Data center dilemma: Retail CIOs seek ways to balance cost and value in 2023

Retail CIOs and their teams face complex challenges in reducing data center costs and increasing the value their data centers deliver. 2023 is turning out to be a more challenging year than many expected, thanks to the need to support an expanding scope and variety of digital-first revenue initiatives, defend infrastructure against a spike in cyberattacks, deal with supply chain disruptions and keep sharpening their competitive edge with AI.  

“The pressure on CIOs to deliver digital dividends is higher than ever,” said Daniel Sanchez-Reina, VP Analyst at Gartner, during his keynote at the Gartner IT Symposium/Xpo in Orlando. “CEOs and boards anticipated that investments in digital assets, channels, and digital business capabilities would accelerate growth beyond what was previously possible. Now, business leadership expects to see these digital-driven improvements reflected in enterprise financials.” Summing it up, he said that “a triple squeeze of economic pressure, scarce and expensive talent, and ongoing supply challenges is heightening the desire and urgency to realize time to value.” 

Retail CIOs’ challenges are intensifying 

“While the rules of the game have changed, it’s the speed of the game — driven by the accelerating pace of technology adoption — that is the primary source of disruption,” writes EY America’s research team. Retail CIOs face the challenge of getting more projects done with less budget and new equipment, starting with their data centers. Retail CIOs must define a scalable strategy to secure new infrastructure, including edge devices, non-x86 architectures, content delivery networks, service meshes, and 5G mobile service while controlling data center costs.

CIOs need to demonstrate the business value data centers deliver 

To hold onto their budgets and gain new funding, retail CIOs must demonstrate the business value of data centers in the context of current and future digital-first revenue initiatives. CIOs tell VentureBeat that their boards of directors want to see progress on new digital transformation initiatives that drive new revenue without increasing data center capital expense (CAPEX) spending.

That’s forcing CIOs to do more with less and devise workarounds with existing data center hardware, systems and software. Many rely on operating expense (OPEX) budgets to support business growth with data center spending. For example, one CIO provided monthly data showing how data center upgrades reduced order cancellations and increased customer satisfaction.

Scenarios like this, which show data centers’ direct contribution to reducing costs, increasing customer loyalty, and driving revenue, are invaluable.  

Constant pressure to reduce IT costs and optimize performance

Retail CIOs face the daunting paradox of cutting data center and infrastructure costs without compromising support, services, security or responsiveness to customers and internal operations.

Every retail brand is impacted by its stance on sustainability, whether the retailer acknowledges it or not. More often than ever, consumers decide whom they buy from based on how sustainable a business is. With C-level executives and boards defining progressively more ambitious environmental, social and governance (ESG) targets, CIOs managing data center consolidations are getting significant support. 

CIOs tell VentureBeat that sustainability is part of the lean data center. Sustainability programs and data center infrastructure parameters that prioritize energy efficiency and asset utilization are among the most prominent ways leaders can reduce IT costs while increasing data center performance. In a recent Gartner survey of business leaders, 80% stated that sustainability reduces costs, and even more — 86% of these executives — believe that sustainability investments protect them from disruptive impacts.

Retail data centers are a prime target for attacks  

Because of the valuable information they store and process, data centers are a prime target for cyberattacks. Cybercriminals and nation-state-backed hackers frequently target data centers to steal or destroy data.

Target’s 2013 data breach is an example. Credit card and personal information for millions of customers was compromised. The company’s expenses related to the breach totaled $162 million. Cybersecurity, data protection and privacy are forcing CIOs to work towards consolidating tech stacks to make them more effective at identifying intrusion attempts, threats and endpoint breaches. 

Compliance and security aren’t the same thing — especially in retail 

Retailers’ data centers need to excel at meeting a growing base of global compliance laws while continually hardening their security. Yet while improving compliance with customer privacy rules is paramount, it doesn’t solve the problem of keeping data centers more secure.

Zero-trust security is proving effective at achieving compliance while hardening endpoints and data centers. 

In a recent interview with VentureBeat, John Kindervag, creator of zero trust, said that “the biggest and best-unintended consequence of zero trust was how much it improves the ability to deal with compliance, auditors, and things like that.” Retail CIOs tell VentureBeat their zero-trust security initiatives to secure data centers need to start with validating identities and roles. It’s imperative to move beyond passwords to newer, more robust authentication technologies, including passwordless authentication.

Ivanti, Microsoft Azure Active Directory (Azure AD), OneLogin Workforce Identity, Thales SafeNet Trusted Access and Windows Hello for Business are the leading providers.

Ivanti’s approach of combining zero sign-on (ZSO) with passwordless authentication and zero trust on its Unified Endpoint Management (UEM) platform reflects how vendors are responding to the need to improve every aspect of identity security. Ivanti ZSO replaces passwords with mobile devices as the user’s primary identifier and authentication factor, and relies on FIDO2 authentication to eliminate passwords. CIOs tell VentureBeat that Ivanti ZSO is successfully gaining user awareness and adoption because it can secure any device, centrally managed or not.

