and migrate to multi-architectural platforms using in-house data centres, co-location and cloud platforms. As part of this process, JLL has increasingly witnessed the move of hardware from in house to co-location, through to strategic fully fitted sale and leasebacks of underused assets globally. “We have even seen some institutions looking at setting up vehicles to invest into data-centre operations, given the projected growth of the sector,” says Tilley.
JLL is seeing a large proportion of activity derived from historic real-estate lease events of large office buildings. Ten to 15 years ago, it was common practice for institutions to build out their IT infrastructure on premise, so these buildings typically hold legacy primary data-centre facilities. As these leases start to expire, JLL is seeing businesses reevaluate their real-estate strategy and look to better use the square footage for employees, taking back the technical space and outsourcing the data-centre operations to specialist operators.
When it comes to embarking on these projects, JLL puts its clients in good stead and is always focused on the strategy and the ‘why?’, engaging customers as long as two years before commencing any implementation. The current range of typical projects includes disposal or acquisition of a data centre or server real estate; data-centre consolidation; outsourcing data-centre needs to third parties; and, in some circumstances, ground-up development.
Data-centre outsourcing is a complex matter and combines multiple stakeholders within an organisation, including real estate, engineering, operations, network, security, risk, compliance, legal and procurement, to name just a few. The number-one focus has to be a fully engaged and briefed team because multiple moving parts need to be operating in the same direction.
“Our clients often ask about the risks of outsourcing their infrastructure and sharing data-centre occupancy with third parties, rather than hosting in house,” Tilley says. “Our answer is always to work with all stakeholders within the businesses to understand the internal risk factors and how they can be mitigated.”
With a diverse portfolio of work, JLL is well placed to advise organisations about their data-centre needs. The team is focused on data-centre advisory services, with detailed experience of data-centre monetisation projects.
“We’ve undertaken more projects than any of our competitors across EMEA and globally,” Tilley says. “We collate primary research in a form that is more granular, with monthly research reporting tracking supply, demand, pricing and uptake in real time to ensure market entry is timed impeccably. We are the only company in the sector producing forecasts to 2020 in these areas across Europe.”
JLL Data Centres also assists with occupier services, with the team advising end users of data-centre infrastructure on co-location optimisation, be it expansion or consolidation. In recent months, JLL Data Centres has seen a large uptick in land requirements for data-centre development from end users and operators alike. JLL advises on how to match under-served markets or hit the supply cycle right from its forecasting on the acquisition of the land, ensuring that appropriate power and fibre are available.
“JLL’s documentation has been refined over a number of years through working with some of the leading financial services and technology companies, and covering multiple areas of questioning, including M&E infrastructure resiliency, connectivity, power, security and access protocols. This is to ensure that when our clients are embarking on an outsourcing project, full disclosure of the proposals can be understood by all stakeholders involved,” Tilley explains.
Cost is a really interesting point for customers who undertake rationalisation projects as many are looking to reduce run rate. The majority of the current focus is on improved efficiencies through migrating away from an ‘inefficient’ data-centre facility – with an annualised PUE of, say, 2.0 and above – to a modern, purpose-built facility with lower operational capped PUE of 1.20, for example. Some professionals question the use of the PUE metric due to its many interpretations, and the debate over what is or isn’t included, but, when evaluating the total cost of ownership of a project, it’s a powerful tool because it shows the overall cost exposure to the customer.
According to Tilley, in reality, this may not be an accurate measure of the efficiency of the data centre. However, from a commercial standpoint, it gives the end user cost certainty over a longer period of time.
Outsourcing to a third party minimises exposure to capex risk for planned preventative maintenance of an in-house data centre. Consider that the life time of a data centre can be as long as 15–25 years, and it will need multiple repairs and replacement over the course of its economic life. With an outsourced co-location contract, these costs are included within the opex and are adhered to without exception.
“We’re seeing a lot of banks wanting to reduce capex and move to an opex model, together with reducing their ongoing opex, which is a tall order but achievable across EMEA,” Tilley says.
When analysing options in a market, if an end user is looking at a significant data-centre footprint with an IT load of 750kW and above, for example, it is possible to structure the supporting M&E infrastructure in a dedicated configuration for the single occupier. Not only is this a self-contained data centre within a wider building envelope, but it also allows internal stakeholder to be more comfortable due to the fact that dedicated M&E infrastructure usually allows step-in rights in the event that the operator breaches a predefined number of critical service level agreements (SLAs) in a rolling defined period of time (usually 12 months). This allows the occupier to step in and self-remedy or even take control of the M&E infrastructure to run the facility as a principal.
JLL spends a lot of time with potential operators looking at where their electricity is sourced from, whether it is a green tariff or genuinely from a green generation source. When it comes to looking at the overall efficiency of a data centre, there are many factors to consider, with the main one being the design and construction of the cooling infrastructure as this is where a significant opex cost of running a data centre lies for an occupier.
Technology is the main focus when improving the green credentials of data centres. Traditional chiller solutions and backup DX solutions in a 2N configuration might not be required within a facility in today’s world, and banks will need to look at reducing resiliency to improve efficiencies and reduce cost. Deploying a more efficient cooling technology – such as direct or indirect air-cool solutions with adiabatic sprinklers to reduce the need for mechanical backup cooling – is one option. This type of deployment has been seen in recent years and has worked well, but can lead to very static design criteria from a rack layout perspective. Tilley believes that the market will increasingly see a return to traditional chilled water systems, albeit ones that use more efficient chillers, and the principles of direct and indirect air-cooled solutions. JLL has seen manufacturers designing cooling systems in this manner. This lowers capex and opex, and increases flexibility of a solution.
When it comes to operations, this is where Tilley is seeing the biggest shift towards improving operational efficiencies. “We’ve seen banks and end users focusing on the ASHRAE TC 9.9 recommended temperature range, and allowable range of 20–80% for relative humidity,” Tilley says. This shift is allowing data centres to run more efficiently and, therefore, reducing the total cost of ownership for customers. One of the main barriers to further improving operational efficiencies is the manufacturer warranties, which force end users to keep within defined temperature and humidity ranges to keep the integrity of the warranty. With these boundaries becoming more widespread, more operators and customers will be moving towards the ASHRAE TC 9.9 allowable ranges.
Banks and other financial organisations need swift, responsive and convenient data-centre operators to take care of their needs so that they can focus on their core competencies. While there may be perceived risk involved in outsourcing IT infrastructure, through its skills and expertise, JLL ensures that institutions find the right data-centre solution, with flexibility to grow or shrink as their needs dictate, and drive efficiencies through third-party specialist skills.