Data Center Management Highlights

Server upgrade strategy for a large datacenter in the internet information services industry.

Issues

• Several months required for internal analysis.
• Critical errors and lack of transparency in analyst’s spreadsheet.
• Goal maximized the value for the IT department instead of shareholders.
• Lack of flexibility for choosing server upgrades.
• No accounting of potential lost revenue for suboptimal datacenter performance.
• Unrealistic projections of demand for datacenter services.

Provisdom's Solution

• Required only 3 days for complete analysis.
• Straightforward inclusion of uncertainty for future demand and revenue.
• Flexible strategy based on projected learning about demand.  The upgrade strategy balances expected future revenue with upgrade costs based on current information about demand.
• Proper inclusion of tax and depreciation effects on shareholder value.
• Direct maximization of shareholder value instead of departmentally motivated goal.

Results

• Identified spreadsheet errors causing discrepancies of between $119 million and $172 million in shareholder value.
• Included more information known to be relevant, providing a seven-year strategy increasing shareholder value by $460 million.
• The strategy would also prevent an average of 66,000 metric tons of carbon dioxide emissions, while still meeting 100% of the data demand even in extreme cases.
• Time required: 3 days + 3 hours of client time.