Fewer wrenches, more software: datacenter facilities services evolve

The engineering expertise and qualifications required for the safe and efficient management of the critical equipment in datacenters means that some operators opt to outsource the work to specialist facilities management (FM) services companies. Traditionally, the FM sector has included a lot of manual processes centered on mechanical and electrical (M&E) equipment, but there are indications this is beginning to change, albeit slowly. Management software will play a greater role in the future, and forward-looking providers are also integrating facilities and IT management to provide combined 'datacenter engineering' services. New providers have also entered the market recently, including a small group of multi-tenant datacenter (MTDC) operators, which have expertise in IT, facilities and connectivity.

The 451 Take

The manually delivered world of FM services is slow to change. But, as with the wider datacenter industry, it is facing long-term disruption on a number of fronts. The move toward hybrid IT represents a threat but also an opportunity. Fewer, larger datacenters concentrated in the hands of a pool of commercial operators (some that may provide their own FM services) could eventually squeeze smaller, regional FM suppliers reliant on enterprise customers. Some commercial operators, however, will look to outsource large and lucrative engineering contracts – with FM and IT combined – to concentrate on their core business. Software and data will also play a greater role: in the longer term, some equipment makers will use datacenter management software and new leasing models to grab a larger slice of ongoing equipment maintenance.

Context

FM services can be broadly defined as outsourcing the management of a datacenter's entire physical infrastructure, or specific mechanical and electrical equipment, to a third party. FM services are a sub-category of a broader range of lifecycle services that span planning/commissioning, monitoring and management, as well as decommissioning of datacenters. These services contribute a significant proportion of some datacenter suppliers' revenues. As such, we have recently expanded our coverage and analysis of these services, and the suppliers who provide them. More reports in this area will follow.

Services overview

The specific scope of FM services varies between suppliers, but can be broadly broken down into the following four main areas:

  • M&E equipment, monitoring and maintenance – Specific services include mechanical and electrical system maintenance, BMS-related services and energy efficiency audits and optimization. Select suppliers also provide some remote monitoring and software-driven management (see below).
  • Project management/professional services – As well as day-to-day management, some FM providers also offer management services for specific projects such as overseeing new or additional capacity builds or datacenter migration services. Other additional services include training and financial planning.
  • Third-party contract management – Comprehensive FM services often include the management of third-party maintenance contracts for specific M&E equipment (typically UPS or cooling equipment). These services also include other non-technical services such as security, landscaping and logistics. Contract management is usually aligned with overall financial management services to help operators keep track of capital and operating expenses as well as financial forecasting and budgeting.
  • IT hardware services/remote hands – A number of FM suppliers also provide IT hardware services including rack, stack and cabling services. Some providers, such as CBRE and T5 Data Centers' T5FM, are also moving further into the IT and provide software patching and upgrades and other related IT services. Some FM providers also provide connectivity management services including managing carrier cross-connects.

Business models

FM services support contracts can range into the millions of dollars for medium to large sites. The specific pricing is dependent on a range of factors, including:

  • The age of the facility and the M&E equipment in it.
  • The overall size of the site and number of assets to be managed. These will typically require some level of maintenance by specialist contractors or equipment makers.
  • The required level of cover. This could range from coverage during business hours only to 24 hours a day, all year around depending on the criticality of the services.
  • The perceived stability of the facility also plays a role. For example, an FM provider may charge more for a facility that has undergone frequent upgrades to M&E systems, IT upgrades and other changes, than for a facility with more stable infrastructure and processes.

The majority of FM services continue to be relatively low margin, however. Services are delivered by on-site staff and customers are often reluctant to pay more than market rates even if staff are highly trained and managed by a third party. Pricing structures also differ depending on the provider and the customer but include:

  • Fixed price (where risk of going over budget falls on the provider).
  • Fixed pricing but with specific exceptions built in.
  • Open book costs plus margin (Costs made visible to customer plus an agreed margin).
  • Shared savings models (If operational costs – e.g., energy costs – are reduced, savings are shared as an incentive to drive efficiency).

Some of the larger FM suppliers also to use their scale to negotiate lower procurement costs on specific datacenter equipment (e.g., UPS batteries). They may also be able to negotiate lower pricing with equipment makers when replacements are required and even to provide financing in some circumstances.

Software and automation

One area where FM suppliers are able to increase margin, and differentiate from less-developed rivals, is through the use of remote monitoring and software-driven management. For example, MTDC FM supplier QTS has developed an Operational Service Center (OSC) that acts as a coordination point for aggregated power and environmental data but also ticketing, alarm monitoring and incident response for the facilities it manages.

