Data To store or not to store: a plan for business

January 5, 2011
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Do you operate your data storage plan with a “save-it-all” mentality? Does your organization have a comprehensive data storage strategy? Gone are the days when companies, large or small, could approach data storage with the default of saving all their information. The cost is prohibitive. A comprehensive data storage plan is needed by all — from the individual to the small family business owner to the large multi-national corporation.

The costs of data storage, a mission-critical activity for most organizations, are growing rapidly with many hidden costs. The storage of data for the individual as well as the billion-dollar corporation begins with the purchase of the physical storage unit, but this cost is only the tip-of-the-iceberg. Estimates a few years ago suggested that spending $2,500 on a server really meant spending between $8,000 and $15,000 on infrastructure to house the server and costs to power the unit (Brill. Forbes. Aug. 10, 2008). The power and space are only part of the costs.

There are additional data storage costs associated with the operation of the physical device, the supporting IT infrastructure and risk management. The operating of the physical device requires power. There are many factors that influence this cost. Primary power consumption occurs as a direct result of processing activities. As more data is stored, more processing transpires, causing an increase in both power consumption and heat generated. The heat in turn, must be reduced to manageable levels. This requires cooling infrastructure as well as ongoing power resources. Cooling units can create a secondary problem: noise. Large-scale IT environments may have the luxury of locating the noisy machines away from users. However, smaller-scale businesses must also invest in physical barriers to protect employees for this noise.

To mitigate risk, data storage backup and security are essential. Depending to how mission critical the data is, backup can be done multiple times, with additional redundancy in infrastructure as well as storage units. This easily doubles the costs of storing information. The costs of security breaches or unauthorized access to data are two-fold: prevention and repair. Hardware, software, and training costs to prevent breaches can be significant but pale in comparison to costs companies may face in the wake of a security breach, particularly costs of lost reputation, compromised proprietary information, or potential litigation.

Over all these activities, there is a support staff for managing data storage. These costs include both the daily activities as well as the educational activities to maintain professional competency in an area that is rapidly changing.

As more and more data is stored, the cost of managing it increases. Given that it is extremely costly to store unimportant data, what data needs to be stored? How long should it be stored? How accessible does this data need to be? How complex a system is needed for business continuity?

Each organization, large or small, will need to develop a unique data storage plan based on the unique needs of the organization.

From the mission and business plan, organizations need to address the regulatory requirements and the business value for their data storage. Hardly any business does not encounter some regulatory requirement that influences data storage decisions. Firms are faced with pressure to comply with regulations from tax authorities, federal and state laws, business standards, and other governmental and industry regulations. Compliance is a critical function of any data storage system.

In addition to complying with regulatory requirements, businesses must evaluate the business value of information. This is usually more ambiguous. There is primary value from the transaction; however, after some initial process, this information can have a secondary value in the analysis of trends. 

For example, when a retailer sells a product, the initial value of information is useful for inventory control and revenue recognition. However, after this initial stage, the information becomes useful in combination with other data items as customer trend data, but becomes obsolete over time. Finally, litigation risk management can also influence the data storage plan. Questions about what to store and how long generally arise from evaluating the business value of the information. Data should be kept as long as its value exceeds its costs.

Given the complex needs of business for data access, companies now need individuals who specialize in data storage and who understand the business environment. These individuals need to know both the technical aspects of physical storage (power, cooling, etc.) and the logical aspects of data storage. Moreover, they need to understand the business access, the value of information as well as the cost.

Because the IT environment is changing so rapidly, anyone involved in data storage must also be familiar with current trends and have a visionary spirit. Good quality data storage specialists can help organizations avoid significant hidden costs in many areas.

Regardless of the size of an organization, developing an integrated data storage plan is essential given the large costs and the regulatory and business requirements. This plan should address data retention and disposal, technology lifecycles and capacity management. It should be long enough to capture anticipated changes in technology but short enough to be relevant. A five-year planning horizon is reasonable.

To develop such a plan, competent professionals are worthwhile. Having a plan can reduce the unanticipated hidden costs.

Anne Sergeant is assistant professor in the School of Accounting at Grand Valley State University’s Seidman College of Business.

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