Federal agencies are increasingly turning to contractors to run their ever-expanding data centers, but they face growing competition from commercial companies for storage space and management expertise.

Agencies and private companies are competing for the same shrinking pool of available data center managers. By 2015, the number of qualified senior-level professionals is predicted to decrease nearly 50 percent, according to the Afcom Data Center Institute, a data center think tank. That expected decline is particularly critical in the federal sector, which is also bracing for an exodus of employees retiring in the next decade.

Finding and recruiting experienced data center managers is difficult, especially in the Washington area, where qualified professionals are in great demand, said George Newstrom, president and chief operating officer at Lee Technologies Inc., and former secretary of technology for Virginia.

“We’re just having a difficult time finding, hiring and training [workers with] the skill sets that we need today, much less what we need for the future,” he said.

Nevertheless, Lee Technologies has increased its number of data center employees for the past two years, an expansion that Newstrom insists will continue — despite a tight labor market — as agencies and private companies outsource more of their data center functions.

Afcom also predicts that by 2010, more than half of all data centers — government and commercial alike — will have to relocate to larger, more secure facilities, creating greater competition for facilities and land.

A survey of some 300 corporate information technology executives found that 90 percent intend to increase or maintain their data center square footage, said George Hamilton, research director at the Yankee Group, a Boston analysis firm. Sixty-nine percent said they were going to increase their space, with nearly half of those respondents saying they planned to add between 25,000 and 100,000 square feet in the next one to two years.

“Some of the larger [telecommunications companies] are running into the same issue of trying to find more data center space,” he added.

Upgrade needed
But it is government data centers that are more than five years old that face a dire future. They were not designed to meet the new, more-stringent security standards mandated in the Federal Information Security Management Act, the Defense Department Information Technology Security Certification and Accreditation Process and the Health Insurance Portability and Accountability Act.

Those standards are “adding new skills to the mix that these federal data centers need to meet and qualify for in order to turn on a new system,” said John Curran, chief technology officer at ServerVault Inc., of Dulles, Va. “It’s not enough to say, ‘We’ve got a couple of people who are aware of how these servers work.’ You need to have people who are experts in security, experts in networking.”

Moreover, Curran said that within five years, the government-mandated changeover to IPv6, the increasing adaptation of virtualization — in effect, replacing many of the routers and switches needed to and other new technologies will put new burdens on federal data center managers.

“There’s a lot going on to put virtualization- type capabilities into the network,” said Brad Boston, senior vice president of global government solutions at Cisco Systems Inc. He said Cisco is seeing increased demand for such services as data centers become more consolidated.

“Instead of putting the data close to where it’s needed, it’s being consolidated into a central spot for management efficiencies,” Boston said. But customers — especially military units in the field — must be able to quickly retrieve the information they need wherever they are, he added.

Outsourcing solution
To meet those changes and new requirements — coupled with the need for more space — federal IT managers are going to outsource whatever they feel they can’t handle adequately, Curran said. “Servers, networks, databases all exist in today’s data center, and you need all those skills to keep them running.”

ServerVault has reported a steady increase in the number of agencies that want secure, hosted facilities. The challenge there is to keep applications and systems running with “a high level of knowledge about how the applications work, how the network works [and] how the security is set up,” Curran said.

ServerVault runs applications for more than half a dozen federal agencies, which he declined to name for security reasons.

“Many of them have multiple applications here, the ones they don’t feel comfortable running in their own data center,” Curran said.

Vendors take notice
Vendors have noticed the developing market and are aiming to take part in it. An increasing number of IT product companies are making a concerted push into the federal data center space, seeking to sell storage, products or both.

Liquid Computing Inc., a Canadian company, recently structured its federal unit as a wholly owned U.S. subsidiary and hired federal market veteran Tom Kreidler as president to make government agencies aware of LCI’s product offerings.

LCI’s strategy focuses on its fabric-based computing technology, which aids in server virtualization by eliminating the need for many of the cables and switches that operate multiple servers in a data center, Kreidler said.

The Army High Performance Computing Research Center is LCI’s first government customer, and the company is also seeking to demonstrate its technology to NASA.

Kreidler said he knows LCI must gain market share quickly because it faces large competitors, such as Cisco Systems, IBM Corp., Hewlett-Packard Co., Sun Microsystems Inc. and Lee Technologies.

“Government is starting to discover that the data center is not just a room but is a vital part of their very critical mission infrastructure,” Newstrom said.

On the comeback trail
Ten years ago, Newstrom thought data centers were passé. “Then, all of a sudden, the Googles, the Yahoos, the eBays of the world began building these huge data centers to house the servers — not the mainframes any longer,” he said.

Then came the 2001 terrorist attacks, a somber wake-up call for federal agencies — especially those whose data was critical to national defense — to set up, expand or outsource their own data centers.

“There are a lot of data centers in the Washington metropolitan area. And the larger mission-critical agencies — DOD, [Homeland Security Department] — cannot afford those data centers to be inside what they call the blast zone,” Newstrom said. “So there are huge [request for proposals] out on the street for moving data centers and critical infrastructure outside of the Washington geographic area.”

In addition, the Base Realignment and Closure program includes money to relocate critical infrastructure. “So there is funding for the major agencies, the ones that have the most dire need,” he added.

Newstrom said he believes Lee Technologies can triple or quadruple in size in the next five years because of the need and the allocated agency budgets.

That expansion will include services, to eventually account for about 80 percent of revenue. Newstrom declined to release Lee Technologies’ annual revenue.

His plan also calls for expanding business opportunities outside the Washington area while aggressively increasing Lee Technologies’ federal sector component, “which was a small fraction of our business to date, into a significant component of our business.”

Newstrom’s bullishness about the data center market is perhaps best exemplified by his insistence that Lee Technologies will not resort to acquisitions to meet its growth targets. “We feel the markets are robust enough to carry us to this growth rate,” he said.

Associate Editor David Hubler can be reached at dhubler@1105govinfo.com.