Consolidating a wide area network (WAN) and data centers are two major initiatives that organizations may look to undertake to improve their network infrastructure and simplify their data center / infrastructure platforms. While they are distinct efforts, they are often closely related, as consolidating data centers often involves consolidating the WAN as well. In this blog post, we'll explore the challenges, potential benefits, and cost savings of consolidating a WAN and data centers together. We will also outline our client case study which we are in the process of executing this year.
Let’s begin with why organizations start down the consolidation path. Years of mergers and acquisitions typically leave organizations with multiple data centers to maintain. Integration of these M&As usually stops after email and other back-office services are incorporated. However, once we start to run the numbers, many organizations start to see the advantages and cost savings of consolidation of the disparate common services such as WAN, Telco, network, and compute footprints. Beyond the immediate cost savings, organizations can selectively address technical debt concerns on an as needed basis. There is not an immediate or up-front need from the business for a huge capital investment to decrease costs and increase performance.
Consolidating WAN and data center infrastructures can result in significant cost savings. According to industry research, data center consolidation can result in cost savings of up to 25% in the first year, and up to 50% over three years. Consolidating a WAN can result in cost savings of up to 20-50% depending on the size of the network. The primary cost savings come from reducing hardware and software costs, energy costs, and facilities costs.
These are just industry averages, and we’ll dive deeper into our client’s numbers in a minute. Our experience over the last 5 years shows that most of our clients experience 30% annual cost savings on data center consolidations and about 45% savings on the circuit / WAN consolidation. This allows for IT leaders to implement the “Save $2 to Spend $1” budget strategy to keep driving the business forward and show cost reductions.
Cost savings metrics are king, but there are many other potential benefits to consolidating a WAN and data centers, including:
Improved reliability and performance: resulting in a more reliable and efficient network infrastructure, which can lead to improved application performance and reduced downtime.
Cost savings: Significant cost savings can be realized by reducing hardware and software costs, energy costs, and facilities costs.
Improved security: Improves security by reducing the number of entry points and streamline the organization's ability to monitor and manage security.
Lower carbon footprint: Removing equipment and data centers requires less equipment, power, space and cooling.
Simplified support: Consolidation projects require that organizations know what assets they have and where. This exercise and the resulting documentation allow for simplified staffing and support.
Our client, like many organizations has a strict “No new spend” budget for 2023. The challenge is that their leadership team has also been tasked with identifying expense savings. Their aging infrastructure, reduced staff and lack of governance has left them with multiple data centers domestically and globally, a network that is more complex than required, as well as several compliance and security requirements that need to be addressed.
As part of this blog, I’m rounding our cost analysis to simplify but also protect pricing and customer privacy. This client is a medium enterprise with about 2000 team members globally. They have 10 data centers and multiple private / public cloud accounts. To implement the “Save $2, Spend $1”, we identified existing “Out of contract” circuits at all locations (not just data centers, but office locations, too.) This resulted in us finding $55,000 in monthly spending on traditional Voice, Data and POTs (plain old telephone lines) for their locations domestically. Of that, $38,000 was “out of contract” meaning the contract (24 months, 36 months) duration was expired.
Vsol and the customer renegotiated those circuits for all locations (and consolidated the invoices to a single invoice) down to $25,000 in monthly spend. That is 54% monthly reduction in cost. Yes, some of that savings was removing services / circuits that were not being used or added little value. Some of these cost savings were also circuits that would be shut down as part of a data center consolidation program. Long story short, we determined that over a three-year period, the cost savings would be approximately $1.2 million.
This provided the “Save $2” base to begin consolidating data centers. With 10 data centers domestically, the plan was to consolidate their private cloud accounts and data centers into two data centers. One on the East coast and one more central. While these consolidations are still in progress, our cost analysis currently shows that over the next 12 months, we will have reduced monthly data center spend from $233,500 down to $135,000. At the end of 2 years, we expect spend to be about $90,000, or a 61% reduction in data center costs! (These spend numbers do not include public cloud costs, which they do expect to increase.)
Consolidating a WAN and data centers is a complex, time consuming and challenging process but the potential benefits and cost savings are significant. By consolidating data centers and a WAN, organizations can improve reliability and performance, reduce costs, and improve security. It's important for organizations to work with a provider like Vsol whose primary focus is analyzing, planning, and executing data center and WAN consolidations. We work diligently to conduct a cost-benefit analysis that is unique to you, and to help you evaluate the potential benefits and risks. With Vsol’s approach, careful planning, and execution, consolidating your WAN and data centers can be a worthwhile investment for organizations looking to optimize their environment and IT budget.