We all know that compensation plans drive sales behavior. But what if that behavior makes you less profitable, less competitive and grows rather than shrinks your environmental footprint?
When you break the “norms” of an industry there can be unintended consequences. After a while at Softiron it’s something you start to get used to. Almost everything we do, and the way that we do it, isn’t a cookie cutter of what has gone before. Sometimes it means we need to surface these consequences and ask our customers, our partners and sometimes the industry as a whole to think again. As you likely guessed from the title of this post, the “consequence du jour” is sales compensation plans, though there’s another one around metrics used to calculate data center efficiency that I’ll return to in another post shortly.
What’s the Problem?
From time to time I get to talk with Data Center colocation operators. Here I’m not talking about managed service providers, I’m talking about the class of operators who provide space, power, cooling, connectivity and possibly some simple “remote hands” type services. Many (most?) operate on the basis that it’s really none of their business what brands or types of equipment are installed in their facilities, but at the same time many, if not all, are continually striving to improve the efficiency with which they can deliver their service. I’ve talked about this before here.
The problem is that the sales compensation plans of many of these operators have become out of step with this objective. Let me explain.
I’m sure it can’t be every operator, but in my “straw poll” of around half a dozen different vendors in this space I found that how much power capacity was sold as part of the contract with a customer formed part, or even all of the method by which their sales team’s targets and compensation was calculated.
Paying for Behaviors
An old (and obvious) adage in sales is that you should compensate sales for the behaviors that you wish to encourage. If your corporate goal is efficiency, and efficiency is derived by full racks consuming the minimum in power and cooling, then the compensation plan should incent the sales team to encourage their customers to install the most energy-efficient solutions. How did we get to the situation where the sales folks compensation seems diametrically opposed to achieving that?
Power equals Performance?
Here’s my (untested) theory. Feel free to shoot me down if you disagree. In a “pre-SoftIron” world, IT hardware design has been much of a muchness – really very little differentiation under the hood to speak of, whether buying bare metal/ white box servers or buying one of the big name brands. For “like for like” performance levels the electrical consumption would be roughly on a par between them.
And so it scales. As the performance demands of customers’ applications have increased the processing power/ networking connectivity/ storage capacity of the boxes in the racks has had to also keep pace. More of the same, demands more kVAs to be delivered to support these (we can assume) services that, in turn, are more valuable to the end customer.
If the services are more valuable to the end customer, then maybe (historically) electricity demand is a reasonable proxy for this and therefore compensating sales folks using this metric is a shorthand way to factor in rewarding them for bringing higher value client applications into the racks – all without needing to know anything more about the actual hardware or applications themselves.
SoftIron Changes Assumptions – and everyone can Win
Our task-specific design approach has enabled us to change the paradigm. To deliver unparalleled performance at fractions of the electrical power required by more traditional, generic designs. My colleague Leigh dug into this in some detail in this post a little while back.
By dramatically lowering the energy requirements to both power and cool the racks, rack density can be maximised, exotic cooling technologies potentially kicked to the sidelines and overall significant cost savings made.
These efficiencies are a win all around. For operators they can run their DCs at maximum rack capacity yet on a fraction of the power, saving real money which can go either directly to the bottom line or can be shared with customers by providing keener rack rates for utilizing more efficiently designed products.
That smaller power footprint can also provide a welcome contribution to any social responsibility goals that both the DC operator and the customer may have. Indeed, our customer THG cited this as one of the key reasons for selecting SoftIron as a key component of their infrastructure.
Time to rethink the “Rack Rate”
In fact, it seems today that maybe the only people who have no financial incentive are the DC sales team on an old-school comp. plan. Crazy when you realize they are actually being incented to make their own employers less profitable and/or not as competitive as it might otherwise be.
So my call to action is this. If you run a Data Center then maybe it’s time to reward the behaviors that make you more profitable, more competitive and make your operation greener.
Let’s take power out of the compensation equation, once and for all.