White Paper

Intel Xeon Processor

Data Center Modernization

Building the Business Case for

Data Center Modernization
A financial and technical ROI-based approach

Introduction
IT departments are under more pressure than ever to deliver increasing value back
to the business. In addition to responding to day-to-day operational challenges,
IT is being asked to define an efficient path to new deployment paradigms,
including server virtualization, cloud computing, and ultimately, a software-defined
infrastructure. For IT decision-makers, the question becomes: How do you help
lead your business forward?
While there is no silver bullet for all the challenges IT faces today, spearheading
IT modernization initiatives and replacing outdated data center technologies with
the latest, cost-effective innovations, IT decision-makers can better meet business
needs for greater performance, security, networking, storage, and software
efficiency advantagesall while lowering operating expenses. Optimizing the
data center can also help IT be viewed as an enabling internal partner, moving the
enterprise toward a highly efficient, software-defined infrastructure that enables
the business to better use the latest technologies to take advantage of future
opportunities.
Many organizations consider the benefits of IT modernization through the
lens of infrastructure modernization technology benefits, including better
performance, efficiency, and security. This is a common and valid way to think
about modernization.
However, another way to look at modernization is to examine the financial aspects
of a modernization effort and to seek answers to key questions, such as:
Does it cost more to get these new capabilities?
Can the business afford the incremental cost in a tight budgetary environment?
What is the short term / long term financial impact and ROI related to these
efforts?
Sajid Khan
Global Enterprise Segment
Marketing Manager

John Kuzma
Senior Data Center Architect

Isaac Priestley
Data Center Finance Manager

These perspectives are of keen interest to key stakeholders in general

management, operations and finance and this paper examines the key financial
considerations necessary to understanding the financial metrics and ROI of a
modernization effort. Further, this paper provides the building blocks necessary to
developing a clear and compelling financial business case that resonates with key
stakeholders who ultimately ratify data center modernization projects.

Building the Business Case for Data Center Modernization

Table of Contents

Building the business case Who are the Key Stakeholders

Building the business case. . . . . . . . 2

Strong financial business cases focus on key metrics and information of interest to
not only the chief information officer (CIO) but also the chief financial officer (CFO).
In fact, a May 2013 Gartner FEI CFO Technology Study, showed that a significant
percentage of CFOs have direct responsibility for IT and are increasingly becoming
key IT decision makers and influencers.

Building a Business Case

A Best Practices Framework. . . . . . . 3
Terms and Definitions . . . . . . . . . . . . 4
Developing your Financials . . . . . . . 4
Storage. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Utility Expenses. . . . . . . . . . . . . . . . . . 7
Green IT Benefits. . . . . . . . . . . . . . . . . 8
Accounting: Depreciation
Expenses and Tax Implications. . . . 9
Putting It All Together . . . . . . . . . . . 10
Annual Operating
Expenses Impact. . . . . . . . . . . . . . . . 10
Capital Expenses Impact. . . . . . . . . 11
Tax Implications. . . . . . . . . . . . . . . . . 12
Summarizing the Financials. . . . . . 12
Additional Benefits of
Data Center Modernization. . . . . . . 13
Get Started Today. . . . . . . . . . . . . . . 14
Appendix . . . . . . . . . . . . . . . . . . . . . . . 15

Figure 1. Where Does IT Report? Source: Gartner (May 2013, Survey Analysis: CFOs Top
Imperatives From the 2013 Gartner FEI CFO Technology Study)

This change is primarily due to the CFOs control of the budget and her critical
insights over how business value can best be achieved. IT leaders can benefit from
this shift in organizational control by educating CFOs about the value of IT and
focusing the conversation on topics that have greater meaning to a CFO such as;
total cost of ownership (TCO), return on investment (ROI), net present value (NPV),
and payback periods rather than focusing solely on general performance, server
utilization, and power efficiency. Consolidating all of these topics is a developing
best practice for positioning your modernization project for success.
The conversation with the CFO is a key step towards showcasing the overall
business value of keeping IT environments current. However, IT leaders also need
to have cross-functional conversations to uncover line-of-business (LOB) needs
to better support IT infrastructure improvements. Understanding the perspectives
and insights of colleagues across the enterprise is essential to developing strategic
and insightful data center optimization plans precisely what IT needs to expand
its value within the business.

