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Clicks and Bricks

By October 9, 2015Lease Accounting

A comment on the next few blog entries:

One of my interests as both a former real estate executive and then an analyst at Gartner has been the relationship of real estate management and IT management. I predicted over twenty-five years ago while at Xerox, that IT would transform the workplace and the nature of work. This was before the advent of the internet and mobile technology. We were still working with client server architectures, LANs, and desktop computing. At Xerox, I founded a subsidiary, the Harbinger Group which focused on the office of the future. We did a multi-client study called ORBIT-II in conjunction with Cornell University and a British Architect.  In that study we were convinced that emerging technologies would revolutionize the workplace. Later at Gartner I led a multi-client study we called, “The Agile Workplace,” in which we examined how IT was driving workplace flexibility, to include telecommuting, desk sharing, and co-working arrangements.

These blog entries reflect on this IT-real estate convergence. I hope you find them of interest:

Clicks and Bricks

Virtually the entire infrastructure of the enterprise combines traditional facilities assets: buildings, land, furnishings, and lease contracts and IT assets: servers, storage, networks, mainframes, and applications. In the last half century these distinct asset classes have become ever more intertwined, interdependent, and fused to create work platforms. With the advent of distributed processing in the 1980s, and then net centric computing in the last 10-15 years, the boundaries between space (physical) and cyberspace (virtual) continue to blur. Consider the retail industry. Internet shopping has transformed the nature of retail, where retailers combine traditional store based offerings in combination with web based shopping. Blockbuster competes with Netflix by combining store based rentals with web based services. You can order a DVD on line, receive it in the mail, and return to a local Blockbuster store. This combination of “clicks and bricks” typifies many retail business models whether its electronics, automobiles, or fashion. Shop on the web or the store, or both. Clicks and bricks, the combination of physical infrastructure and web based applications and connectivity continues to transform virtually all industries including medicine (virtual diagnostics); education (virtual classrooms); financial services (virtual banking and trading) and government (self service via web based applications).

This fusion of the physical with digital infrastructure mandates a fusion of management disciplines, processes, software tools, and performance metrics. But IT management and facilities management still remain primarily siloed in their own functional domains with different vocabularies, cultures, and time scales. Beyond the obvious differences, IT and facilities bring vastly different perspectives to their respective functional disciplines. IT focuses on availability, uptime, fault tolerance, and reliability. Facilities focuses on stability, efficiency, capital conservation, and risk minimization. Not that these factors aren’t important to the CIO; but uptime always wins above efficiency. One of the biggest differences between IT and facilities is the time scale dimension. IT assets typically involve a 2-3 year asset life; where facilities assets span decades. IT changes rapidly; hardware and software assets become obsolete quickly sometimes in less than a year; whereas buildings endure for years. IT operations work in real time; responding or reacting to instantaneous changes in the network; whereas facilities operations work in much longer time scales; a typical building project can span 24 to 36 months; whereas software applications can be acquired almost immediately via a web services offering.

No where has the critical need for IT and facilities management collaboration been more urgent than in the modern data center. There is a virtual crisis in the modern data center. With the advent of high density equipment like blade servers; the power demand and corresponding heat gain in the data center has quadrupled in the last few years. Historically, data centers were designed to provide 40 to 50 watts per square foot; or the equivalent of 2-3 Kilowatts per rack. Today, power demands of 10KW – 15 KW per rack overwhelm traditional power supply and underfloor cooling. The energy costs of the data center have commensurately escalated to 4 to 5 times historical rates. It’s now common to see data centers incurring $50 to $60 per square foot in annual electrical costs. George Gilder, at a recent conference in Boston, reported that the combined energy consumption of the four major internet companies (Google, Yahoo, AOL, and MSN) equal the power consumption of the city of Las Vegas. Goggle is reportedly spending in excess of $1 Billion a year alone in electrical costs. The data center energy crisis has emerged as a federal imperative. The US Congress has passed legislation for the EPA to study data center energy consumption and return later this summer for legislative recommendations that may involve penalties or restrictions similar to recent legislative initiatives in building more energy efficient automobiles. The broader “green” trend globally will become more intense, necessitating a more collaborative and unified approach between IT and facilities management within the enterprise.


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