Operating Expenses: The Hidden Element of Cost

In everyday life, 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 cost of driving the car down the road. (Pardon the pun.)

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. OPEX for security systems can include many things, but the three main components are: 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. 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.

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. 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 5 years).

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 5 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 5 years, which totals to $28,000 in electricity costs alone.

Rack space. There’s a cost associated with that space too.  For example, in an outsourced datacenter (e.g. http://www.hostventures.com/colocationprices.html) you could pay up to $125 per rack unit per month for a fully managed server, or at least $12,000 per rack per year. To carry through our cost example above even further – our 5 servers and 10 RAIDs would need 25 RU (which could fit comfortably in one rack), although I have personally created quotes for systems needing over 8 racks.

In this example, the total five year OPEX, taking into account all three elements above (power, cooling, and rack space) would therefore be about $88,000.

List price for this equipment would likely be in the range of $150-200K, suggesting that OPEX can easily account for a third of the Total Cost of Ownership. Put bluntly, for every two dollars you spend on CAPEX, you need to put another dollar aside for OPEX.

One final important point regarding OPEX is that keeping OPEX costs down starts with choosing the right solution. For example, in the case of VMS solutions, some vendors’ software may be designed to run more efficiently than others, allowing them to: record double the number of cameras on a given network video recorder, handle double the recording bandwidth, run more channels of video analytics on a server, or even maximize the usable amount of storage on a disk array rather than losing up to 45% of it as overhead.

As you can see, calculating OPEX is not difficult, and well worth your time. I do it with a simple spreadsheet. If you don’t have such a tool then simply add up the total number of rack units needed for all your equipment, and find some collocation rental prices from the Internet (that already have everything factored in), such as the one found on this web site: http://www.hostventures.com/colocationprices.html. This will give you an instant ballpark figure, and help you bring the hidden costs of OPEX into clear view.

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