Figure 2. What interests stakeholders?

Building the Business Case for Data Center Modernization

Building a Business Case A Best Practices Framework

Leading Cancer Care
Providers OPEX Savings
Drives New IT Investment
Refreshing our infrastructure
allowed us to support more
users without having to lease
more data center space, says
Antoine Agassi, Senior VP and
Chief Information Officer of 21st
Century Oncology. At the same
time, we were able to cut power
costs by as much as 20 percent.
Those cost savings enable
the company to adopt new
technologies and introduce new
services that improve patient
care.
Read the full case study

The remainder of this paper is a focused discussion on considerations used to

develop an effective financial business case for a data center modernization
program. We use a common enterprise scenario based on a five-year-old server
environment and related aging infrastructure. While the company scenario for
ACME Company is fictitious and simplified for brevity, the actual cost savings and
tax implications are based on established formulas and calculations.
For help building your own custom scenario using the concepts described in
this paper, use the online Intel Xeon Processor-Based Server Refresh Savings
Estimator described in the sidebar below.
The IT infrastructure environment for ACME Company is aging. As was the case
at many other enterprises, the recession forced ACME Companys IT organization
to postpone capital expenditures and limit IT infrastructure spending to essential
operations and maintenance only.
The companys director of IT oversees an environment with 100 servers and has
stretched his budget and the useful life of the five-year-old environment (servers,
storage, network infrastructure, and the software stack) to its limit. The primary
concerns hes now facing include:
Spiraling cost of reactive maintenance
Supporting Line of Business (LOB) manager projects
Supporting Big Data and Private/Hybrid/Public Cloud initiatives
While his maintenance efforts provided short-term relief in a very tough economic
environment, his environment has now fallen behind in performance and costefficiency compared to the leading-edge hardware and software available
today. The IT director now needs to develop a financial business case to justify
modernizing his IT infrastructure.

Estimate savings
with online tool
The Intel Xeon ProcessorBased Server Refresh
Savings Estimator tool helps
you evaluate the benefits of
replacing your existing data
center infrastructure with the
latest generation of servers,
networking products, and
storage solutions. The Estimator
enables you to model your
existing IT environment and see
the benefits of an infrastructure
refresh.

As an IT infrastructure ages, a business can expect the percentage of its total IT

expenditures to increase to support operations and maintenance. The TCO for
any data center is based on a variety of factors and assumptions related to its
environment. While every company has a different way of looking at TCO this
paper focuses on the most important TCO factorsserver maintenance, software
expenses, storage expenses, and utility expenses. These factors most often form
the majority of annual cost savings available to enterprises.

CAPITAL EXPENSES
Server hardware
Network hardware
Storage hardware

ANNUAL OPERATING
EXPENSES

ACCOUNTING

Installation and other

costs/rebates

Depreciation expenses
and tax implications

Network and server

maintenance
Power (Utility expenses)
Labor
Software expense

Figure 3. Common IT Infrastructure TCO Factors

Building the Business Case for Data Center Modernization

Terms and Definitions

Aging Infrastructure
= Increased OPEX
A large, aging, complex,
and difficult-to-manage
infrastructure consumes more of
your time and money than new,
innovative technologies.
Nearly three-quarters of a
businesss total IT expenses
are devoted to operations
and maintenance. As the IT
infrastructure grows and ages,
these costs continue to increase,
reducing the resources available
to support other business
growth and innovation.
Business innovation
throttled to 26%

26%
CAPEX

74%
OPEX

74% captive in operations

and maintenance
Source: Gartner, IT Metrics: Align IT Investment
Levels with Strategy Using Run, Grow, Transform
and Beyond (March 2012)

