HEALTHCARE TECHNOLOGY

PREPARING FOR THE WORLD OF TOMORROW

Jeremy Meyers, BD Manager, Data Center Solutions

The healthcare industry has undergone a technology renaissance. What once

encompassed patient scheduling and payment software has evolved into a myriad of
applications and IoT devices (internet of things) that are often critical to the delivery
of healthcare services. These changes to the healthcare industry have increased the
need for IT infrastructure and data center capacity. However, despite the proliferation
of technology in the healthcare sector, many healthcare companies arent providing
the correct or adequate data center and IT infrastructure solutions to support their
organizations growing technology needs. This article outlines the current data center
landscape in the healthcare sector, industry trends, and challenges and opportunities
new technologies present to the healthcare space.

Current Healthcare IT Landscape

From an IT perspective, the healthcare landscape is extremely complex and fluid.

CBRE HEALTHCARE Consolidation and merger and acquisition (M&A) activity has caused organizations to
inherit portfolios of often disparate or duplicative data center and IT assets. The typical
combination of owned and leased data center assets are a mixed bag, often in the wrong

PERSPECTIVES
location and inconsistent from a design and operation perspective. Consolidation and
M&A events are the perfect catalyst for a reevaluation of data center and IT strategy. IT
refresh periods should be used to rightsize data center portfolios and dispose underutilized

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and obsolescent data center capacity. However, its
challenging to develop a strategy to conform to changing
business, technology and regulatory environments.

As outsourcing in the healthcare industry becomes more

prevalent, migration to third-party solutions seems to be a
natural progression, allowing healthcare organizations to
focus on their patients and alleviating the responsibilities
and risks associated with owning a data center. As data
center strategies become multi-faceted, IT and real
estate decision-makers face the reality that their data
center facilities may not be capable of accommodating
cloud, virtualization and active-active architecturesall
components of the evolving IT stack and often critical to a
successful strategy. The trend toward third-party solutions
has also enabled companies to hedge financial risks.
Having the ability to scale data center footprints and IT
technologies helps mitigate unnecessary spending and
manages the risk of incorrect IT forecasting and capacity
planning errors. Industry Trends of these new technologies.

The complexity of matching data center strategies with
evolving IT is exacerbated when options like cloud,
managed services and virtualization are thrown into
the equation. These options complicate the IT stack
and contribute to a departure from traditional space
and power discussions. By combining services beyond
traditional power and space, the line between real estate
and IT becomes blurred. This only adds to the difficulty
of formulating a cohesive strategy since there is often
a mismatch of IT needs and perceptions between real
estate, IT and the procurement arms of an organization.
Adapting to changing business and IT environments,
healthcare companies are seeking flexible and scalable
data center solutions to support emerging technologies.
Often these requirements cant be met in a single-owned
data center facility and thus migrations to third-party
solutions are taking place (i.e., co-location, cloud or other
third-party environment). Besides the scalability benefits,
healthcare companies are migrating to third-party
solutions to support new and emerging technologies.
Facility density, resiliency, location, connectivity,
compliance certifications, hybrid IT services and other
attributes play into the effective deployment and growth
As healthcare organizations continue to look at reducing
costs, data centers can prove to be a lucrative area
for both short and long-term savings opportunities.
With increasing healthcare real estate values, theres
often a financial benefit to repurposing traditional on
premise data center space. This can also help mitigate
occupancy constraints in existing healthcare facilities
while providing more revenue-generating space.
Migrating to third-party solutions also allows end users
to take advantage of variable cost savings associated
with different geographies, power, taxes, incentives, real
estate, network and staffing. These variables are static in

