Averting a data center legal crisis

Engineers involved in data center design can limit their potential exposure by taking a few simple steps.


Jocelyn L. Knoll is chair of the construction and design practice group, a member of the energy and insurance practice groups, and a member of Dorsey & Whitney’s policy committee. Courtesy: Dorsey & WhitneyWhen a data center suffers an unexpected outage, the losses to its owners or users can be substantial. So can the potential liability for those involved in designing, constructing, and maintaining the data center, including the consulting engineer. Engineers involved with the design, expansion, or modification of data centers, however, can limit their potential exposure by taking a few simple steps.

Data centers are crucial to the operations of today’s corporations. The most prominent data center owners are Internet-focused corporations like Google and Microsoft, and some public attention is paid to those companies’ data centers. For example, newspapers across the country recently reported on rumors (which subsequently turned out to be false) that Google was building seaborne data centers on barges moored in San Francisco and Portland, Maine. Less attention is paid by the press and public to other owners, renters, and users of data centers, but the data centers used by the corporations are themselves critically important. The public may not appreciate them, but everyday life in the U.S. depends on the continued reliable operation of data centers. Necessary corporate applications like e-mail, payroll, finance, credit card processing, inventory tracking, and e-commerce operations run on the hardware contained in data centers.

The data centers used for a particular application may be corporate-owned, owned by a co-location provider, or owned by a provider of cloud services. Any given corporation may use a mix of strategies in its corporate IT infrastructure. Regardless, firms count on the continued reliable operation of the data centers hosting their applications whether those data centers are owned by them or someone else. Simply put, if the computers at the data center shut down unexpectedly, the e-commerce website, corporate e-mail, and other necessary applications may stop operation.

Consequences of data center failure

Not surprisingly given the criticality of the applications they support, when data centers do fail, the financial consequences can be serious. A 2011 study by the Ponemon Institute of 41 data center outages found an average outage cost of $5,617 a minute, which works out to $337,020 an hour. The Aberdeen Group has a lower, though still significant, assessment of the cost of data center outages. It calculated in February 2012 that an hour of downtime cost an average of $161,000. Of course, particular outage costs vary widely depending on the nature and size of the organization, the timing of the outage, and the nature of the affected applications. For example, a large retailer could lose far more than $5,617 a minute if an outage took down its website during December. A 2013 survey of data center operators conducted by the Ponemon Institute gives some idea of how costly data center outages can be at the high end. Seventeen percent of respondents estimated that a one-hour outage would cost their organization more than $500,000, and 6% said a one-hour outage would cost more than $1 million.

A lawsuit filed in Illinois in June 2013 provides some insight into the costs of a specific outage. Sears sued some of the vendors that provided it with data center-related maintenance and monitoring services. The lawsuit arose out of two outages at Sears’ data center in Troy, Mich. Sears estimated that it lost $1,580,000 in profits as a result of a five-hour data center failure it suffered on January 5, 2013, and another $630,000 as a result of a subsequent failure on January 24. Those lost profits are in addition to the costs of repairing the data center and running generators for weeks while repairs were carried out.

Even if the critical building systems in a data center are quickly returned to normal operation following a failure, it can take much longer to bring a company’s IT applications fully back on line. When a co-location data center owned by Equinix lost power for a single minute in the middle of the night on July 10, 2012, Salesforce.com, which leased space at the data center, was not able to fully bring its service back on line for at least nine hours. Even if an application suffers only a brief outage, the losses (and potential liability for those who may responsible) can be significant if the application itself is sufficiently important. Google may have lost more than $500,000 as a result of a five-minute outage in August 2013.

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