Server prices are dropping, performance is increasing, and IT is consuming less space. So why is total cost of ownership headed through the roof?

The problem lies deep within the data center, far beneath the radar of most CIOs. While everyone has been focused on smaller, faster and cheaper servers (and their fulfillment of Moore’s Law), almost no one has been watching the expenses associated with powering and cooling them. If this line item isn’t already screaming for your attention, it soon will be. And unless you address the problem head on, no manner of outsourcing, staffing cuts or freezing of capital spending will save your budget.

Facilities and infrastructure now account for anywhere between 1 percent and 3 percent of IT’s budget, according to a study done by my organization, The Uptime Institute. Rising energy-related costs, including electricity, will push these line items up to between 5 percent and 15 percent in the next few years. That’s enough for the CEO and CFO to begin scrutinizing how the IT budget is being spent.

Chip makers AMD, IBM and Intel are well aware of this problem. The dual-core and quad-core processors they’ve introduced over the past several months weren’t just a fluke: These chips offer increased performance for less power, at least in some applications. Nevertheless, more chips are being packed into the same space, so total power consumption trends still point relentlessly upward. Another Institute study of real-world data center operations predicts that the purchase price for a rack of servers will drop from $138,000 today to about $103,000 in 2012. But the number of watts required to power a full server cabinet will increase from about 15,000 currently to between 22,000 and 170,000 depending on power improvement assumptions. As a result, within five years, the cost to power and cool a server cabinet over its three-year projected life could rise from the current $206,000 to as much as $2.3 million. That’s anywhere from 300 percent to 2,250 percent of the equipment purchase price.

Note that this is the price tag for just one full cabinet! In good times, rising profits can be siphoned off to cover these facility costs. But in bad times, don’t be surprised to find the CFO scrutinizing IT productivity gains per total dollars spent. Will they allow increases in IT’s budget to cover increasing facility costs? More likely, they will demand cuts from somewhere. Fortunately, new energy efficiency research and best practices can help reduce costs until chip and hardware manufacturers can reverse the current trends.