Operating Expenses and the Hidden Element of Cost

How to measure it and why you should care


Every day, we often consider the long-term consequences of our decisions, as well as the immediate obvious effects. Take purchasing a car for example. If one car costs $18,000, but another priced at $22,000 has a far better consumer report rating and exceptional fuel economy, we might weigh our desire to save money up front against the risk of paying high fuel prices and maintenance costs down the road. The true cost of the car isn't what you pay to buy it. It's what you pay to maintain and drive it too.

So shouldn't the same decision process be applied to security technology buying decisions? After all, we know this principle is true for powered electronics (such as racks of servers and storage). The true (total) cost of owning isn't simply the initial Capital Expense (CAPEX). It's also every facet of the cost of running them. This is what's known as the Operating Expense (or OPEX). Unlike Capital Expenses which can be modified through spontaneous discounts (especially during tough economic times), Operating Expenses cannot be discounted, eliminated or deferred. You cannot run your server without electricity, or simply switch off the air conditioning and let your equipment overheat.

Still, there are two particularly interesting truisms about OPEX as it relates to the security industry. First, most buyers and system integrators often overlook it-which can mean a missed opportunity to make a better purchasing decision, or in the case of the integrator, a missed opportunity for consultative selling. Second, OPEX can be a remarkably high component of one's Total Cost of Ownership (TCO), so not including this cost can lead to an uninformed (and perhaps less than optimal) purchase decision. And aside from the bottom line implications of OPEX, there are other reasons to care-reasons that have less to do with cost and more to do with another trend, going 'green.' That's because there's a direct correlation between some components of OPEX (power consumption for example) and one's carbon footprint. So understanding and evaluating OPEX is important on many levels.

Now that we know why OPEX is important, here are some pointers to help you measure it. OPEX for security systems can include many things, but in this article, I will highlight three: power, cooling and rack space.

Power: You need electricity to power the equipment. A 1 kW device (e.g. a server plus one disk array) typically consumes 8,760 kWh of energy each year. No, that's not a typo; that is 8.76 Megawatts-hours. Using the U.S. Government's national average (http://www.bls.gov/ro3/apwb.htm) of 13.3 cents per kWh, it would cost about $1,113 per year, or over $5,500 over the typical OPEX lifespan of five years, to power a single 1kW device. In terms of environmental impact that is 29 tons of CO2 using U.S. standards for power generation.

Cooling: All equipment generates heat, which is measured in BTU/h. Our same 1 kW device (noted above) would generate around 3,400 BTU/h. (The exact number would depend on its workload, operating schedule and efficiency.) Data centers, or any rooms where racks of equipment are housed, need to be cooled with air conditioning. There is a cost associated with that as well. In this case, the cost would be the power used by the cooling unit required to remove the 3,400 BTU/h. Some air conditioners are more efficient than others, by design or because of age, and this is referred to as the Seasonal Energy Efficiency Ratio or SEER (http://en.wikipedia.org/wiki/Seasonal_energy_efficiency_ratio). A brand new cooling system has a typical SEER rating of about 10, telling us that we will need to consume another 3,000 kW per year for our single 1 kWh device. That is, $380 per year ($1,900 over five years). If the cooling system is older or less efficient this number will be higher (http://www.coloradoenergy.org/procorner/stuff/ac_seer.htm).
Before we tackle rack space let's do a quick 'so-what?' For the sake of argument let's say that a video security system needs five servers and each one needs two RAID disk arrays. Assuming they are modern well-respected brand names, I can calculate that they will consume (for power and cooling) 220,000 kWh over five years, which totals to $28,000 in electricity costs alone and a cost of 147 tons of CO2 to the planet. Put into perspective, your personal carbon footprint for flying from New York to Los Angeles is less than one ton. It is a sobering thought and explains why the European Union is considering investing $1.4 trillion in renewable energy infrastructure.

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