Surge in oil prices hits IT

The threat of oil costing $200 a barrel could mean firms dumping the cost of power on IT, forcing a huge rise in the cost of IT operations

The dramatic rise in oil prices is causing a rethink of IT strategies, as energy costs look set to drive the IT agenda.

Chief information officers (CIOs) face being charged for datacentre services by kilowatt hours, and industry attempts to curb energy use in datacentres are being seriously questioned.

Energy savings through technologies such as virtualisation are improving performance but can be offset by greater cooling needed for consolidated servers.

And even in areas such as software as a service, supplier sources told Computing that customers will also feel the impact of surging energy prices, as costs of running power-hungry datacentres are passed directly to customers.

“Datacentre providers have started to price by kilowatt and not by server footprint and performance, and those prices have gone up by 30 per cent in the past month,” said Duncan Scott, CIO at global commercial real estate management company DTZ Holdings.

“Inevitably we will have some kind of formula such as that used by the airlines that includes distress and passes the costs on.

“It is a bit of a stand-off at the moment. The question is what the price of oil is going to do next. Are the providers going to completely change their business model based on the oil price? My advice is avoid kilowatt pricing at the moment but accept that it is going to come eventually.”

A $200-per-barrel oil price would be a jolt for IT, said David Tebbutt, programme director at analyst Freeform Dynamics. “This may wake people up to the true cost of IT, and move the cost of electricity from facilities budgets to IT,” he said.

“The cost of IT infrastructure would go shooting up. But you are not going to solve the problem quickly. You can get staff to behave differently and economise on power, but you can’t transform IT infrastructure at a stroke. It can take yea rs.”

A source at a major IT supplier said: “For those building server farms, rising energy costs will affect their business. There was a time when server and storage spend was two-thirds of costs, now one-third is IT costs and two-thirds is power and operational.

“I haven’t seen any commercial arrangements taking this into account yet but it might come. At the moment we’re underwriting the energy costs. Risk and reward may happen in the future.”

Read more about how CIOs plan to deal with higher energy costs here.