Undervaluing Disaster Recovery in Data Center Services

Michal Halama

Michal Halama

Summary Bullets

  • Treating business continuity and disaster recovery services as ‘must-haves’ can obscure value and cost
  • Cloud-based business continuity and disaster recovery services can adjust to variable values over time

The best businesses (buyers and service providers) develop effective business continuity and disaster recovery (BCDR) strategies well in advance of natural and man-made catastrophes. AT&T’s investment and development of physical solutions to help customers recover from major outages is a good example. Some other organizations become focused later, and may survive (through good fortune). This can result in BCDR services later being assumed and treated as ‘must-haves’. They may then be bundled with underlying services, which can obscure the true value and cost of BCDR to service provider and customer alike. BCDR teams: does your organization value your service highly enough, or do colleagues see ‘must-have’ BCDR as a cost weighing on underlying service?

Attributing revenue or demand for BCDR fairly is necessary to ascertain the value of offering the service relative to its costs. From that valuation service providers can determine whether BCDR is a service that they might sell as wholesale, or cost-effectively outsource. Assuming a non-premium brand that does not need full, end-to-end control, outsourcing is possible – to larger providers able to implement the service with economies of scale, or to several smaller, regional specialists to spread the risk and exploit rare expertise and experience. Buyers may find either approach appealing if it reduces costs or the risk of BCDR services, themselves, failing when actually needed. Plenty of opportunities exist for large players to offer wholesale, physical BCDR services, or for smaller players to offload uneconomic BCDR services.

A ‘must-have’ rating for BCDR can also be misleading over time. Buyers can value BCDR services up and down at one time or other, depending upon other spending priorities. To say BCDR should always be considered the top priority can be wrong if, for instance, cash flow is tight and a buyer overspends on BCDR when the business needs funds to invest in commercial activities to thrive or survive. The issue can be more acute for smaller customers so service providers aggregate BCDR costs and risks across multiple customers to give economies of scale, but that does not always help each and every buyer all the time relative to their current valuation of BCDR.

Fluctuations in buyers’ current valuations of BCDR make cloud-based solutions appealing because of their inherent resource elasticity. These work if buyers anticipate when their valuation of BCDR will rise and when it will fall. Anticipating BCDR valuations is not anticipating ‘need’ (i.e., a disaster), so expecting some anticipation is not absurd – so long as buyers understand their cash-flow and aversion to risk, and how it varies with easy and hard times. If you are a buyer of network or data center services, you are accustomed to SLAs, but how much do you value BCDR components of services? By what margin does BCDR value vary for you during the year or from one year to the next? If you have a big variation you may want to investigate cloud-based BCDR solutions. Either way, consider how much you value and vary the value of BCDR, and let providers know.

 

 

About Michal Halama
As a Principal Analyst for the Current Analysis Business Network and IT Services team in Europe, Michal's coverage areas include leading and emerging providers of managed services. He has a special focus on managed unified communications, data center services and the cloud.

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