Lets first briefly define the key category expenses related to our scenario:
Server Capital is the cost of acquiring new servers and does not include
installation costs, which are primarily based on the actual installation and
migration costs of hardware, and their respective disposal costs. Rack costs are
also not included because a refreshed environment results in a consolidation of
the number of servers needed to deliver the same level of performance as well as a
decreased facility footprint.
Network costs are based on the number of Ethernet ports (adapters) on a per
server basis. Storage costs are based on type of storage device that will be used
or migrated. In this example, the key factors are HDD form factor sizes, HDD
storage interface, HDD RPM which impacts the performance and amount of
power consumed, HDD storage capacity and total number needed, as well as the
percentage utilization of the storage devices and the type of configuration used.
Server Maintenance is expressed simply as a cost of maintenance on a per server
basis and the financial impact of expired parts and service warranties.
Utility expenses. Utility expenses for this discussion are calculated on estimates
of server power usage, utility rates, utility growth rate, data center operating hours,
data center cooling efficiency factors (PUE), and data center capacity costs. The
server power usage is based on an estimated server power in kilowatts both when
the server is busy and idle. The utility rate is a cost per kilowatt hour for utility
power. Utility growth rate is a factor to estimate future utility rate increases year
over year in the form of kilowatt per hour. Data center cooling and PUE (Power
Usage Effectiveness) is a factor to estimate infrastructure cooling efficiency
and cost requirements. The default value for this discussion is set to a PUE of
2. A PUE of 2 means that your non-IT power (e.g. cooling, HVAC, lighting, etc.) is
equal to your IT power (e.g. server, storage, networking). Therefore total power
consumption is estimated at 2 times the IT power consumption. Data center
capacity costs (in $/kW) is for data center infrastructure capacity additions. This
is used for calculating the cost avoidance savings of not having to build new
server infrastructure to accommodate incremental growth if old servers were not
refreshed.
Software Expenses are a sum of licensing, support, and validation. Licensing is
the cost per server to purchase new licenses needed for the environment or for
any incremental demand needed. Software support is the software maintenance
fee per server. Software validation is the cost per server for validating software
configurations on newly installed servers.

Developing your Financials

Now lets examine the financials in more detail. Start with determining
maintenance costs of keeping your network and servers up and running (including
the impact of expired parts and service warranties), and then compare those
costs to the costs of maintaining a refreshed environment. The calculation is
straightforward, and the information becomes an essential input to calculating
your overall project TCO and ROI.

Building the Business Case for Data Center Modernization

Server Maintenance Savings Formula

School District Gets

More IT Per Dollar Spent
One school district with an
operational budget reduced to
a bare minimum, wanted to get
the most for its money. Migrating
to x86 reduced not only the
districts capital investments, but
also licensing and management
costs.
Read the full case study

The inputs shown above for ACME Company can easily be tailored to the number
of servers and maintenance costs in your environment.

EXISTING NETWORK AND SERVER ENVIRONMENT

SCENARIO

Number of Servers
Average Maintenance Cost Per Server
Total Existing Network and Server Maintenance Costs

100
$2,399
$239,900

NEW INTEL XEON PROCESSOR-BASED ENVIRONMENTnvironment

Number of Servers
Average Maintenance Cost Per Server
Total New Network and Server Maintenance Costs
Total Server Maintenance Savings

21
$2,399
$50,379
$189,521

Table 1. Annual Server Maintenance Comparison

The Annual Server Maintenance Savings clearly illuminate the high cost of
maintaining an aging infrastructure. While this scenario looks at the annualized
savings from a server maintenance perspective, you can also expand the financial
review to include additional annual savings and benefit opportunities derived from
network and other related maintenance.
Additionally, ACME Company reduced its server inventory from 100 to 21. This
impacts the number of required resources and space necessary to support the
business, resulting in additional labor savings to maintain, replace or manage the
infrastructure. This information can be calculated in a similar way to the server
maintenance calculations above. The savings achieved with this change contributes
to your project ROI and to a lower TCO.
The TCO savings of a server refresh are compounded when you also consider
the impact annual software maintenance fees have on your total expenses. The
calculation needed for this input takes into account the proposed project life in
addition to the number of servers and the software maintenance fees.
The following is a basic formula for calculating software maintenance savings:
Software Maintenance Savings Formula
Total Software Maintenance Savings =
Project Life (Number of Servers X Annual Software Maintenance Fees)