The board’s ask: Making digital transformation happen with existing data centers and budget

Retail CIOs are being asked to do more with less, in delivering digital transformation initiatives using existing data centers with no incremental CAPEX spend. “CIOs must prioritize digital initiatives with market-facing, growth impact,” said Janelle Hill, distinguished VP analyst, Gartner, during her keynote at the Gartner IT Symposium/Xpo. “For some CIOs, this means stepping out of their comfort zone of internal back-office automation to instead focus on customer or constituent-facing initiatives.”

VentureBeat has learned that the CIOs who work to connect data center contributions to revenue are more likely to get the support they need from the board when new systems and technologies are needed. Taking ownership of the revenue contributions data centers make is an intelligent career move. Eighty-nine percent of CIOs expect to have revenue-generating responsibilities in their career today. “Business equals technology,” said David Gledhill, CIO and group head of technology and operations for DBS Bank, a global bank based in Singapore. “My job is not just providing information technology but delivering on business outcomes and customer satisfaction.”

Driving more value from data centers while reducing costs  

Retail CIOs face the dual challenges of increasing data center value while reducing costs. The goal is to achieve significant cost savings without sacrificing performance or quality of service. Ways that data centers are delivering more value at lower cost include:

• Using AI-based techniques to optimize resource utilization
• Selectively adopting automation while consolidating infrastructure
• Adopting energy-efficient technologies.

Here are some of the strategies that are delivering more value from data centers while reducing costs.

Going all-in on optimizing resource allocation and utilization

Retail CIOs told VentureBeat that they start with monitoring and analytics to set a performance baseline. First, they use real-time monitoring to immediately uncover bottlenecks, inefficiencies and immediate opportunities to improve performance.

Second, they commit to fine-tuning their infrastructure and optimizing it with real-time data. That’s the lifeblood of getting more value out of existing data center assets.

Third, they’re using virtualization and containerization to consolidate workloads on fewer physical servers. This is an area where AI and machine learning are helping to greatly optimize performance today. AI-based tools, they have told us, directly reduce hardware, energy and maintenance costs, optimizing workload placements for performance, security and other factors.

Nearly every CIO VentureBeat interviewed also said that optimization must include on-premises, cloud and edge computing to maximize resource utilization throughout the data center. Capacity planning and forecasting, automating routine tasks and measuring performance gains are essential to foster continuous improvement.

Consolidating data center infrastructure to reduce costs

Streamlining hardware environments reduces costs for energy, maintenance and hardware and can improve data center performance. Using AI and machine learning-based tools, CIOs and their teams are finding new ways to make infrastructure leaner. Relying on AI and machine learning to improve resource allocation, workload density and computing power efficiency is proving effective in reducing costs and improving performance. 

Integrating sustainability to reduce costs and increase ESG compliance

Retail CIOs tell VentureBeat that sustainability principles are now core to their long-term strategies — and, for many, a significant part of their compensation plans. CEO, CIO and senior management financial incentives are increasingly tied to ESG performance targets.

Pursuing sustainability is quickly becoming a core part of every CIO’s cost-reduction strategy for data centers as they respond to rising energy costs, supply constraints and uncertain economic conditions. Reducing excess power, investing in clean energy and delaying replacement cycles are crucial for attaining this goal.

Using cloud or colocation services is also helping CIOs consolidate data centers and close no-longer-needed facilities. Public cloud and colocation providers, knowing the pressure CIOs are facing to consolidate and get more done with less, are prioritizing sustainable computing and clean energy to attract new data center business.

Transitioning workloads to cloud services

Data centers are no longer defined by physical facilities alone. They’re a core part of an infrastructure that needs to be hybrid and adaptive enough to flex as business needs change. That’s why so many retail CIOs are moving workloads into the cloud and creating a hybrid infrastructure — to meet rising market requirements for speed, scale and responsiveness to customers. Cloud services’ pay-as-you-go model helps businesses cut capital and operational costs and better allocate resources. By moving workloads to the cloud, retailers can focus on their core business, streamline operations and improve the customer experience while saving money.

Conclusion 

Data centers need to be smartly managed to maximize digital dividends, defend against cyberattacks and absorb supply chain disruptions while minimizing costs. Retail CIOs can meet these challenges by concentrating on optimizing resource utilization, automating processes, consolidating infrastructure, investing in energy-efficient technologies, using cloud services, implementing more predictive, proactive maintenance, and outsourcing non-core functions.

Retail CIOs and their teams will then have more time and resources to devote to customer-facing initiatives while improving compliance and security to reduce risks to revenue and operations.