Data Center Consolidations Help Cut Costs and Improve Performance

April 01, 2014

The growth of digital systems has occurred rapidly and often haphazardly over recent decades, and a large number of companies – particularly IT innovators with a broad range of applications – have found themselves with sprawling data center infrastructures that span multiple regions or even continents. In many cases, parts of the corporate data center infrastructure are small and inefficient facilities likeserver closets and converted office spaces. These types of rooms not only lack the type of state-of-the-art power, cooling, disaster resilience and high-density server technologies that characterize the modern data center, they lack the amenities and scale needed to enable such tools.

As business in every sector turns more IT-intensive, these data center technologies are becoming more essential for powering applications in a cost-effective and reasonable way. Accordingly, data centers are shifting toward a large- or hyper-scale delivery model that has the economy of scale needed to implement truly advanced solutions. At the same time, companies are virtualizing their storage and server architectures to use hardware more effectively and to reduce the challenge of managing a complex network of systems. These trends have prompted a range of organizations to consolidate their data center footprint. By closing down the large numbers of small, far-flung data centers in their organization and consolidating operations to a few large-scale, high-efficiency, high-density data centers, companies like Fidelity Investments and Citigroup have been able to cut costs and reorient their IT focus. The trend has seen steady interest over the past few years, too, as a result of projects like the Federal Data Center Consolidation Initiative.

Fidelity’s Operational Improvements


One recent data center consolidation success story is that of Fidelity Investments, which reduced its global data center footprint by about 20 percent over the past five years and is aiming for an overall reduction of 35 percent, Wall Street and Technology reported. Its original infrastructure layout consisted of more than 80 rooms that ranged from in-office data closets up to larger facilities. Now, the company relies on around 20 data centers, and it plans to ultimately have just “a handful,” according to Joe Higgins, Fidelity’s vice president of engineering and its corporate sustainability officer. The overall goal is to reduce the company’s data center real estate footprint and operational costs by 50 percent over the next 15 years.

“These are significant benefits in the bigger picture, it’s not about saving a few dollars per square foot or per Watt of added capacity,” Higgins told Wall Street and Technology.

At the same time, data center consolidation is as much about improving service delivery models as it is about cutting costs. One component of the shift is that Fidelity has taken an application-centric view to expansion, looking at the IT infrastructure it needs to meet its actual technology needs rather than planning out data center spending and real estate and deploying solutions accordingly, Wall Street and Technology reported. In line with this shift, the company abandoned the traditional enterprise data center planning model of building massive facilities designed to last for 30 years and slowly filling them with equipment while following a three to five year refresh cycle. Instead, Fidelity switched to a modular, prefabricated design that enables incremental growth at a faster, more easily adjustable pace. In turn, it can adapt more effectively to changes on the application and storage side.

“Everyone is familiar with the growth in mobile and social data,” Higgins told Wall Street and Technology. “Those trends, coupled with the rapid advances in technology and the unprecedented need to access data for transactions or analysis, are important to note.”

Citigroup Gets Efficient


Fidelity isn’t the first financial sector giant to make the move to a more consolidated data center infrastructure. At the end of 2012, Citigroup reported that it was at the end of a successful five-year consolidation process in which it eliminated 50 data centers from its global portfolio, cutting its total number of facilities from 70 to 20. In the process of making this consolidation, the company virtualized tens of thousands of servers and improved its server utilization rate. It also scrapped many of its outdated centers, opting to build eight brand new LEED-certified data centers instead. The focus was increased efficiency, and the operational gains were great enough that the company was able to pay for the new construction solely through those savings.

“The whole data center infrastructure cost has come down drastically,” Jagdish Rao, head of enterprise operations and technology at Citigroup, told Wall Street and Technology. “In fact, the reduction in costs has been so substantial, the entire consolidation program was self funded.”

Like Fidelity, Citigroup found that it was spending the bulk of its IT budget – around 60 percent – on maintenance and infrastructure and that innovation and application development accounted for just 40 percent of spending. With the improvements in data center efficiency, the company was able to reverse that ratio. In addition to building more modern data center facilities, those savings largely came from the move toward virtualization. By virtualizing 40,000 servers, Citigroup was able to improve its server utilization rates from between 5 and 10 percent to around 50 percent, enabling a much smaller footprint while also better positioning the company to handle growing data center demands. Storage utilization also increased from 10 percent to 60 percent, due to large-scale shared resources.

Increases in credit card transactions and trading activity, as well as a general growth of digital data have offered new challenges to the company’s infrastructure, but virtualization provided the necessary flexibility to absorb this evolution. It also gave the company the capability to absorb unexpected loads or handle outages by transferring workloads across the world when needed. With these advances, the company could theoretically consolidate its infrastructure even further if not for some of the regulatory challenges introduced by operating in so many countries.

“If there were no regulatory constraints, I could run the entire infrastructure in 10 data centers,” Rao told Wall Street and Technology. “The 10 satellite centers are run in certain countries to comply with local regulations.”

Depending on their business models and needs, other companies following in Citigroup’s footsteps might be able to achieve even greater consolidations, then. Given Citigroup’s own successes with financial savings and performance gains, the incentive is strong.

A Consolidated Future


Given the successes of companies like Citigroup and Fidelity, many businesses are likely to see an incentive to consolidate their data center infrastructure. There are other models, as well. Launched in 2010, the Federal Data Center Consolidation Initiative has sought to dramatically reduce the federal government’s data center footprint by consolidating the number of facilities in use. As of Feb. 10, more than 1100 data centers had been shut down were scheduled to shut down, according to Data.gov. Since the FDCCI is a public project, it also includes resources for curious CIOs on its website.

With the general trends toward increased virtualization, high-density computing and hyperscale data center deployment models, consolidation appears set to continue as a valuable enterprise strategy. Companies like Citigroup and Fidelity have demonstrated clear cost saving, efficiency and computing architecture benefits, and many more could achieve the same gains through a strategic adjustment.



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    The growth of digital systems has occurred rapidly and often haphazardly over recent decades, and a large number of companies – particularly IT innovators with a broad range of applications – have found themselves with sprawling data center infrastructures that span multiple regions or even continents. In many cases, parts ...