Building the Business Case for Data Center Modernization

Rising Costs of
Aging Infrastructure
Enterprises often pay a heavy
toll for aging infrastructure in the
form of rising operational costs.
Consider, for example, a typical
scenario where 32 percent of
the servers in a small group
or data center are over four
years old. Those aging servers
contribute only 4 percent of the
total performance capabilities
in the data centerand yet they
consume 65 percent of overall
energy.
Age distribution of servers
>4 years old

32%

Performance Capability of servers

>4 years old

EXISTING SOFTWARE OPERATING SYSTEM

Number of Servers
Annual Software Maintenance Fee per Server
Total Software Maintenance Fees

SCENARIO
100
$15,455
$1,545,500

NEW INTEL XEON PROCESSOR-BASED ENVIRONMENTnvironment

Number of Servers
Annual Software Maintenance Fee per Server
Total Software Maintenance Fees
Cumulative Annual Software Maintenance Savings

21
$50,595
$1,062,495
$483,005

Table 2. Annual Software Maintenance Comparison

It is important to note that the above scenario only reviews the impact of
maintenance fees on the software operating system. Your environment is likely
different and you may have an opportunity to add additional software upgrades
that warrant a deeper analysis. Other software refreshes may include capital costs
and annual maintenance expenses for database software, application servers,
system management software, or other types of software. The calculations are
similar once the costs are obtained.
More complex software environment modeling and scenarios, such as; databases,
systems management software, application software or virtualization software,
can be developed using the Software Configuration Wizard contained within the
Intel Xeon Processor-Based Server Refresh Savings Estimator.

Storage
The next component of our TCO calculation is storage. Advances in storage
technology offer financial benefits that are easy to determine. Using the Server
Refresh Savings Estimator for our scenario, were able to determine that the 100
HDDs in the existing environment can be replaced by 21 200 GB SSD solution.
Using those assumptions, it is relatively simple to calculate the estimated storage
savings attributed to ACME Companys proposed refreshed IT infrastructure:

Server energy consumption

>4 years old

65%

Storage Expense Savings Formula

Total Storage Expense Savings = Total Existing Storage Expenses - Total New Storage
Expenses

EXISTING STORAGE ENVIRONMENT

Number of HDDs

Source: Gartner, IT Metrics: Align IT Investment

Levels with Strategy Using Run, Grow, Transform
and Beyond. (March 2012)

SCENARIO
100

HDD Expense per Hard Disk Drives (HDD)

$651.42

Total Storage Expenses

$65,142

Building the Business Case for Data Center Modernization

NEW STORAGE ENVIRONMENTnvironment

Number of Solid-State Drives (SSD)

21

HDD/SSD Expenses per HDD

$1,952

Total Storage Expenses

$8,281

Cumulative Annual Savings

$56,861

Table 3. Storage Capital Expense Comparison

Utility Expenses
Infrastructure refreshes can also significantly lower data center utility expenses.
Utility expenses are examined because the information and results impact budgets
controlled by the CFO. The choices IT make directly impact power consumption
and a refreshed environment can lower overall utility expenses.

