Traditionally, companies build new data center space to accommodate their IT growth, however, this approach is costly as organizations take on high capital expenditure for infrastructure and data center equipment, and often overbuild and overspend to accommodate future growth. There are other opportunity costs associated with a lengthy planning and construction process as well. On the other hand, with colocation services that offer a pay-as-you-grow model, businesses can replace capex with a more manageable and predictable opex.
Anyone who is faced with the critical decision to build or colocate should understand that there are use cases for both approaches. Colocation presents an attractive opex model, better access to space and power and ability to expand quickly. However, owning a data center allows more control over the facility and its operations, but overall, as far as the costs go, colocation usually has distinct benefits for the average enterprise.
Owning a data center
- Capital costs
Many enterprises have invested substantial capital to build their own data centers. However, with decreasing or flat budgets, capital expenses are the first cut. Building a data center requires Capex for design / engineering, project implementation, and data center physical infrastructure system costs.
Costs include real estate, specialty staffing, and build costs. Build costs can include expenditure on raised flooring, Uninterruptable Power Supply (UPS), Data Cabling / Ladder Rack System, Backup Generator(s), transformers, Power Distribution Units, structural steel, Physical Access System, diesel storage & day tanks, Diverse Fiber Entrances for network cables, and cooling systems. That’s just to create the data center. Now we have to operate it.
- Energy costs
Private data centers can face power capacity challenges as data processing needs grow. Many organizations have space to expand their data center, but become constrained on power. As energy costs increase, so does exposure to regulations on energy consumption and carbon.
- Facilities staff
Building and operating your own data center requires a specialty range of skills, including specialty electrical and mechanical trades, mission critical support and operations, energy purchasing, and real estate. This can have substantial financial implications.
Philadelphia Technology Park conducted a comprehensive study based on a hypothetical company to calculate the cost savings associated with data center colocation. The study found that room construction with a modern power design, including Heating-Ventilation-Air Conditioning (HVAC), an advanced electrical system, security systems, and fire suppression costs around $562,000. The figure touches $707,000 when we include other costs such as contingency (10%), project manager consultant (10%) and architect and engineering fees (6%). Also, annual recurring costs such as utilities, maintenance, bandwidth, personnel, taxes and insurance could come to $270,000. For the same hypothetical organization in this situation, this research found that collocating would require roughly $39,000 in startup costs, with an annual fees estimated near $206,000. This clearly shows the cost savings a company can achieve by way of collocating its data center.
While some organizations may have specific requirements that dictate that they build and operate their own data center, the occasions for this are increasingly rare. For most enterprises, especially those for which mission critical facility operations is not a core competency, it makes business sense to consider colocation at a third party colocation provider. The start-up and recurring costs of buying third party colocation services can be much more cost-effective than building and maintaining an in-house data center.
By staff writer