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an owned data center scenario. Despite
all of the benefits of migrating to a
third-party solution, some organizations
remain hesitant as they struggle with
misconceptions around control of the
data center, compliance and location.
With the shift toward third-party solutions,
many legacy data center assets are
becoming obsolete to organizations
evolving IT strategies. Apart from
obsolescence, other data center
challenges healthcare organization face
include:
Underutilization
Extensive capital expenditures
Inefficient densities
Security concerns
Escalating operating costs
Although these assets may not be suitable
for a healthcare entity to own and
operate, many healthcare organizations
are successfully offloading the liabilities of
these data center assets and monetizing
them in the form of sale-leaseback or
sale-partial leaseback transactions. This
strategy can be ideal when looking to
minimize Capex exposure, raise capital
and remain in the same data center
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Information Officers (CIOs) and IT
professionals begin to grasp the severity
of security breaches. Data center and
cloud providers have responded with
offerings that address these concerns
from a physical standpoint and virtual
approach, rolling cybersecurity services
into their offering.
Healthcare organizations are closely
evaluating the criticality of applications
and matching them with the appropriate
tiering requirement support, a radical
shift from the tradition Tier III and
above data center solution. This shift
in thinking has allowed healthcare
organizations to realize the substantial
savings that providers can offer
through non-redundant (N) data
center offerings, ideal for organizations
building without the perils of maintaining aging infrastructure. Even though investors that process large amounts of data
for test and development, research,
appetites for data center assets are high, end users should be cautioned that not all legacy
data centers are diamonds in the rough. Tenant credit rating, facility quality, lease terms high-performance computing and
and location all weigh heavily on the valuation. If I have an opportunity to minimize my non-mission-critical applications. As
capital expenditures, thats something I am going to look at, said Daniel Morreale, CIO enterprises look to segment applications
of Riverside Healthcare, in a recent Clear Data article. He also noted the growth of data by criticality, the need for colocation,
storage requirements is on a steep curve, which will continue to rise with the growth of cloud and hybrid IT technologies
picture archiving and communication system (PACS) across cardiology and other non- becomes even more crucial.
radiological medical specialties.
Compliance issues like HIPAA (Health
Insurance Portability and Accountability
Security & Compliance Act) continue to be a major burden
Security concerns have been a catalyst for migrating to third-party solutions as Chief and expensive effort for in-house data
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centers. In addition, the Affordable Care Act (ACA) has
increased the number of patient records, driving growth
in the data center. Multiply growth in the number of
patients by the number of procedures, such as CAT scans
or MRIs, and the effect on data becomes apparent. With
doctors, nurses and technicians using mobile devices
to check patients, data centers must be maintained to
a zero fail rate and designed with enough flexibility to
grow on demand.
IT Strategy
As companies develop and refine their IT strategies,
discussions around traditional power and space are
becoming less of a focus. Successful strategies begin
by quantifying IT needs from a workload perspective
and identifying the other applications necessary to
complete the data center plan. By taking a more
granular approach to understanding workloads and
growth of the organization, IT and real estate leaders
can more effectively align resources to ensure capital is
being deployed and technology assets are being used
to their fullest potential. A flexible and scalable data
center strategy should also help mitigate unnecessary
expenditures, reduce underutilized data center space
and offer substantial cost savings.
While the approach for formulating a data center strategy
is important, so is its life cycle. Effective strategies should
be ahead by a minimum of 24 months and should
address changes inside and outside of the healthcare
organization. These extended lead times will help IT
and real estate decision-makers review their data center
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portfolio and assess existing technologies. This will allow their optimal data center strategy. While traditional power
time to evaluate new technologies to implement across and space are still a cornerstone of data center strategies,
the organization. the IT stack has grown in complexity; cloud, managed
services and virtualization are now key components and
For organizations with leased data center assets, its
allow organizations to mitigate traditional challenges of
crucial to assess renewals and expiring leases more than
growth, forecasting and owning traditional IT and data
two years in advance. On average, data center lease rates
center infrastructure.
are 25% lower than they were three to five years ago,
offering substantial savings. The benefit of renewals and IT and real estate leaders should also view the prevalence
renegotiating leases goes beyond rental rates as service of consolidation and M&A activity as an opportunity for
level agreements (SLAs) may become more favorable their organizations to refine and develop their data center
to end users. These SLAs can be incredibly important strategy, taking time to quantify and optimize assets in
to healthcare organizations as a majority of their data
center applications are mission critical and dont allow
for downtime. Allowing a 24-month lead time gives IT
teams the opportunity to develop and execute a migration
strategy should the terms be favorable in other locations.
Since todays data center strategies are made up of
so many components, its important to open lines of
communication across IT, real estate and procurement
departments. Many organizations are plagued by self-
sourced technology, business lines within procuring
servers or applying for cloud subscriptions since the
organizations technology cant move quickly enough.
This is a textbook example as to why its difficult to
calculate an organizations true IT spend and footprint.
Conclusion
As technology continues to evolve and shape the
healthcare industry, its critical that data center decision-
makers understand the options available when creating
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their IT and real estate portfolios. With a better understanding of these portfolios, end
users are increasingly migrating to third-party solutions as owning and operating data
centers isnt their core competency.
This move toward third-party solutions has allowed healthcare providers to realize
the benefits of a flexible, secure and scalable environment for their IT hardware and
applications. Although technology is fluid and constantly evolving, developing effective IT
and data center strategies in the healthcare industry is becoming increasingly important.
As the delivery of healthcare services and the success of healthcare organizations can
often hinge on these factors, IT and real estate leaders need to be certain theyre making
the right data center decisions for the future.
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ABOUT THE AUTHOR
Jeremy Meyers has been in the real estate industry since 2012
and leads business development for CBREs Data Center Solutions
(DCS) Advisory & Transaction Services group. In his role, Jeremy
works closely with the DCS executive leadership and data center
professionals across the globe on data center projects of various
sizes and scopes. Jeremy manages DCS business development
efforts and acts as the single point of contact for group-wide
business development initiatives, service offering expansions and
integrating the various DCS service offerings. Jeremy is also
responsible for developing and advising on marketing strategies
and collateral specific to the data center industry and the DCS
group. In addition to his business development and marketing responsibilities, Jeremy
manages the operations side of the DCS including budgeting, forecasting and financial
reporting. Jeremy also plays an active role in authoring the DCS research reports,
whitepapers and thought leadership publications.
Prior to joining CBRE, Jeremy was a wealth management professional who managed
his clients personal and business financial portfolios. Jeremy also has experience in the
real estate finance industry, working for lenders specializing in HUD, FHA and non-profit
lending activities. During his time at Colorado State University he earned a degree from
the College of Business with concentrations in Corporate Finance and Real Estate.
Jeremy is a board member of the Rocky Mountain AFCOM Denver Chapter and a
member of CBREs Harvard Management Mentor and Rising Professionals Organization
programs.
For more information on Healthcare Data Center Solutions contact
Jeremy.Meyers@cbre.com.
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