Vitamin Y: Feds outsourcing to IBM’s Barrie facility

Context: IBM Canada announced this month that Shared Services Canada (SSC) has selected IBM to provide and manage enterprise data centre space as part of the Canadian government’s data centre consolidation initiative. The federal government has chosen to outsource some of its facilities requirements to IBM’s Barrie data centre, which launched in September 2012 with support from the governments of Canada (through the IBM Canada Research and Development Centre program) and the Government of Ontario. SSC has not yet specified what services will be run out of the Barrie centre.

Three keYs:

Shared Services shift: By virtually all accounts, government is the largest consumer in Canada of IT products and services. According to InsightaaS revenue models, government as a whole represents about 16% of total Canadian IT spending, and the federal level accounts for approximately 7%-8% of that total. Federal IT spend is managed by Shared Services Canada (SSC), an entity established back in 2011 to consolidate and centralize the delivery of email, data centre and networking services across the entire federal public service. The original Shared Services mandate called for transition to “one email system,” which has already been implemented, reduction of “the overall number of data centres from 300 to less than 20, and streamline of electronic networks within and between government departments,” however, no specific recommendations were made at that time for facilities outsourcing as part of the data centre consolidation project.

The current SSC plan calls for the consolidation of 485 facilities in partner organizations (government ministries or agencies) into seven high availability data centre “pairs” that will ensure continuity of application delivery in the case of disaster. This project aims at reduction of the government’s data centre footprint from 600,000 to 180,000 square feet. SSC’S award of the contract to outsource provisioning and management of data centre space to IBM’s Barrie facility is further sign of a fundamental shift in thinking on the part of Shared Services that takes into account the large capital outlays required for infrastructure build: the Shared Services website notes, “Most of the Government of Canada’s 22 large data centres are over 20 years old. SSC has determined that nearly all of these data centres are at the end of their technological lives with respect to power, cooling, capacity, emergency systems and physical security. They would require upgrades to electrical and mechanical equipment requiring significant capital investment.” The IBM outsourcing deal is a second in the SSC’s data centre program (the first contract was awarded to Bell’s Gatineau facility, which is paired with an Ottawa location), and one that IBM hopes to extend to other initiatives, such as the engineering and science specific site that is now under discussion and an additional production/non production pair, for which the government has not yet defined its requirements.

Cracking the code on government business: Bob Wylie, VP of IT services at IBM Canada, has described a “rigorous and thorough” RFP process for bidding to become the Bordon data centre pair. This process opened last year with an “intent to qualify phase,” “industry days” that encourage input on what government requirements should be, refinement of a highly articulated RFP, which industry is again allowed to comment on before release of a final RFP with very specific requirements. According to Wylie, “only a subset of data centre service providers would meet these government criteria”: location no more than 100 kms of fibre optic (as opposed to linear or driving) distance from the Bordon site was a particularly challenging criteria. IBM bid on the contract with its new Barrie facility as this site fulfilled the government’s requirements for proximity (27 kms from Bordon to support redundancy, resiliency, quick second site fail over and archiving), data classification and security certification, network termination points for selected fibre-enabled carriers, secure physical access, high efficiency in design, and expansion capabilities.

IBM bid success was based on the Barrie facility’s ability to deliver on these criteria, and on the company’s ability to address government sensitivity on issues of privacy and data residency: IBM has invested more than $200 million into data centre expansion nationwide, and with recent opening of its new Softlayer cloud facility in Toronto and the Edmonton leadership data centre now operates 19 sites in Canada — so enough capacity for DR or in-country expansion. The Barrie facility itself, which was designed as a modular build, has capacity to expand to 100,000 square feet of raised floor and deliver up to 15 MW of power, though it currently operates with 25,000 square feet and 3 MWs. As Wylie pointed out, this expansion capability offers good business value to the government, which can buy data centre capacity as needed, counting on delivery of additional MWs in a 9-12 months’ time frame, which is typical for modular designs. In terms of energy efficiency, Wylie also noted that the Barrie facility was built to high standards (with a water side economizer and uninterrupted power supply systems, it uses 60% less energy than a similar-sized facility without), has achieved LEED Gold certification, and as a result, “exceeded requirements” set by the SSC in this area.

Regional economic development: As part of the IBM Canada Research and Development Centre program, government support at both the federal and provincial levels for construction of IBM’s Barrie facility was viewed as contributing towards the creation of state-of the-art infrastructure to support business collaboration, and as stimulus for local economic development and job creation. On the job front, the Barrie data centre promised the establishment of 20 skilled jobs, a number that stretches notions of regional development as does the fact that data centre operations aspire to and generally succeed with the automation of most tasks.

The bottom line:

If gains on the job creation front are not crystal clear, SSC has clearly made a strategic decision to take advantage of benefits enabled by the outsourcing model. By shifting to the Barrie facility, the government will be prepared for the introduction of new IT equipment that typically has power and density requirements that cannot be supported by aging data centre infrastructure. In addition, SSC will reduce total cost for space on a square foot basis since the infrastructure is more efficient, while moving from a CAPEX to a more manageable OPEX cost structure — and leave planning for capacity expansion in the hands of the provider. As Wylie explained, “The government is no longer in the data centre build business — they’re in the buying data centre-as-a-service business” — a major transition on part of government which has until very recently managed its own data processing requirements.

But what does this mean for the data centre outsourcing industry in Canada, which a recent Datacenter Dynamics report on the GTA market argues is experiencing dramatic demand increases? In Canada, the government sector represents a large part — 18%-20% — of large enterprise IT spending, and the federal government would account for a majority of this. Since the outsourcing market is typically concentrated on large customers, the impact of government activity in this space would likely have an even greater impact in terms of generating demand than these figures would indicate. The IBM experience suggests that SSC is going slow and steady — but the crack in the door should be welcome news to facilities providers who are investing in their own infrastructure. And what can we learn from the IBM win? While it’s critical to match the capacity and performance standards of contract winners — “This is not a simple colocation agreement. We’re looking forward to a “long term, strategic relationship with the federal government,” Wylie noted — it’s a lot about ‘location, location, location’, or accurate guesstimating on where and when government demand will come online.