Intel IT Saves USD $184 million with New Refresh Strategy1

Intel ITwhich operates 64 data centers and 55,000 servers to support
the computing needs of over Intel 100,000 employeesused to focus on
maximizing the useful life of each server, keeping most of them in service
well beyond their four-year warranty. As compute requirements outgrew
existing data center space or power and cooling capacity, the organization
paid a high price to add or expand data center facilities.
To address rising costs and performance issues, Intel IT began a data center
optimization program that included revising the server refresh strategy.
Since 2010, the strategy has created new business value in excess of USD
184 million, in part by moving to a proactive server refresh schedule, in
which existing servers are regularly upgraded to the latest generations of
Intel Xeon processors. This has resulted in:
Virtualization ratios of up to 35:1
43 percent fewer servers in the Design group
10 percent reduction in energy consumption in Design
6x increase in performance from 2005 to 2012
Additional changes have included:
Deploying more than 13,000 Intel Solid-State Drives as fast swap
drives, which generated a 27 percent increase in server capacity.
Adopting new storage capabilities, accelerating storage refresh, and
focusing in increasing utilization, which generated USD 33 million in cost
avoidance.
Deploying more than 18,000 10 gigabit-per-second network ports,
generating more than USD 20 million in cost avoidance.
Integrating the server and network infrastructure for a 39 percent
reduction in hardware across the enterprise.
IT@Intel White Paper, Intel ITs Data Center Strategy for Business Transformation, Jan. 2014

Building the Business Case for Data Center Modernization

The comparison table below, as discussed previously above, are calculated on

estimates of server power usage, utility rates, utility growth rate, data center
operating hours, data center cooling efficiency factors (PUE), and data center
capacity costs. Your companys situation and approach for calculating total utility
expenses and power consumption may be different.
EXISTING INFRASTRUCTURE UTILITIES EXPENSE
Number of existing servers
Hours of Operations 24 X 7 (24 X 365 X Number of servers)
Utility Rate (per Kilowatt-Hour)
Utility Growth Rate (per year)
PUE
Total Utility Expenses

SCENARIO
100
876,000
$0.10
3%
2
$100,417

NEW INFRASTRUCTURE ENVIRONMENT

Number of new servers
Hours of Operations 24 X 7 (24 X 365 X Number of servers)
Utility Rate (per Kilowatt-Hour)
Utility Growth Rate (per year)
PUE

Cloud Service Provider

Refreshes Infrastructure for
Greater Performance
The costs of our server
operations went down by 67
percent thanks to the lower
power consumption of the Intel
technology-powered servers,
while the addition of the
virtualization software has cut
server management costs by 54
percent, says Petr Suchanek,
CIO of Gigant Group.
Read the full case study

21
131,400
$0.10
3%
2

Total Utility Expenses

$21,088

Annual Savings Comparison

$79,330

Table 4. Annual Utilities Expense Comparison

For additional information on data center power consumption and utility expenses,
review this article on Power Metrics for Data Centers and other information at
Intel.com.
Driven by the server refresh power efficiency gains alone, ACME Companys annual
utility expenses would drop substantially. The cumulative annual savings represent
approximately USD$80,000 and help make the case for the financial benefits of
the proposed data center modernization project.

Green IT Benefits
Another significant benefit is the Green IT benefit resulting from implementing a
new environment. A more energy efficient infrastructure benefits the environment
through reduced CO2 emissions. Acme co. saw 254,000 LBs of CO2 reduction. This
is equivalent to planting 634 trees or removing 19 cars from the highways.

Building the Business Case for Data Center Modernization

Chart 1. Green IT benefits of new IT infrastructure. Source: Intel Xeon Processor-Based

Server Refresh Savings Estimator

Accounting: Depreciation Expenses and Tax Implications

To this point, weve examined the potential savings of an infrastructure refresh
from a cost savings perspective. Our scenario includes an infrastructure that is five
years old and past the depreciable life of the asset (four years). Another important
consideration and area of interest to you and the CFO is the impact of asset
depreciation expenses on tax payments resulting from a refreshed infrastructure
environment.
For the last four years, ACME Company has been able to take advantage of a
depreciation expense associated with the original server and storage purchases.
During the fifth year, however, the assets are fully depreciated and the enterprise
is no longer able to take advantage of the depreciation expense. This impacts the
overall savings opportunity available to the organization and provides additional
support for an infrastructure refresh.
Lets take a look at the impact an infrastructure refresh has on depreciation
expenses and subsequently the companys tax situation. The enterprise scenario
we are using applies a common Straight-Line Method of Depreciation to our new
set of assets. Simply defined, the Straight-Line Method accounts for uniform
depreciation over the intended life of an asset. The following table can be used to
determine the depreciable amount:
DEPRECIATION EXPENSE
Number of New Servers
Server Capital Costs