In the long term, we expect that more manual FM tasks will become automated (in a similar vein to how the Internet of Things is expected to alter FM for generalist buildings) through the use of data collection tools and management software including datacenter infrastructure management (DCIM). Some FM providers already (manually) collect and aggregate data on equipment performance from multiple customers and use this to optimize service delivery.

Select equipment makers, which also offer FM services, are also beginning to automate this process with the use of datacenter management as a service (DMaaS), where monitored data is encrypted and sent to the suppliers' cloud for analysis. The data is analyzed by algorithms – as well as by (human) data specialists in 24/7 network operations centers – and then sent back to customers. This enables real-time views and historical trending; incident alarming, management and analysis; forecasting of potential problems and best-practice recommendations. Schneider Electric recently launched its StruxureOn DMaaS offering and has made the service freely available to customers with an existing maintenance contract. Eaton has also launched a DMaaS service for its UPS units.

Equipment makers are also exploring the concept of 'asset as a service' – effectively leasing equipment to customers bundled with remote monitoring and services such as preventative maintenance. The customer avoids the capital outlay while the supplier is guaranteed ongoing contact, and revenue, from the customer as well as data on asset performance, which can be fed back into product development.

Policies and procedures

FM providers also help customers to define, and improve, datacenter operations management (DCOM) policies and procedures. DCOM can be defined as the routine but critical day-to-day processes and standard operating procedures necessary in every datacenter. Some operators may have out-of-date or incomplete procedures; others may have none at all. Professionalizing the introduction and enforcement of these processes is key to efficient and effective management, FM service providers argue.

Computerized maintenance management (CMMS) tools such as IBM Maximo can be used to automate some aspects of DCOM. But suppliers such as MCIM and ICARUS Ops have also developed more specialist DCOM tools, which could be used by FM services companies to improve delivery. DCOM tools can also be integrated with the environmental monitoring, asset management and capacity planning features found in DCIM tools.

Uptime Institute (an independent division of The 451 Group) offers a program, backed by certification, to help operators achieve higher efficiency and availability – the management and operations (M&O) program. This program addresses areas such as documentation, contracts, service levels, training, policies, escalation procedures, call-in procedures for staff, and full and documented maintenance programs. Uptime is working with a number of FM services companies to enable them to provide customers with M&O certification.

Suppliers

The market for FM services is highly fragmented and regionalized. There are a handful of large engineering and property services companies, which dominate in key markets (Western Europe, North America, parts of Asia) such as CBRE, ENGIE, JLL and Schneider Electric. But there are also a large number of small to medium-sized companies providing full or partial FM services on a regional basis. These suppliers vary greatly in terms of size, resource and technical sophistication.

As such, estimating the size of the market is challenging. The number of facilities under management by some of the largest providers gives some indication:

  • Schneider Electric (which gained FM services from its acquisition of Lee Technologies in 2011) reports that it has more than a thousand sites under management.
  • CBRE Data Centre Solutions manages roughly 600 sites globally, including Western Europe, North America and Asia.

Facilities under management can range from mixed-use sites (server closets and rooms in generalist buildings) to medium to large MTDCs and even hyperscale operators. Deals can be bundled (part of a wider deal including non-datacenter sites) or unbundled (datacenters are managed separately from the rest of a customer's estate).

The FM sector has seen some recent M&A activity and new entrants. Large providers such as CBRE, as well as some MTDC companies, have recognized an opportunity to introduce more convergence, standardization and automation to a sector where many services are bespoke and manually delivered. Recent activity includes:

  • CBRE acquired Norland Managed Services (2013) and Johnson Controls' Global Workplace Solutions business (2015).
  • T5 Data Centers launched facilities management company T5FM (2014).
  • QTS launched CFM services (2014).
  • NTT Facilities acquires Electronic Environments Corp (2014).

We expect more consolidation in the future driven by the move toward hybrid IT, which will include the shuttering of some mixed-use (server closets, rooms) sites in favor of colocation and cloud. Not all equipment makers see FM services as strategic, however. Siemens sold its US FM services business to US-based construction services company EMCOR in 2003.

Outlook

Overall, we expect to see FM services – or more accurately, datacenter engineering services – continue to evolve. Developments could include more medium to large MTDCs launching FM services (following the lead of QTS, T5 and Vantage). It is also possible that property services, or other FM providers, will acquire/invest in IT services specialists to increase their range of capabilities. Alternatively, large IT services companies may look to acquire/develop FM capabilities to offer a complete range of datacenter engineering services.

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