Total Cost of Ownership Analysis Will Save Your Data Center Money

Total Cost of Ownership is a neat topic that doesn't get enough respect; particularly when managers look at projects through the blinders of Initial Capital Cost.

The chart below, summarizes it all. Here's why:

This is a comparison of two alternatives for a proposed Tier III, 8 MW IT load project:

1. A Baseline efficient data center that meets ASHRAE energy minimum requirements
2. The same project but with LEED Platinum requirements  

I'm not going to go through the detailed numbers because I don't want to loose focus on the main point of this post.  

The Base Design in this analysis cost around $40 million. The Platinum Design cost around $56 million. The two points are plotted on the graph at year zero. Most decision makers will stop at this point and choose the Base design because there is less capital expenditures involved. 

What they are missing though is the 20 years of operation and energy costs that are reflected in what we term the Total Cost of Ownership (or Life Cycle Costing).  These cumulative costs over the days and months and years do add up to a hefty amount.  

The graph above is an extraction of the first graph in which I simply captured 8 years into the operating timeframe. (It helps visualize the graphic). The plot shows that the Platinum building total operational costs remain higher than the Base alternative, but only for a short timeframe.  Around the 5th year, the Platinum project starts to cost less to operate than its Base counter. 

Now go back to the first graph above and follow the Magenta line. You will see that the Platinum LEED project over the 20 years lifetime, costs less to operate. To be exact, it costs roughly $140 million less to operate.

There's a lot of engineering economic analysis that happened behind the scenes to get these numbers. We had to look at energy costs, operation costs, maintenance costs, apply a realistic discount rate for borrowing monies, which may differ between one option and the other. 

But the point I want to stress is that planning a project without doing TCO analysis is risky business; the operational costs over the years could drain your bank account.  In this example the LEED Platinum project after the 6th year was the gift that kept on giving and identifying this gift required big picture TCO analysis.