SCENARIO
21
$251,328

Network Capital Costs

$8,400

Storage Capital Costs

$6,328

Total Annual Depreciation Expense

$66,514

Table 5. Annual Depreciation Expense

Refreshing the enterprise environment contributes financial savings back to ACME

Company in the form of an annual depreciation expense of $66,514. This same
expense can be applied forward in the same increment for the following three
years for a combined depreciated expense of $266,056.

Building the Business Case for Data Center Modernization

This figure doesnt directly impact the TCO however it does help lower the
companys overall tax burden. Its an area of opportunity for the company to
explore with respect to the overall financial impact of the proposed project.

Putting It All Together

Summarizing all the financial information in one table creates a compelling
financial story that contrasts the costs and benefits of an existing aging
infrastructure to a refreshed environment. In our example, ACME Company has a
strong business justification for a new infrastructure project.

CATEGORY
Server Capital

EXISTING
ENVIRONMENT*

NEW
ENVIRONMENT

SAVINGS

SAVINGS
IMPROVEMENT

$679,200

$251,328

$427,872

(63%)

Network

$7,008

$9,872

($2,864)

41%

Storage

$65,142

$8,281

$56,861

(87%)

Network
and Server
Maintenance

$239,900

$50,379

$189,521

(79%)

Utility
Expenses

$100,417

$21,088

$79,330

(79%)

Annual
Software
Expenses

$1,545,500

$1,062,495

$483,005

(31%)

Tax
Implications

($923,533)

($491,646)

($431,887)

(47%)

Total

$1,715,134

$913,057

$802,078

(47%)

*See appendix for full set of assumptions

Table 6. Annual Infrastructure Expense Comparison

Annual Operating Expenses Impact

This summary is based on expenses for a one year period of time. The most
significant refresh savings occur within the annual operating expense category and
include network and server maintenance, software, and utility expenses.

10

Building the Business Case for Data Center Modernization

Chart 2. Acme Co. Annual IT Operating Expenses Comparison

Capital Expenses Impact

Reductions in capital expenses between the existing environment and the new
environment are also substantial. Capital expense reductions are primarily driven
by new environment hardware efficiencies and impacts gained with the refresh
and indicative of the high cost of an aging infrastructure. The single largest TCO
category, software, also decreases and results in an annual savings improvement
of 31%.

Chart 3. Acme Co. Annual Capital Expenses Comparison

11

Building the Business Case for Data Center Modernization

Tax Implication

Chart 4. Acme Co. Tax Implications Comparison

Chart 5. Acme Co. Consolidated Annual Savings Comparison

Summarizing the Financials

While the earlier TCO comparison above is an annual view of expenses, the
following financial overview summarizes the financial benefits over the course of
the life of the modernization project. Figure 4 provides an example of the financial
benefits overview and the project ROI/Breakeven point.

INITIAL INVESTMENT

$293,106

NET BENEFITS
RETURN ON INVESTMENT (ROI)
NET PRESENT VALUE (NPV)
PAYBACK PERIOD (MONTHS)
INTERNAL RATE OF RETURN (IRR)
Figure 4. ACME Co. Proposed Infrastructure Initiative Financial Benefits Overview

12

$1,76m
599%
$1.33m
7
175%

Building the Business Case for Data Center Modernization

Figure 5. ACME Co. Proposed Infrastructure Return on Investment

The financial benefits overview information becomes the heart of the financial
business case for discussions with your CFO and CIO. While the scenario depicted
in this paper has been simplified to provide the potential financial savings of an IT
modernization initiative via an infrastructure refresh, the information can be used
to help your IT build a data-driven financial discussion.
You are now ready to build your own business case. Heres a recommended outline
of information to help guide the discussion with your key decision-makers and
project stakeholders. Download a sample presentation using the Intel Xeon
Processor-Based Server Refresh Savings Estimator at
http://estimator.intel.com/serverroi/

Title Slide

Executive
Summary Title
Slide

Name of your initiative.

