Credit Crunch Takes Toll on Data Center Spending

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The deepening financial crisis is causing more businesses to lower their data center budgets for 2009, with spending on training and new hardware likely to feel the brunt of the cutbacks, according to a survey from Afcom, an association for data center workers.

Of employees at 133 large data centers that responded to the survey, 38 percent, or more than a third, said they had been asked to cut their budgets since Afcom conducted a similar survey in May. In the earlier survey, 19 percent expected their budget to be cut for next year.

The new survey was conducted last month, and the change reflects new cutbacks planned since the depth of the financial crisis became apparent in the autumn. The average cutback will be a 15.2 percent reduction in data center spending in 2009, Afcom said.

The survey was completed by IT and facilities staff at large data centers primarily in the U.S.

Of those data centers asked to cut their budgets, 30 percent will reduce spending on travel; 21 percent on IT equipment such as servers and storage; 23 percent on training; 16.5 percent on support gear such as cooling, power backup and power distribution systems; and 14 percent on staffing costs, Afcom said.

While travel and training feature prominently, those budgets are typically small relative to new equipment purchases, and most of the actual spending reductions will be in hardware, according to Afcom President Jill Eckhaus.

"Many more actual dollars will be cut on the equipment side than in areas like travel and training," she said.

That is supported by another figure in the new survey: 86 percent of respondents said they expect increased use of virtualization in 2009 to reduce the need to buy new physical servers.

Only 12.6 percent of data centers surveyed said they plan to increase their use of hosted applications next year, while 22.7 percent will increase their use of cloud computing services, according to Afcom.

Of those that won't expand cloud computing use, half said it was not applicable to their "current or future data center management strategy." The others gave reasons that were split evenly between security, cost, lack of reliability, and lack of confidence in service providers.

One technology that will see increased use is video conferencing: nearly 70 percent of data centers said they will use more of it to reduce travel costs.

Asked what impact the spending cutbacks will have next year, 13 percent said they'll likely affect salary increases, and 20 percent said they would decrease worker satisfaction. Three percent predicted more service interruptions.

Combined, the two surveys suggest that just under half of large data centers plan to make some sort of cutbacks next year, Eckhaus said. She was able to find a silver lining in that, however.

"It's still good news because it shows that a little more than half of 2009 data center budgets are not being impacted," she said. "These companies are cutting other parts of their budgets but not their data centers, and that's indicative to me that corporations recognize how critical data centers are to their businesses."

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