Example: The Business
Value of a Technology
Refresh

This section provides

the financial benefits
overview such as
Initial Investment, Net
Benefits, Return on
Investment, Internal
Rate of Return, Payback
Period

Financial
Benefits Over
Time

Financial
Benefits by
Category

This section focuses on

the annual cash flow
details over the course
of the proposed project
life.

This section focuses

on the savings
improvements (by
category of TCO)
gained by a refreshed
infrastructure and the
cumulative net financial
benefit.

Return on
Investment (ROI)

This section may

contain a visual chart
indicating the ROI and
investment breakeven
point.

Other

This section can include

other relevant factors
including benefits
for Facilities, Green
IT, other business
benefits (power and
performance)

Investment
required

This section may

contain a table
summarizing the
technology scenario
you are proposing
along with the costs for
hardware, software,
installation, and
disposal fees related to
implementing the new
environment.

Next Steps /
Request

This section specifies

the next steps and/or
actions you are seeking
to achieve as a result of
the discussion.

Download a sample presentation after using the Intel Xeon Processor-Based

13

Server Refresh Savings Estimator.

Building the Business Case for Data Center Modernization

Additional Benefits of Data Center Modernization

Lower operating expenses have led the discussion for this paper. Other business
benefits that include more capable, higher performance, energy efficient servers
enable your business to do more with less, boosting competitiveness, business
productivity, operating efficiencies, and enhancing services.
Beyond the performance benefits and cost savings, there is also a much larger
story behind the need for data center optimization. As is now widely discussed
within IT, the role of IT is changing rapidly. Shadow IT is emerging as lines of
business become increasingly tech-savvy and take IT decision-making upon
themselves. In fact, recent research by Vanson Bourne found that 35 percent of
IT spending is already occurring outside the IT department, and that number is
expected to grow to 44 percent by 2016.
For IT to remain relevant and trusted, its role needs to change from simply
being a provider of IT services to being a service broker or consultant to the
organizationa strategic expert that collaborates with stakeholders across the
business to achieve near- and long-term goals. Further, IT needs to introduce
innovative ideas that guide the business forward by reducing costs, enabling new
revenue opportunities, and improving support for new applications and other
business initiatives.
Data center modernization initiatives can help IT move into this new role. When
IT decision-makers build a solid financial case for revising the existing hardware
refresh cycleshowing how doing so can lower costs significantly while enabling
better performance and availabilityit shows not only technology expertise
but also strategic acumen that is essential to the new and expanding role of IT in
enterprises today.

Get Started Today

Use the discussion presented in this paper to begin building your business
case for an infrastructure modernization project. Get started today by
conducting a cost/benefit analysis online with the
Intel Xeon Processor-Based Server Refresh Savings Estimator.
Find other resources, strategies, and information at
www.intel.com/datacenteroptimization

Additional Resources
Server Refresh Planning Guide
Network Structure ROI Calculator

14

Building the Business Case for Data Center Modernization

Appendix
The following assumptions and data from the Intel Xeon Processor-Based Server
Refresh Savings Estimator were used to generate the financial tables for the ACME
Company scenarios listed in this paper. The data is presented for both the existing
environment and the new environment:

Existing Environment
Server

2P Intel Processor-based servers

Server Age

5 years

Server Count

100

Costs to
Implement new
environment

Estimated Server Price

Per Server

$6,792

Installation Migration
Costs Per Server

$50

Storage

Storage

100 2.5 HDD, 73 GB, 10K rpm HDD

with SATA HDD Storage Interface.
10% HDD capacity consumed. RAID 0
Configuration

Software

Software Support Costs

$15,455 software support costs per

server per year

Software validation
Costs

$1,000 per server

Operating System

Linux Premier Support

Annual Operating
System Support Fee

$1,399

Database

SQL Server 2012 Enterprise. $6,736

license fee.

Annual Database
Support Fee

$1,757

Estimated Server Power

Busy (Kilowatts)

.384

Estimated Server power

Idle (Kilowatts)

0.110

Utile Rate ($/kWh)

0.10

Utility Growth Rate (per

year, in $

3%

Operating Hours

24 X 7

Data Center Cooling

Efficiency Factor (PUE)

2.0

DC Capacity Cost ($/kW)

$10,000

Server Warranty Period

3 Years (now expired)

Server Maintenance
Costs ($ per server per
year)

$2,399. Costs are per server per year for

hardware and maintenance/support of
any out-of-warranty maintenance.

Network Maintenance
Costs ($ per server per
year)

$15

Power

Hardware
Maintenance
Costs

Hardware
Depreciation
Cycle
15

4 years

Building the Business Case for Data Center Modernization

New Environment
Server

2P Intel Xeon Processor E5-2600 v3

Product Family

Server Count

21 (number of server needed to deliver

the equivalent performance)

Estimated Server Price

Per Server

$11,968

Installation Migration
Costs Per Server

$50

Disposal Costs Per

Server

$50

Network
Implementation Costs
Per Profile

$8,400

Storage Implementation
Costs Per Profile

$6,328

Storage

Storage

200 GB 710 (No OP) Solid-State Drive

solution

Software

Software Support Costs

Per Server Per Year

$50,595

Software validation
Costs Per Server

$1,000

Operating System

Linux Premier Support

Annual Operating
System Support Fee

$1,399

Database

SQL Server 2012 Enterprise. $6,736

license fee.

Annual Database
Support Fee

$1,757

Estimated Server Power

Busy (Kilowatts)

.384

Estimated Server power

Idle (Kilowatts)

0.110

Utile Rate ($/kWh)

0.10

Utility Growth Rate (per

year, in $

3%

Operating Hours

24 X 7

Data Center Cooling

Efficiency Factor (PUE)

2.0

DC Capacity Cost ($/kW)

$10,000

Server Warranty Period

3 Years (now expired)

Server Maintenance
Costs ($ per server per
year)

$2,399. Costs are per server per year for

hardware and maintenance/support of
any out-of-warranty maintenance.

Network Maintenance
Costs ($ per server per
year)

$15

Costs to
Implement new
environment

Power

Hardware
Maintenance
Costs

16

Examining the High Cost of an Aging Infrastructure

Hardware
Depreciation
Cycle

4 years

Financial
Parameters

Discount Rate

10%

Marginal Tax Rate

35%

The TCO or other cost reduction scenarios described in this document are intended to enable you to get a better understanding of how the purchase of a given Intel product,
combined with a number of situation-specific variables, might affect your future cost and savings. Nothing in this document should be interpreted as either a promise of or
contract for a given level of costs.
This paper is for informational purposes only. THIS DOCUMENT IS PROVIDED AS-IS WITH NO WARRANTIES WHATSOEVER, INCLUDING ANY WARRANTY OR
MERCHANTABILITY, NONINFRINGEMENT, FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY OTHERWISE ARISING OUT OF ANY PROPOSAL
SPECIFICATION OR SAMPLE. Intel disclaims all liability, including liability for infringement of any property rights relating to use of this information. No license, express or
implied by estoppel or otherwise to any intellectual property rights is granted herein.
Copyright 2014 Intel Corporation. All rights reserved. Intel, the Intel logo, Xeon, are trademarks of Intel Corporation in the U.S. and/or other countries.
* Other names and brands may be claimed as the property of others.

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